NY Times reports on “onerous terms” used by state student loan program

by Julie Murray

On Saturday the New York Times had this article about New Jersey’s student loan program, which has an outstanding loan portfolio of about $2 billion. Here’s an excerpt:

The loans . . . carry higher interest rates than similar federal programs. Most significant, New Jersey’s loans come with a cudgel that even the most predatory for-profit players cannot wield: the power of the state. New Jersey can garnish wages, rescind state income tax refunds, revoke professional licenses, even take away lottery winnings — all without having to get court approval.

“It’s state-sanctioned loan-sharking,” Daniel Frischberg, a bankruptcy lawyer, said. “The New Jersey program is set up so that you fail.”

The article profiled a student borrower whose request for debt deferral was denied by the New Jersey program after the student was diagnosed with cancer and lost his job. Of taking out loans through the state, he said:

 “I felt so comfortable because it was the State of New Jersey,” Mr. Gonzalez said. “It’s the state, my government, trying to help me out and achieve my American dream. It turns out they were the worst ones.”

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