Saturday, December 2, 2023

Even death won’t forgive student loans in N.J.


A mother who cosigned a student loan for her son in New Jersey was still required to make payments on the loan, even after her son was murdered, the New York Times tells us.

student loan debt

It may seem heartless, especially compared to a federal loan administrator who expressed condolences and assured the mother that her son’s balance would be written off or compared to the bailouts given by (the federal) government to private companies like banks and automotive manufacturers. And the Times certainly spins a good yarn, tugging on our heartstrings.

But student loan debt is a growing problem in the US, and for state-sponsored loan programs—New Jersey’s is the largest in the country—the government has certain tools that can help them recover the money: garnishing wages, rescinding lottery winnings, etc.

Some states apply their powers a little more stringently than others and fail to remember that the borrowers aren’t usually criminals trying to steal from the government. It wasn’t difficult, though, to find stories of borrowers who have received less than a professional response from the state loan administrators. That’s because the agency has stepped up its collections activity, filing about 1,600 lawsuits against borrowers in default last year, compared to fewer than 100 in 2010.

Clearly, strong-arm tactics on the part of the government—even in a state like New Jersey, which has established a litigious reputation across America—can’t be endorsed by us or any organization. However, since the program depends on private investors, whose money needs to be at least recovered, we can’t fault the agency for trying to collect the money.

But when a borrower can’t repay because he dies, I think that shines a different light on the story. None of this would be a problem if students didn’t accumulate more than $100,000, sometimes, in debt, just to get a bachelor’s degree, which leads to a $35,000-a-year job. There’s a bigger problem here facing students across the country: taxpayer-supported, not -bilked, education, either in college or in the trades. But I also hope professionalism, decency, and morality come to New Jersey and the state starts supporting students and investors alike. Solutions are needed. An option might be paying for life insurance policies on borrowers.

Officials in New Jersey also need to consider what this loan-sharking activity does in the bigger picture: it takes money out of the economy. When mothers are forced to repay their dead sons’ debts, they don’t buy houses or cars or other items that would keep money flowing through the economy. As I said, there’s a bigger picture here, and I mean that not just in terms of the cost of a state-supported college education but of the economy in general.

Paul Katula
Paul Katula is the executive editor of the Voxitatis Research Foundation, which publishes this blog. For more information, see the About page.

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