New Jersey Higher Education Student Assistance Authority Loans (NJ CLASS Loans) and Bankruptcy
by: Jonathan Goldsmith Cohen
Christmas may have been last month but it is fast approaching the “most wonderful time of the year” for the New Jersey Higher Education Student Assistance Authority (HESAA). If you have an NJ CLASS loan and are in default on it, your federal and state tax refund can be withheld and applied to your NJ CLASS loan until it is paid in full. If you are a co-signer on an NJ Class loan and that loan is in default, your refund may be withheld to the defaulted loan as well. Don’t worry though, I’m here to provide a solution that will help you reorganize and pay off your NJ CLASS loan(s) for good. This can also help the co-signer on an NJ CLASS loan.
Getting a Defaulted NJ CLASS Loan Back into Good Standing
Once an NJ CLASS loan is in default, it is considered in default until the loan is paid off in full. There is no way to get an NJ Class loan back into good standing. Ok. I take that back. There are two ways to get an NJ Class loan back into good standing, both of which are not tenable for the average person. The first way to get an NJ Class loan back into good standing would be to pay off the balance in full at once. The second would be to try and settle the debt and pay the settlement amount in a lump sum. Don’t get too excited over the prospect of settling your NJ Class loan. HSEAA’s guidelines dictate settlements in lump sums that are very close to the outstanding loan balances. Again, next to impossible. For example, if the balance on a loan is $35,000.00, the HESAA might take $27,000.000 or $28,000.00 to settle it.
You can try and work out a payment arrangement with NJ CLASS if your loan is in default. However, the payments may be more than you can afford since they are not based on your income. Most importantly, a payment arrangement with NJ CLASS is only temporary. Generally, a payment arrangement is for six months or less. After that period, you have to try and see if they will agree to another payment arrangement. This can be burdensome if it would take a long period of time to pay off the loan in full. And even if there is a temporary payment arrangement, the loan is still considered in default.
What to Do If Your NJ CLASS Loan is in Default
Chapter 13 Bankruptcy has proven to be an effective tool to handle NJ CLASS loans and pay them off in full over 36-60 months. In a Chapter 13 Bankruptcy, interest and fees stop accruing on the student loan. Each month, your payment goes directly to the principal on the loan. Chapter 13 Bankruptcy provides a surefire way to payoff a student loan such as an NJ CLASS loan without interest in a defined period of time. The Chapter 13 Bankruptcy protects the co-signer’s credit because the debt they are jointly responsible on is now being paid. The “stay” provided by the bankruptcy filing ensures that the student loan creditor cannot garnish wages, levy bank accounts, or take a tax refund while the loan is under the protection of a Chapter 13 Bankruptcy.