The determination of default is different depending on whether you have a federal, NJ CLASS, or private loan. Private loans are usually pretty strict (missing one payment), but it is determined by the terms of the promissory note. Federal is fairly liberal, but don't expect the same from the State of New Jersey.
In general, default occurs when you fail to make a payment when due, or to meet other terms of the note. This must be done "under circumstances where (HESAA) finds it reasonable to conclude that the borrower no longer intends to honor the obligation to repay." But what does that mean?
How Far Behind Do I Have to Be?
It can mean different things depending on how often payments are due. It is where the failure to repay persists for:
- At least 180 days when payments are due monthly; or
- At least 240 days during the period of time you are in school and payments are due less frequently (usually quarterly)
So, either six (6) monthly payments behind or 8 months if you are in school.
What Can Happen Once I Default?
Default on an NJ CLASS loan is very serious, and not fixable as with a federal loan. Many bad things can happen to you, including:
- Seizure of your NJ Tax Refund
- Garnishment of your wages
- A lawsuit against you and your cosigner resulting in levies, including on your bank accounts.
In addition to this there is the potential suspension of a professional license, so doctors, lawyers, and teachers need to be cautious. Plus, you can never get a CLASS loan again.
Is There Anything I Can Do?
Even if you are in default, and even if you are being sued by a law firm, there is hope. I have successfully negotiated many an affordable payment plan with most of the law firms contracted by the State of New Jersey to collect these loans.
If you are being sued on an NJ CLASS loan, click on this link to schedule an initial call to discuss your case. Don't wait until they've garnished your wages, as it will probably be too late to make a deal!
If you would like more information about student loans, you can download my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans.
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