Amid a haze of grief after her son’s murder last year, Marcia DeOliveira-Longinetti faced an endless list of tasks 2014 helping the police access Kevin’s phone and email, canceling his subscriptions, credit cards and bank accounts, and arranging his burial in New Jersey.
And then there were his college loans.
When DeOliveira-Longinetti called about his federal loans, an administrator offered condolences and assured her the remaining balance would be written off.
But she got a far different response from a New Jersey state agency that had also lent her son money.
“Please accept our condolences on your loss,” said a letter from the Higher Education Student Assistance Authority to DeOliveira-Longinetti, who had co-signed the loans. “After careful consideration of the information you provided, the Authority has determined that your request does not meet the threshold for loan forgiveness. Monthly bill statements will continue to be sent to you.”
DeOliveira-Longinetti was shocked and confused. After all, the agency features a photo of Governor Chris Christie on its website, and boasts in its brochures that its “singular focus has always been to benefit the students we serve.”
But her experience with the authority, which runs by far the largest state-based student loan program in the country, is hardly an isolated one, an investigation by ProPublica, in collaboration with the New York Times, found.
New Jersey’s loans, which currently total $1.9 billion, are unlike those of any other government lending program for students in the country. They come with extraordinarily stringent rules that can easily lead to financial ruin. Repayments cannot be adjusted based on income, and borrowers who are unemployed or facing other financial hardships are given few breaks.
New Jersey’s loans also carry higher interest rates than similar federal programs. Most significantly, the loans come with a cudgel that even the most predatory for-profit players cannot wield: the power of the state.
New Jersey can garnish wages, rescind state income tax refunds, revoke professional licenses, even take away lottery winnings 2014 all without having to get court approval.
“It’s state-sanctioned loan sharking,” said Daniel Frischberg, a bankruptcy lawyer. “The New Jersey program is set up so that you fail.”
The authority has become even more aggressive in recent years. Interviews with dozens of borrowers, who were among the tens of thousands who have turned to the program, show how the loans have unraveled lives.
The program’s regulations have destroyed families’ credit and forced them to forfeit their salaries. One college graduate declared bankruptcy at age 26 after struggling to repay his debt. The agency filed four simultaneous lawsuits against a 31-year-old paralegal after she fell behind on her payments.
Another borrower, Chris Gonzalez, couldn’t keep up with his loans after he got non-Hodgkin’s lymphoma and was laid off by Goldman Sachs. While the federal government allowed him to suspend his payments because of hardship, New Jersey sued him, seeking nearly $266,000 in payments, and seized a state tax refund he was owed.
One reason for the aggressive tactics is that the state depends on Wall Street investors to finance student loans through tax-exempt bonds and needs to satisfy those investors by keeping losses to a minimum.
Loan revenues also cover about half of the agency’s administrative budget.
In 2010, the agency filed fewer than 100 suits against borrowers and their families. Last year, it filed over 1,600 suits. (Some could result from federal loans handled by New Jersey, though such loans make up just 4 percent of the agency’s portfolio.)
The cases are handled by debt collectors, who can tack on another 30 percent in fees on top of the outstanding debt.
Marcia Karrow, the authority’s chief of staff, said, “the vast majority of these borrowers are happy with the program.” She added that New Jersey’s loans had “some of the lowest default rates” in the country. But when asked to produce the annual default rates, the agency sent ProPublica and the Times data only for students with strong credit scores, making it impossible to calculate the overall rate. (Read their responses to our questions.)
A spokesman for Gov. Chris Christie said the governor does not control the authority and declined to respond to questions about the loan program. But Christie appointed its executive director, Gabrielle Charette; he also has the power to appoint at least 12 of the agency’s 18 board members and can veto any action taken by the board.
Besides administering the loan program, the authority provides financial aid counseling, conducting hundreds of financial aid nights at New Jersey high schools, where it offers advice about paying for college, including pitching its own loans.
DeOliveira-Longinetti, who emigrated from Brazil and had long worked as a nanny while raising her son as a single mother, always knew that paying for college would be a challenge. Even after marrying her husband when Kevin was in middle school, she knew that their combined income would not be enough to cover the costs. But a friend told her about New Jersey’s program. That, along with a combination of scholarships, grants, and other loans, allowed Kevin to enroll at the University of Vermont.
Since her son’s murder, DeOliveira-Longinetti has made 18 payments to New Jersey. At $180 per month, she has about 92 to go.
“We’re not going to be poor because of this,” she said. “But every time I have to pay this thing, I think in my head, this is so unfair.”
For decades, states served as middlemen for federal student loans. Most of the loans were made by banks and were handled and backed by regional and state-based agencies as well as by the federal government. The arrangement was unwieldy, expensive and marked by scandal.
That same year, New Jersey’s agency was caught in what amounted to a kickback scheme. The state attorney general found that the agency had improperly pushed one company’s loans in exchange for annual payments of $2.2 million. A subsequent investigation by the state’s inspector general found that the agency was in “disarray.”
In 2010, Congress and the Obama administration decided to effectively eliminate the role of state agencies by having only the federal government lend directly to students.
Some states, like California, decided to downsize and transferred their federal loan portfolios. Others, such as Pennsylvania, won contracts from the federal government to service debt from the federal loan program.
But New Jersey chose a different path. In the years leading up to the end of the federal program, New Jersey sharply expanded its loan program, slowly replacing the federal loans it once handled with state loans. From 2005 to 2010, loans from the agency nearly tripled, to $343 million per year. Since then, the agency has reduced its loans by half, but its outstanding portfolio has remained roughly the same, about $2 billion.
Karrow said the growth of New Jersey’s program was simply a result of both the growing number of students and the rising cost of tuition. But in fact, college enrollment and tuition have not grown as rapidly as the program’s size.
Lawsuits on the Rise for the New Jersey Higher Education Student Assistance Authority
Source: New Jersey Courts Automated Case Management System (ACMS) and Archive Case Management Information System (AMIS)
While other states have similar programs, New Jersey’s stands apart, both for its size and onerous terms.
Massachusetts, running the next-largest program with $1.3 billion in outstanding loans, automatically cancels debt if a borrower dies or becomes disabled, something many other states also do. The program of the third-largest state lender, Texas, is half the size of New Jersey’s. And Texas offers a flat interest rate, a modest 4.5 percent, while New Jersey’s rates can reach nearly 8 percent. Some other state loan programs also have more flexible repayment options 2014 Rhode Island, for example, offers income-based repayment.
New Jersey, meanwhile, encourages students to buy life insurance in case they die to help co-signers repay. As an agency pamphlet cautions, “Are you prepared for the unthinkable?”
The agency, Karrow said, treats each instance of a deceased borrower case by case and tries to be compassionate, but, she added, “we must also meet our fiduciary duty to our bondholders.”
When consumer lawyers protested the program’s onerous conditions at a 2014 agency meeting, the agency, according to minutes from the meeting, said that giving borrowers a break would make the bonds sold to finance loans “less attractive to the ratings agencies and investors.“
Indeed, in a recent bond assessment, the credit rating agency Moody’s cited the authority’s “administrative wage garnishing, which it uses aggressively” for “significantly higher collections” compared with other programs.
A New Jersey rule adopted in 1998 allows the agency to give borrowers in default a second chance by allowing them to become current on their account through on-time payments. But the agency has never granted a reprieve and instead cuts off contact with borrowers, leaving them at the mercy of collection firms.
Karrow said federal regulations prohibited the agency from offering such relief, but student loan experts disputed that assertion.
“There is nothing in the federal law or regulations that prohibits them from offering private loan rehabilitation,” said Mark Kantrowitz, a financial-aid expert.
The combination of a lack of flexibility, an unwillingness to discharge loans and the state’s power to seize wages has resulted in even “more intractable problems for our clients than predatory mortgages, deceptive car loans or illegal internet payday lending,” said David McMillin, a lawyer with Legal Services of New Jersey, a nonprofit organization that provides free legal assistance to low-income state residents. “Many borrowers and co-signers find themselves facing a lifetime of debt problems.”
Given the lack of options, some New Jersey borrowers have resorted to declaring bankruptcy, even though, as is true of all student loans, their debt is rarely canceled. Declaring bankruptcy also makes it virtually impossible to secure a mortgage, lease a car or even use credit cards for years. But for New Jersey borrowers, such an extreme step at least offers a way to gain manageable monthly payment terms.
As a co-signer, Tracey Timony struggled to help pay off her daughter’s $140,000 in loans. Though the Higher Education Student Assistance Authority can seize wages or tax returns without court approval, it must secure a judgment to dip into borrowers’ bank accounts or place liens on their property. Instead of garnishing Timony’s wages, New Jersey sued her after her daughter defaulted.
“The agency is looking to put as much pressure on the borrower and be as aggressive as possible, and the way that you do that is you go after everybody that is liable,” said Jennifer Weil, a New Jersey student debt lawyer. “In case the garnishment doesn’t work, a judgment will help put pressure on the parents.”
Timony declared bankruptcy and got monthly debt payments that will rise no higher than about $1,000 a month, far less than what the agency had demanded.
“I never thought that sending my daughter to college would ruin our lives,” Timony said.
Few have felt the weight of the agency’s powers more than Gonzalez, the college graduate who was sued after receiving a diagnosis of cancer and losing his job.
He had borrowed the maximum he could in federal loans 2014 a total of about $30,000 for five years 2014 and paid for most of his tuition with loans from New Jersey.
“I felt so comfortable because it was the State of New Jersey,” he said. “It’s the state, my government, trying to help me out and achieve my American dream. It turns out they were the worst ones.”
Over five years, he took out over $180,000 in state loans. Unlike most other states, New Jersey does not impose a strict cap on loans to discourage overborrowing. One family, according to a recent state audit of the agency, took out over $800,000 in loans, more than five times the value of their home.
Gonzalez’s loans had a relatively high interest rate 2014 on average about 7.5 percent. At the time it seemed like a good investment. He graduated with an engineering degree from Embry-Riddle Aeronautical University in Florida and landed a job on Wall Street working as a programmer for Goldman Sachs.
But a few months after he started, unusual rashes began to appear on his legs and underarms. He was diagnosed with non-Hodgkin’s lymphoma and started radiation therapy.
After three years of cancer treatments, Gonzalez was also laid off.
He needed to take care of his student loans. The federal government and his private lenders all deferred his debt for at least six months.
Gonzalez expected New Jersey to do the same, but the agency refused, requiring him to pay at least $500 a month. With unemployment checks as his only income and burdened by continuing health expenses, it was too much for him.
He made no payments while the agency reviewed his case. In June 2014, Gonzalez moved to Florida to lower his cost of living. His health slowly improved and he started his own company, developing technology for small businesses. In his first year, he made just $26,000, but he started to pay back his federal and private bank loans.
On May 8, 2015, after months of hearing nothing, he received an email from New Jersey: His deferral request had been denied and his loan was being sent to a collection agency.
“Unfortunately, because of how the loan originated, the Authority is not in a position to offer forbearance or relief,” Robert Laird, a program officer at the loan agency, said in the email.
Terrified by what a default would mean for his credit rating, Gonzalez told the agency that he would stop paying for health insurance and use the money 2014 $200 per month 2014 to repay the loans.
The agency rejected the offer. “In the event that your doctor declares you total and permanently disabled, please keep me posted,” Laird told Gonzalez in an email.
One day in April, a stranger rang Gonzalez’s doorbell.
“Chris Gonzalez?” he asked. Gonzalez nodded. “You’ve been served with a lawsuit from the New Jersey Higher Education Student Assistance Authority.”
The suit demanded over $260,000 2014 about $188,000 for the original loans, nearly $34,000 in interest, and $44,000 to cover the fees of a collection agency’s lawyer.
Even if his business improves, Gonzalez has no idea how he will afford his ballooning payments.
“I don’t have money,” he said. “I am spending it all on my debt.”
ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for their newsletter.
Most big donors don’t want Warren on the ticket because she is the most accomplished anti-Wall Street populist in the Democratic Party. But many also think her presence would drive a potential Clinton administration too far to the left, poison relations with the private sector from the start and ultimately be damaging to the economy.
A constant theme that emerged in the interviews is that executives in the financial industry believe the first 100 days of a Clinton administration could feature potential deal making with Republicans, who are likely to maintain their majority in the House of Representatives.
The dream deal for Wall Street would be a combination of targeted infrastructure spending that appeals mostly to Democrats and corporate and international tax reform that could bring Republicans along. The fear is that Warren would make such a deal more difficult.
“Clinton is going to face a divided government unless there is a total tsunami,” said one moderate Washington Democrat with close ties to the banking industry. “What you want in a vice president is someone who can negotiate for you on the Hill, someone like Joe Biden. And that is not a Warren strength.”
All of the donors and senior Democrats interviewed for this story demanded that their names not be used both because they were not authorized to speak about the Clinton campaign’s internal deliberations and because they feared Warren’s wrath.
“There is no upside to my talking to you on the record,” one big donor said. “Either I piss off the Clinton campaign or I piss off Warren, or both.”
An independent federal report on the Trans-Pacific Partnership (TPP) found that the trade agreement between 12 countries would have only modest benefits to the U.S. economy and job growth. The report was mandated by US law as a final step before President Obama could send legislature to Congress for a vote. The highly anticipated report, conducted by the US International Trade Commission, was revealed on Wednesday. It predicted that by 2032 the TPP would likely increase the national income by $57.3 billion a year, just 0.23% more than what it would be without the trade pact.
This falls short of what private studies had projected would be an increase of over $100 billion annually, including a study by the Peterson Institute for International Economics, which in January of this year estimated an increase of $131 billion in annual real income by 2030.
While the report projected US exports would increase, imports would grow at a faster rate with free trade partners in Japan, Malaysia and Vietnam. Job growth would also be modest in the US with a projected addition of 128,000 jobs by the 15th year of the TPP’s implementation, which is only 0.07% greater than baseline estimates.
Dean Baker, co-director of the Center for Economic and Policy Research, notes the unreliability of these types of projections because of their inability to account for future currency fluctuations and exchange rates.
Top White House trade representative, Michael Froman, who finalized the TPP at the end of last year, emphasized that the International Trade Commission report did not acknowledge the non-tariff benefits including measures to help American firms protect intellectual property, solidify more free and open Internet commerce and reduce the red tape and competition from state-subsidized foreign competitors.
“There has been tremendous focus on the impact on manufacturing,” said Joel Nied, the chairman of the Transactional Group of Price Benowitz, a US law firm that focuses on international business transactions, “but the agreement will have a profound impact on intellectual property protection issues for US companies as well.” It is important to note that the US-led pact does not include China. Obama stated that the TPP is critical to securing US economic interests in Asia. The Pacific partnership includes Canada, Australia, Mexico, Singapore, Chile, Peru, New Zealand and Brunei, binding economies that constitute nearly 40% of global economic production. Continue Reading →
John Oliver’s weekly 20-minute rants have a knack for seeping into the mainstream. The Consumer Financial Protection Bureau recently announced new, stronger regulations on the payday loan industry, nearly two years after Oliver called them out for their predatory business model. At Oliver’s urging, viewers sent 45,000 emails to the Federal Communications Commission urging them to… Continue Reading →
If there is a single, overriding lesson in the unfolding Trump University scandal, it is this: If you are the defendant in a civil trial in which you are accused of a massive and grotesque act of fraud, it’s probably best if you don’t get up in public and imply (loudly) that the presiding judge is a Mexican criminal. This can result in the judge’s simply saying, “Fck it,” and dumping a metric ton of evidence regarding said fraud into the public domain. This then will require you to hold a press conference in which you are forced to call a reporter “sleaze” and generally act out because—and I am borrowing here from the Twitter account of the great Quinn Cummings—you are really a giant toddler.
If there is a single, overriding question in the unfolding Trump University scandal, however, it is this: Why in god’s name is anyone surprised?
Of course, the fact that He, Trump was behind this scam is prima facie evidence of some thoroughgoing shenanigans, but that’s not what I mean. He, Trump is an apex bunco artist, but he also is a high-profile American corporate businessman of the late 20th century.
Were you one of the millions who lost your home, job or both in 2008 when the housing market crashed? It shouldn’t surprise you to discover that Donald Trump was one of the guys sitting on the sidelines waiting to profit from your misery. This happened while he was peddling his bogus Trump University courses to… Continue Reading →
Why do many school districts fail to meet the needs of their students? One commonly cited response is our country’s disparate school funding system: because most districts rely heavily on local property tax for funding, schools in poor districts are often left with fewer resources than schools in wealthier areas. Even though school funding issues play out on a local level, in recent decades, it’s risen to the forefront of national issues. This past year, for the tenth year in a row, a national Gallup poll found that Americans view lack of financial support as the largest problem facing America’s schools.
But can more money really fix America’s struggling, poor schools? That is exactly what NPR’s Cory Turner and a team of over 20 NPR member-station reporters wanted to find out. After six months of investigating, Turner and his team published a series of stories digging into school funding disparities from Chicago to Sumter County, Alabama. ProPublica education reporter Annie Waldman spoke with Turner to learn more about their investigation.
Today we learn of another puzzle piece regarding Herr Trump’s shady financial dealings and wow, this one is a doozy. For months, Herr Trump has been dodging requests to show his taxes and just yesterday said “There’s nothing to learn from them.” Ironic, considering in 2012 he publicly blasted Mitt Romney for being slow to release… Continue Reading →
During the debate, opposition parties argued pension cuts and tax hikes would prove recessionary, dealing another blow to a population fatigued by years of austerity.
“The measures will be a tombstone for growth prospects,” said Kyriakos Mitsotakis, leader of the conservative New Democracy party which leads in opinion polls.
Tsipras was re-elected in September on promises to ease the pain of austerity for the poor and protect pensions after he was forced to sign up to a new bailout in July to keep the country in the euro zone.
Monday’s reforms are part of a package that aims to generate savings equivalent to 3 percent of GDP, raising income tax for high earners and lowering tax-free thresholds.
It increases a ‘solidarity tax’ and introduces a national pension, while phasing out benefits for poor pensioners.
I know what it is like to have to juggle creditors to make it through a week. I know what it is like to have to swallow my pride and constantly dun people to pay me so that I can pay others. I know what it is like to have liens slapped on me and to have my bank account levied by creditors. I know what it is like to be down to my last $5—literally—while I wait for a paycheck to arrive, and I know what it is like to subsist for days on a diet of eggs. I know what it is like to dread going to the mailbox, because there will always be new bills to pay but seldom a check with which to pay them. I know what it is like to have to tell my daughter that I didn’t know if I would be able to pay for her wedding; it all depended on whether something good happened. And I know what it is like to have to borrow money from my adult daughters because my wife and I ran out of heating oil.
You wouldn’t know any of that to look at me. I like to think I appear reasonably prosperous. Nor would you know it to look at my résumé. I have had a passably good career as a writer—five books, hundreds of articles published, a number of awards and fellowships, and a small (very small) but respectable reputation. You wouldn’t even know it to look at my tax return. I am nowhere near rich, but I have typically made a solid middle- or even, at times, upper-middle-class income, which is about all a writer can expect, even a writer who also teaches and lectures and writes television scripts, as I do. And you certainly wouldn’t know it to talk to me, because the last thing I would ever do—until now—is admit to financial insecurity or, as I think of it, “financial impotence,” because it has many of the characteristics of sexual impotence, not least of which is the desperate need to mask it and pretend everything is going swimmingly. In truth, it may be more embarrassing than sexual impotence. “You are more likely to hear from your buddy that he is on Viagra than that he has credit-card problems,” says Brad Klontz, a financial psychologist who teaches at Creighton University in Omaha, Nebraska, and ministers to individuals with financial issues. “Much more likely.” America is a country, as Donald Trump has reminded us, of winners and losers, alphas and weaklings. To struggle financially is a source of shame, a daily humiliation—even a form of social suicide. Silence is the only protection.