Marcia DeOliveira-Longinetti's 23-year-old son was murdered last year, but according to the New Jersey state agency that administered his student loans, that's no excuse for loan forgiveness. New Jersey's Higher Education Student Assistance Authority maintains that DeOliveira-Longinetti is still required to make debt payments on behalf of her dead son.
That's one of the shocking findings of a joint investigation by ProPublica and the New York Times into New Jersey's student loan practices. While DeOliveira-Longinetti's son's federal loans were written off, the Garden State would not back down.
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"It's state-sanctioned loan-sharking," bankruptcy lawyer Daniel Frischberg told ProPublica education reporter Annie Waldman. "The New Jersey program is set up so that you fail."
The ProPublica/NYT investigation also told the sad tale of Chris Gonzalez. After being diagnosed with non-Hodgkin's lymphoma, losing his job at Goldman Sachs, and falling behind on his student loan payments, New Jersey sued him—seeking $266,000. The state was then able to seize a tax refund he was owed.
So why is New Jersey among the nation's most aggressive? Lawyer Jennifer Weil tells Broadly the state loans are actually private loans.
"As a private loan, they can make the rules they want," Weil said. "It's fairly typical for a private loan to not be automatically discharged upon somebody's death."
As the ProPublica report explained, "one reason for the aggressive tactics is that the state depends on Wall Street investors to finance student loans through tax-exempt bonds and needs to satisfy those investors by keeping losses to a minimum."
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New Jersey currently administers $1.9 billion in student loans, according to the Waldman's report. The loans also carry higher interest rates than similar federal offerings.
Weil, who is based in New Jersey and specializes in student debt, says the blurred line between public and private backing can lead to problems down the road.
"People get confused when they pick up these loans," Weil told Broadly. "They think they are government loans because they are administrated through a state agency."
Weil says private lenders are less likely to pursue load forgiveness options. Instead of negotiating favorable terms, Weil said, the lenders become "ludicrously aggressive" on collections. New Jersey seems to be responding to that market pressure—often at the expense of the mourning Marcia DeOliveira-Longinetti and others.