Defaulting on your student loans can have a significant negative impact on your credit score and prevent you from realizing your dreams in life, like home ownership or even an affordable car payment. Getting out of default and into an affordable repayment plan is therefore critical to getting on a good financial track.
Federal loans have had income driven repayment plans for years, as well as a path out of default that allows you the ability to repair your credit. But what if you have a New Jersey CLASS loan through the Higher Education Student Assistance Authority (HESAA)? What then?
Default Cure Now Available for HESAA Student Loans
The good news is that, for a year now, there has been a way of doing this; the sad part is that so few people know about it. In the Spring of 2019, Governor Murphy signed into law a bill to offer income based repayment plans to borrowers that also made it possible to remove the default denotation from your credit reports! This would, in turn, cause the FICO score based on that report to go up.
The path towards a higher score is in two parts and will take up to a year to accomplish, but the rewards are certainly worth the time and effort. Here's what you need to do.
Negotiate an Affordable, Income Based Repayment Plan
The first step is to work out a way to repay the loan with HESAA. With the loan in default, it will have been assigned to a law firm for collection, so you will be negotiating with them. This involves filling out a one page financial disclosure form and attaching income documents like paystubs and tax returns.
HESAA will then review this form and propose a repayment plan that waives interest, so that you are paying down principal over time. Once you get to the end of the repayment period, the interest is forgiven, and you are finished. But it is important to note that should you default on this deal, all accrued interest will be rolled into principal, your balance will go up, and you will not be able to get a deal like this again.
The repayment term depends on how much you owe and what your financial disclosure indicates that you can afford to pay. I have been successful in negotiating principal-only repayment plans that have been as long as 30 years!
That may seem like a long time, but if the payment is affordable now, that's what's important. If things improve for you as the years go by, you can always make larger payments and pay it off sooner.
Bear in mind that this interest forgiveness could have tax consequences, and you should consult with an accountant before entering into an arrangement like this.
Make On Time Payments for 9 Months
Much like default rehabilitation in the federal system, HESAA requires you to make at least nine (9) on-time payments under the payment plan before they will take you out of default. Once you do that, the law firm will report to HESAA that you have done so, and it will then report to the credit agencies.
This process can take up to 90 days, so HESAA's always firms recommend that you not anticipate the reporting, and the increase in your score, until you are a year into your repayment plan.
I Can Help!
Over the years I have successfully negotiated many payment plans for clients that have helped them to get their financial lives back on track. Although I cannot guarantee success, I can say that failure to reach a deal is an extremely rare event for me.
If you live in New Jersey, have a defaulted HESAA loan, can afford to make a monthly payment, and are ready to take action, then call my office right away at 856-432-4113 to schedule an appointment or contact me by e-mail.
Looking for more information on HESAA loans? Then download my free book, Paying for Your Classes with a CLASS Loan: A Survival Guide to HESAA.
If you liked this information and found it useful, then you might like or need these others:
- Income Based Repayment of HESAA Loans
- When Am I in Default on a HESAA Loan?
- How Do I Get Out of Default on Federal Loans?