With new programs in place for student loan debt forgiveness and income-based repayment plans, paying back federal student loans is steadily becoming more financially reasonable. Federal student loans have room for forgiveness and flexibility, unless you live in the state of New Jersey. Loan sharking has been a rising issue with New Jersey loan servicing companies but it is perfectly legal.
In New Jersey, loan servicing companies are known to be tough on repayment plans and rigid for borrowers who seek help. In light of recent events, New Jersey’s questionable policies are now under scope. The New York Times recently covered a story about a deceased college student that cannot have his debts forgiven. His single mother is left to bear the burden of taking on her deceased son’s student loan debt. Despite her efforts to have the loans forgiven, the servicing company in New Jersey stands firm in their decision to have the debts repaid.
Student loan debt is a nationwide issue with some states having larger amounts of debt than others. New Jersey is one of the states with exceptionally larger amounts of student loan debt. New Jersey’s student loan debt amounts to over $1.9 billion statewide. With higher interest rates and rigid options for repayment plans, loan sharking has become commonplace for student loan debt servicing companies.
Loan Sharking is a term to describe student loan servicing companies that charge exceptionally high interest rates and enforce rigid guidelines. These “loan sharks” act as debt collectors by going after borrower’s money with harsh consequence. The current state’s legislation on student loans is much harsher than a majority of the U.S. The servicing companies have the ability to garnish wages and confiscate professional licenses. New Jersey loan sharks give few breaks for the unemployed and minimal to zero options for income-based repayment plans. Borrowers with New Jersey student loans are set up for failure. Without proper access to feasible repayment plans, borrowers are at risk for having their loans placed into default.
New Jersey loan servicers hold more power than the average student loan servicing company. If a borrower cannot repay their debts, they are at risk for having an additional 30% in fees onto the existing debt. Loan servicing companies play the role of debt collectors. They have been known to file suits against borrowers who cannot repay their loans back. Rather than opting for a repayment plan based on the borrower’s income, New Jersey loan sharks go after the debts owed, even if it means filing a lawsuit. In 2010, there were less than 100 suits filed against borrowers and their families. However, there was a large jump in the amount of suits filed last year. Over 1,000 suits were filed by New Jersey loan servicing companies in an attempt to collect debts from borrowers and their families.
Student loan sharking is on the rise in New Jersey. Borrowers and their families are suffering from these agencies stacking up fees on their existing debts. Many New Jersey borrowers have a difficult time repaying their loans due to lack of access to repayment plans or debt forbearance. In the next coming years, it would be wise for prospective college students to attend school in other states unless New Jersey enacts legislation to protect the state’s college students.