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CRL Analysis: Student Loan Abuses Require Action by New Jersey Lawmakers

Tuesday, October 16, 2018
Diane Standaert
Yasmin Farahi

DURHAM, N.C. – A new Center for Responsible Lending (CRL) policy analysis calls for the State of New Jersey to protect student borrowers from abusive practices in the face of weakening federal protections. New Jersey, which ranked sixth in the nation for the level of debt carried by 2017 graduates, can take concrete steps to protect their citizens from the worst impacts of a student loan crisis that is rocking the nation.

CRL is releasing the report as part of the New Jersey Citizen Education Fund’s 9th Annual Financial Reform Summit being held today in Newark.

New Jersey can follow the lead of several states that have addressed abuses by student loan servicers that have misled student borrowers, misapplied payments, provided inaccurate information to credit bureaus, and failed to put borrowers in income-based repayment plans for which they qualify.

New Jersyans carry a total outstanding student loan debt load of about $41 billion, and one in ten borrowers have student loan debt in collections. While many families struggle with this burden, disproportionate impacts fall on communities of color, women, and older Americans.

In New Jersey:

  • Seventeen percent of borrowers who live in communities of color have student loan debt in collections, while only 7% of those who live in white neighborhoods do.
  • The number of senior citizens affected grew from 88,000 to over 130,000 between 2012 and 2017. Collectively, New Jersey’s seniors hold over $4.7 billion in student loan debt. The most recent available data show that 12% of seniors in the Garden State are delinquent on their student loans.

“Delinquency and default can create a cascade of long-term effects on borrowers,” said CRL Policy Counsel Yasmin Farahi, who co-authored the analysis. “Defaulting lowers credit scores, which makes securing jobs and homes more difficult. For seniors, it could mean garnishment of their Social Security income, locking them into a lifetime of poverty.”

New Jersey can protect its citizens from for-profit college abuses by claiming their right to oversee these institutions, which often leave students with mountains of debt and little or no improvement in their career prospects. States have the authority to ensure that for-profit colleges spend more on education and less on marketing, and that they don’t steer students into predatory loans.

“The primary source of revenue for for-profit schools comes from federal loans, but little is used in actually educating students,” said CRL EVP and Director of State Policy Diane Standaert, who co-authored the analysis. “This is undoubtedly a major factor in the abysmal job placement rates of for-profits. Students are paying premium prices for a substandard education, and then further paying the price by carrying debt loads they have no means of relieving for years and even decades more. States have the right and the duty to address this injustice.”

The Attorney General of New Jersey, Gurbir S. Grewal, joined other state attorneys general in affirming the right of states to oversee and enforce student loan laws earlier this year.

For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Carol Hammerstein at carol.hammerstein@responsiblelending.org.