New Jersey runs the largest state-based student loan program. It also happens to be one of the most heavily criticized government student loan programs.
This past summer, the New York Times investigated the New Jersey lending practices and reported the following:
- Unlike federal loans, the New Jersey loans carry much higher interest rates, and payments can not be lowered based upon income.
- Because the loans are sponsored by the state rather than a bank, New Jersey can garnish wages, rescind state income tax refunds, revoke professional licenses, even take away lottery winnings — all without having to get court approval.
- One reason for the aggressive tactics is that the state depends on Wall Street investors to finance student loans.
- The agency in charge of administration has gotten very aggressive with loan enforcement — in 2010, the agency filed fewer than 100 suits against borrowers and their families. Last year, it filed over 1,600.
- According to one bankruptcy attorney, “It’s state-sanctioned loan-sharking. The New Jersey program is set up so that you fail.”
Borrowers and consumer advocates alike were outraged by the revelations. Elected officials were criticized for the program, and those same officials likely had many questions for the administrators put in change.
Fixing Their Reputation
As a result of the overwhelmingly negative reviews that the agency in charge received, the Higher Education Student Assistance Authority (HESAA) set out to improve things.
In the past three weeks the reviews of the HESAA have become dramatically more positive on Google. How did they turn things around? The HESAA sent out an email telling borrowers to post positive reviews in order to receive a 4 gigabyte flash drive.
A ProPublica investigation found that these reviews are not just misleading to consumers, but they violate the Google policies for posting reviews. According to Google’s guidelines, users should not “offer or accept money, products, or services to write reviews for a business.”
A Sad State of Affairs
Student loans have long been an area of finance with very limited consumer protections and very vulnerable customers.
The fact that a government based agency would create and enforce loans with such onerous policies and have the nerve to bribe customers into leave positive reviews is truly appalling.
Unfortunately, the issues with the HESAA are just one of many examples of the ways the deck can be stacked against student loan borrowers. Until borrowers get protections comparable to those buying a home or using a credit card, we will likely continue to see cases like this — in both the private and public sector.