Our New Jersey Lawyer Explains the Consequences of Student Loan Default

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 relatively liberal, but don't expect the same from the State of New Jersey.

In general, default occurs when you fail to make a student loan payment when due or when you do not 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?

Determining Default on Student Loan Payments

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
  • At least 240 days during the period of time you are in school, and payments are due less frequently (usually quarterly)

So this means to default on your payments, you are either six monthly payments behind or eight months if you are currently in school.

What Happens Once You Default

Unlike a federal loan, a default on an NJ CLASS loan is severe and not fixable. Many things can happen to you as a result of default, including:

  • Seizure of your NJ tax refund
  • Garnishment of your wages
  • A lawsuit against you and your cosigner resulting in levies, including a levy on your bank accounts

In addition, a professional license could be suspended, so doctors, lawyers, and teachers need to be cautious. Plus, you can never get a CLASS loan again.

What You Can Do if You Are in Default

Even if you are in default and being sued by a law firm, there is hope. I have successfully negotiated an affordable payment plan with many law firms contracted by the State of New Jersey to collect these loans.

If you are being sued on an NJ CLASS loan, cl 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 want more information about student loans, you can download my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans.

Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.