N.J. Admin. Code § 9A:10-6.16

Current through Register Vol. 56, No. 8, April 15, 2024

Section 9A:10-6.16 - Default, consequences of default, and rehabilitation

(a) Default occurs when a borrower fails to make an installment payment when due, or to meet other terms of the Promissory Note under circumstances where the Authority finds it reasonable to conclude that the borrower no longer intends, or is no longer able, to honor the obligation to repay, or when the borrower fails to make installment payments when due, provided failure to repay persists for:

1. At least 180 days when payments are due monthly; or

2. At least 240 days during the student's in-school period when payments are due less frequently than monthly.

(b) Upon default, the borrower and/or cosigner, if any, are liable for the entire balance of the loan. Upon default, the Authority shall notify credit bureaus of this negative information. Default may result in any or all of the following: expedited increase of interest rate, loss of State income tax refunds or State tax rebates, legal action, assessment of collection charges, including attorney fees of up to 30 percent of the debt collected, loss of eligibility for other student aid, negative credit reports, administrative wage garnishment, and offset of lottery prize winnings.

(c) To facilitate recovery on a defaulted NJCLASS Loan Program loan, Refinance Loan, or NJCLASS Consolidation Loan, the Authority shall offer parties to the defaulted loan the opportunity to enter into a settlement agreement, either pre- or post-judgement, based on the terms of the loan and the ability of the parties to the loan to make payments.

1. The Authority's counsel shall respond to a request for a settlement agreement within 15 business days of the request.

2. The Authority's counsel shall provide parties with a proposed written settlement agreement within 30 business days of reaching an oral agreement with the parties reflecting the agreed upon terms.

3. For an NJCLASS Loan Program loan, Refinance Loan, or NJCLASS Consolidation Loan financed in whole or in part by bonds issued by the Authority pursuant to N.J.S.A. 18A:71A-8, the terms of the settlement agreement shall not violate the terms of the applicable bond indentures.

(d) If parties to a defaulted NJCLASS Loan Program loan, Refinance Loan, or NJCLASS Consolidation Loan can demonstrate to the Authority an ability and willingness to repay the loan by making nine on-time monthly payments over the course of 10 consecutive months pursuant to the settlement agreement, the loan shall be considered rehabilitated for the limited purposes of meeting the requirements of Title VI of the Federal Economic Growth, Regulatory Relief, and Consumer Protection Act, Pub. L. 115-174.

1. If subsequent to rehabilitating the loan, the parties fail to continue to honor the obligations of the settlement agreement for at least 180 days, the loan may no longer be considered rehabilitated.

2. A defaulted NJCLASS Loan Program loan, Refinance Loan, or NJCLASS Consolidation Loan may only be rehabilitated one time.

(e) The Authority shall accurately report the status of defaulted loans to the credit bureaus pursuant to the Federal Fair Credit Reporting Act, 15 U.S.C. § 1681s-2, and Title VI of the Federal Economic Growth, Regulatory Relief, and Consumer Protection Act, Pub. L. 115-174.

(f) In the event a borrower with a defaulted NJCLASS Loan Program loan, Refinance Loan, or Consolidation Loan has entered into a settlement agreement with the Authority and is not in breach of such agreement, the Authority shall not refer the borrower to the Department of the Treasury, Division of Taxation, for set-off of Individual Liability, or notify the Department of the Treasury, Division of the State Lottery, to withhold the borrower's winnings.

N.J. Admin. Code § 9A:10-6.16

Amended by 48 N.J.R. 2433(a), effective 11/21/2016

Amended by 56 N.J.R. 374(a), effective 3/4/2024