Bill Text: NJ A3848 | 2024-2025 | Regular Session | Introduced
Bill Title: Establishes maximum rate of interest for New Jersey College Loans to Assist State Student Loan Program; establishes protections for private student loan borrowers.
Spectrum: Slight Partisan Bill (Republican 2-1)
Status: (Introduced) 2024-02-22 - Introduced, Referred to Assembly Higher Education Committee [A3848 Detail]
Download: New_Jersey-2024-A3848-Introduced.html
Sponsored by:
Assemblywoman CLAIRE S. SWIFT
District 2 (Atlantic)
Assemblyman DONALD A. GUARDIAN
District 2 (Atlantic)
Assemblyman WILLIAM F. MOEN, JR.
District 5 (Camden and Gloucester)
SYNOPSIS
Establishes maximum rate of interest for New Jersey College Loans to Assist State Students Loan Program; establishes protections for private student loan borrowers.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning State and private student loans, amending N.J.S.18A:71C-26, and supplementing P.L.2019, c.200 (C.17:16ZZ-1 et seq.).
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. N.J.S.18A:71C-26 is amended to read as follows:
18A:71C-26. Accrual of Interest; Payment.
Interest on each NJCLASS Loan Program loan shall accrue from the date of the making of the loan; however, the payment of the principal or the interest or both may be deferred until a time or times determined by the authority. The rate of interest on each loan shall be determined by the authority, except that the rate of interest on each loan disbursed on or after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) shall not exceed three percent.
(cf: P.L.1999, c.46, s.1)
2. (New section) As used in sections 2 through 4 of P.L. , c. (C. ) (pending before the Legislature as this bill):
"Cosigner" means:
(1) any individual who is liable for the obligation of another without compensation, regardless of how the individual is designated in the contract or instrument with respect to that obligation, including an obligation under a private student loan extended to consolidate a borrower's pre-existing private student loans; and
(2) shall include any person whose signature is requested as a condition to grant credit or to forbear on collection.
As used in this act, "cosigner" shall not include a spouse of an individual described in paragraph (1), the signature of whom is needed to perfect the security interest in a loan.
"Private student loan" means an extension of credit that:
(1) is not made, insured, or guaranteed under Title IV of the "Higher Education Act of 1965" (20 U.S.C. s.1070 et seq.);
(2) is extended to a consumer expressly, in whole or in part, for postsecondary educational expenses, regardless of whether the loan is provided by the educational institution that the student attends;
(3) shall not include open-end credit or any loan that is secured by real property or a dwelling; and
(4) shall not include an extension of credit in which the covered educational institution is the creditor if:
(a) the term of the extension of credit is 90 days or less; or
(b) an interest rate shall not be applied to the credit balance and the term of the extension of credit is in effect until the student completes the educational program.
"Private student loan borrower" or "borrower" means any resident of this State who has received or agreed to pay a private student loan for the borrower's own educational expenses.
"Private student loan lender" or "lender" means any person engaged in the business of securing, making, or extending private student loans, or any holder of a private student loan. "Private student loan lender" shall not include the following persons, only to the extent that State regulation is preempted by federal law:
(1) any federally chartered bank, savings bank, savings and loan association, or credit union;
(2) any wholly owned subsidiary of a federally chartered bank or credit union; and
(3) any operating subsidiary where each owner of the operating subsidiary is wholly owned by the same federally chartered bank or credit union.
"Total and permanent disability" is the condition of an individual who:
(1) has been determined by the United States Secretary of Veterans Affairs to be unemployable due to a service-connected disability;
(2) is eligible for Social Security Disability Insurance or Supplemental Security Income and whose next scheduled disability review will be five to seven years or more from the date of the individual's last Social Security Administration disability determination; or
(3) is unable to work and earn money or attend school by reason of any medically determinable physical or mental impairment, as certified by a doctor of medicine or a doctor of osteopathy who is legally licensed to practice in the United States, that can be expected to result in death, has lasted for a continuous period of not less than 60 months, or can be expected to last for a continuous period of not less than 60 months.
An individual shall not be considered "totally and permanently disabled" under P.L. , c. (C. ) (pending before the Legislature as this bill) on the basis of a condition that existed at the time the individual applied for the loan, unless the individual's condition has deteriorated subsequently so as to render the individual totally and permanently disabled.
3. (New section) a. A private student loan executed on or after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) shall not include a provision that permits the private student loan lender to attempt to collect against the borrower's or cosigner's estates, other than for payment default.
b. A private student loan lender, upon receiving notification of the death of a borrower shall release any cosigner from the obligations of the private student loan.
c. Upon receiving notification of the death or bankruptcy of a cosigner, when the loan is not more than 60 days delinquent at the time of the notification, the private student loan lender shall not change any terms or benefits under the promissory note, repayment schedule, repayment terms, or monthly payment amount or any other provision associated with the loan.
d. A lender shall not place any student loan or student loan account into default or accelerate a student loan while a borrower is seeking a loan modification or enrollment in a flexible repayment plan, except that a lender may place a student loan or student loan account into default or accelerate a student loan for payment default 90 days following the borrower's default.
4. (New section) a. A private student loan lender, upon determination of the total and permanent disability of a borrower, shall release any borrower and cosigner from the obligations of the private student loan. The lender shall not attempt to collect a payment from any borrower or cosigner following a notification of total and permanent disability of the borrower.
b. A private student loan lender, upon determination of the total and permanent disability of a cosigner, shall release that individual cosigner from the obligations of the cosigner under a private student loan.
c. A lender shall notify a borrower and cosigner of a private student loan if either a cosigner or borrower is released from the obligations of the private education loan under this section, within 30 days of the release.
d. A lender shall not monitor the disability status of the borrower at any point after the date of discharge.
e. Any lender that extends a private student loan shall provide the borrower an option to designate an individual to have the legal authority to act on behalf of the borrower with respect to the private student loan in the event of the total and permanent disability of the borrower.
5. (New section) The Department of Banking and Insurance shall promulgate rules and regulations pursuant to the "Administrative Procedure Act," P.L. 1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of sections 3 and 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).
6. This act shall take effect on the first day of the seventh month next following the date of enactment, except that the Department of Banking and Insurance may take any anticipatory action in advance in accordance with section 5 of this act.
STATEMENT
This bill establishes a maximum rate of interest for loans disbursed pursuant to the New Jersey College Loans to Assist State Students (NJCLASS) Loan Program. The bill also establishes various protections with respect to private student loans.
The NJCLASS loan program, offered and serviced by the New Jersey Higher Education Student Assistance Authority (HESAA), is the State's student loan program. Under current law, the rate of interest of NJCLASS loans is set by HESAA and is typically set by market conditions as the loans are funded through the sale of bonds. Currently, the rate of interest of NJCLASS loans ranges from 5.69 percent to 7.47 percent depending on the term length of the loan and if payments are made on the loan while a student is enrolled in an institution of higher education. Under the bill, the maximum rate of interest for all NJCLASS loans disbursed after the effective date of the bill is not to exceed three percent.
This bill also establishes protections for private student loan borrowers. The bill prohibits a private student loan executed on or after the effective date of the bill from including a provision that permits a lender to attempt to collect against the borrower or cosigner's estate, other than for payment default. The bill requires a private student loan lender to release a cosigner from the obligations of the loan in the event of the death of the borrower.
The bill also prohibits a lender from changing any terms or benefits established under a promissory note and the repayment schedule, repayment terms, or monthly payment amount associated with the private student loan upon notice of the death or bankruptcy of a cosigner. Additionally, the bill prohibits a private student loan lender from placing into default or accelerating a student loan or student loan account while a borrower is seeking a loan modification or enrollment in a flexible repayment plan for up to 90 days.
Under the bill, a lender, upon determination of the total and permanent disability of a borrower, is required to release the borrower and cosigner from the obligations of the private student loan. The bill prohibits the lender from attempting to collect a payment from any borrower or cosigner following a notification of total and permanent disability of the borrower. After making the determination of the total and permanent disability of a borrower, a lender cannot monitor the disability status of the borrower after the date of discharge.
Additionally, the bill requires lenders to provide the borrower the option to designate an individual to have the legal authority to act on behalf of the borrower with respect to the private education loan in the event of the total and permanent disability of the borrower.
