I was talking to a young woman the other day who was distraught over her student loans. Although some of it was federal, the rest was over $100,000 in New Jersey CLASS loans with her parents as co-signors. The CLASS loans, by themselves, were requiring a monthly payment of almost $2,000! She got a nice education, and may well get a great job, but what kind of life will she lead?
She also told me that she had recently gotten married to a man who also had student loans, although his were much less and all through federal programs. With their combined debt, she lamented, they may never be able to buy a house or have children because they simply could not afford it!
How CLASS Loans Hurt
New Jersey's CLASS loans, administered by the ironically named Higher Education Student Assistance Authority (HESAA), are not much different than private loans in their terms (8% interest rate over 20 years), although you can get a rate lower than the feds (5.49%) if you pay it back in 10 years. However, in return for the lower interest rate, you do not get the benefits of a federal loan, such as:
- Income based repayment
- The ability to rehabilitate a loan out of default
- More flexible and easily obtained forbearances or deferments in a pinch
The same is true for private loans with banks, but they can't take your tax refund or garnish your wages administratively (i.e. without a lawsuit) like New Jersey can. In addition, because CLASS and private loans are credit based, they often have a cosignor like a parent, who is also on the hook if you don't pay.
A Cautionary Tale
The situation of this young woman is indicative of how bad things have gotten in trying to make sure that everyone can get a good education and a bright future. Ironically enough, it is that good education that darkened her future. With student loan debt over $1.1 trillion nationally, and the percentage of graduates in default, it is just getting worse.
For those with CLASS loans, this is not going to change until the state implements some realistic, income-based repayment options and allows borrowers to get out of default and in good financial condition. Write your senator or assemblyman; it is an election year, after all!
This Sounds Like Me; What Do I Do?
In the meantime, if you are struggling like this woman was, and you live in the Gloucester County, New Jersey area, please feel free to call my office at 856-432-4113 or through this site to schedule an appointment. I may be able to help.
Have questions about your student loans? Download my free book, I Graduated; Now What? A Guide to Dealing With Your Student Loans to get the answers you need!