TRENTON – The Senate Higher Education Committee advanced legislation sponsored by its Vice-Chair, Senator Andrew Zwicker, and Chair, Senator Joe Cryan, which would establish protections for student loan borrowers and cosigners and require the registration of postsecondary education debt creditors with the Department of Banking and Insurance (DOBI).
The bill, S-4011, seeks to ensure consumers are aware of all available information, including whether taking a forbearance will end their streak of on-time monthly payments required for cosigner release, the criteria needed for cosigner release, how borrowers can cure delinquencies to avoid a full acceleration of the loan, and how refinancing federal loans into a private loan will impact the existing benefits of the federal loans.
“As the cost of a college education continues to rise and federal aid is cut under the Trump Administration, more students are being forced to rely on private loans, which do not come with the same protections as federal aid,” said Senator Zwicker (D-Middlesex/Mercer/Somerset/Hunterdon). “Private loans have higher interest rates and fewer repayment options, making them a risky choice for many families. This bill is a huge step forward in bringing fairness and transparency to the market, and will ensure that consumers are not being taken advantage of.”
The bill would also seek to regulate private loan market participants, including creditors and debt collectors, to ensure their behavior is fair to consumers. For example, the bill would require that a creditor provide at least a 30-day notice to the consumer that the creditor will accelerate a private student loan, which notice would be required to be provided to DOBI. Additionally, the bill would require that a creditor must offer all borrowers the same flexible repayment plan options, and that if a borrower suffers a total and permanent disability, the creditor would be required to discharge the borrower and the cosigner of the loan.
“Private student loan providers have been known to engage in sometimes predatory practices, so we want to level the playing field and make sure that students and their families have the information they need to make informed decisions about how to finance their education,” said Senator Cryan (D-Union). “This legislation ensures that borrowers will be fully informed about their loan terms, including the often complicated processes of forbearance or refinancing.”
The bill additionally states that debt collectors would be required to provide documentation detailing information about the debt being collected when attempting to collect it. The bill would also require that an action to enter a judgement against a borrower be taken within six years and that a creditor or debt collector provide critical information about the loan in filing for such judgement.