TRENTON – Two state lawmakers expressed commitment Thursday to investigating problems related to college students repaying private loans in New Jersey.
Sens. Sandra Cunningham and Bob Singer, the chair and a member of the Higher Education Committee, respectively, expressed disappointment after learning how frequently students – often unwittingly – tie themselves to financial anchors that will drag them to the bottom.
A new report issued by the N.J. Public Interest Research Group shows just how widespread the problem has become as students file complaints with the Consumer Financial Protection Bureau.
“It’s a little disheartening to read that so many of our students, or want-to-be students, through either misrepresentation, or not having enough information, find themselves in this situation,” said Cunningham, who pledged to hold hearings.
“We’re seeing young people racking up tremendous amounts of debt,’’ Singer said. “I appreciate making an effort going forward to allow young people to look before they leap.’’
According to Singer, legislation might be necessary to tighten up regulations to protect young borrowers and require lenders to be more transparent.
According to the NJPIRG study, students are not exhausting federal loan options before turning to private lenders, they are confused by lenders’ misleading or dense web sites, and they misunderstand what their post-college income – and loan repayment ability – actually will be.
Students in New Jersey carry an average loan debt load of $25,700, compared to a national average of $24,803, according to NJPIRG’s report, and New Jersey ranked ninth nationally in measuring how likely it would be for students to complain about loans.
The most frequent target of those complaints? In New Jersey and nationally, it’s Sallie Mae, with 81 complaints in New Jersey.
One N.J. student who talked today about his problems with Sallie Mae was Armando Ayala, of Teaneck, a senior at The College of New Jersey in Ewing.
He said he found the Sallie Mae web site so confusing that he almost mistakenly selected a variable-rate loan rather than a fixed-rate loan, which he attributed to the prominence the variable-rate information receives on the site.
In addition, he said every time his co-signer went online to validate changes he had made they never had been updated properly, and he found himself calling customer service repeatedly.
“I was really disheartened,’’ he said. “I felt misled on the application so many times.’’
Contributing to the problem is that colleges often don’t learn of these situations until after it’s too late, when the student already has made a commitment to a loan repayment plan they can’t possibly keep up with.
Jean Rash, director of financial aid at Rutgers-New Brunswick, said students, for one thing, don’t know how to ask for deferment or forbearance to temporarily reduce payments.
“Students are unsophisticated borrowers,’’ Rash said. “They don’t have a history of borrowing when they go into college.”
Regarding private loans, basically the sole involvement on a college’s part is to certify to the lender that the applicant is a student. Rutgers is providing more financial literacy programs to help students, but again, that can often occur after the fact.
“Anything that can standardize or put pressure on lenders to act uniformly would be a great help,” Rash said.
That is where possible hearings or legislation could come in as Singer, (R-30) and Cunnginham, (D-31) suggested.
In the meantime, NJPIRG wanted today – among other things – to publicize the availability of the CFPB’s Consumer Complaints Database, which accepts complaints relating to a variety of financial products and services.
NJPIRG said that the CFPB has helped more than 330 consumers, or about 8 percent of the total complaints filed, to receive monetary compensation to resolve their student loan complaints, with a median of $700 in monetary relief, and maximum relief of more than $75,000.