Not even being murdered will get you loan forgiveness with student loans in New Jersey
(KUTV) If you die your family won't be left with the burden of paying off your student loans, unless you got a loan through the state of New Jersey.
Marcia DeOliveira-Longinetti's son was murdered in 2015 in Vermont, but to this day his mother is forced with paying off her dead son's student loans. The murder remains unsolved to this day, but the interest on the loans is still accruing.
In a denial letter from the state agency told DeOliveira-Longinetti that her son's death didn't meet the "threshold for loan forgiveness.":
"Please accept our condolences on your loss. After careful consideration of the information you provided, the authority has determined that your request does not meet the threshold for loan forgiveness. Monthly bill statements will continue to be sent to you."
Getting the remaining balance of her son's federal student loans forgiven wasn't a problem after he was killed, It was the student loans also issued to her son through the state of New Jersey that were the problem.
The story also states that since DeOliveira-Longinetti's son Kevin was murdered she has made 18 payments to the state of New Jersey. Even though she doesn't think it is fair, she is forking out $180 a month and will has 92 payments to go. While she doesn't agree with having to pay the loan for her deceased son she is determined that she will not become poor because of this.
"It's state-sanctioned loan-sharking," Daniel Frischberg, a bankruptcy lawyer, said in the story published in the New York Times. "The New Jersey program is set up so that you fail."
Not everyone gets their student loans from the state. In 2010, President Obama laid out a student loan reform plan known as the Health Care and Education Reconciliation Act of 2010, which was approved by Congress. It was a huge revamp in the student loan process. At the time President Obama called it "one of the most significant investments in higher education since the G.I. Bill."
A change took place that made it so private banks no longer handled federally backed student loans. The new law took out the middle man and made the federal government the only lender. So loans that students had to private banks were eventually transferred to a loan servicing company that took care of loans owned by the federal government.
Find out what qualifies for federal loan forgiveness: In some situations, you can actually have your federal student loan forgiven, canceled, or discharged.
Since 2010, President Obama has laid out many different ways for students to either qualify for loan forgiveness or to make student loans more affordable. For many college students who get a loan in the United States, it will come through Fedloan Servicing, a company that was established by the Pennsylvania Higher Education Assistance Agency to help out the U.S. Department of Education to service student loans owned by the federal government. The company is known nationally as FedLoan Servicing and American Education Services.
FedLoan Servicing is one of a limited number of organizations approved by the Department of Education to service these loans and is dedicated to supporting borrowers with easy and convenient ways to manage their student loans or even offer loan forgiveness if you land a job working for the government, or a number of other factors.
Student loan reform came for most students in 2010, but not every state played along. During this time New Jersey had already been expanding its loan program and slowly replaced the federal loans that it once handled with state loans. So while many states were downsizing state loans, New Jersey had nearly tripled its loans from 2005-10. That total comes to about $343 million per year. Since then, the New York Times reports the state agency has reduced its loans by half, while its outstanding portfolio has remained stationary at about $2 billion.
New Jersey wasn't the only state that had its own loan program, but it was one that became notorious for its inconceivable terms of agreement. For example, in Massachusetts, it will automatically cancel student debt if a borrower dies or becomes disabled. That is something many other states do and something that federally backed loans do. In Texas it offers a flat interest rate of 4.5 percent, while New Jersey's rates can fluctuate up to about 8 percent, according to the New York Times. Other state loan plans mimic the federal loan repayment plan by offering repayment options that are based on income, health or other factors. However in New Jersey, it "encourages students to buy life insurance in case they die to help co-signers repay," according to the New York Times. One of the state's pamphlets even warns, "Are you prepared for the unthinkable?"