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The secret of the growing NJCLASS loan


“How did my NJCLASS loan balance get so high?” This is a common question that stretches beyond just NJCLASS loans, as it affects most student loans.

Many student-loan borrowers wonder how their student loan balance grew to be so high, especially when it’s only been a few short years since the original loan amount was borrowed. With NJCLASS loans and their relatively high interest rates and punishing rules on defaults, loan balances can skyrocket in a New York minute.

One of the main ways an NJCLASS student-loan balance can grow so high, so quickly, is through default. When you “default” on an NJCLASS loan, it means you have failed to pay according to NJHESAA’s exacting terms. Once a default occurs, NJHESAA is allowed to add the unpaid interest that has accumulated on the loan so far to the outstanding balance, creating a new, higher student loan balance. This addition of the interest to the loan balance is called “capitalization.”

But that’s not all, folks! After capitalization of the interest, the new, higher balance continues to accumulate interest. If you’ve been paying attention, you may have figured out that this involves the accumulation of interest on interest. Sounds bad, doesn’t it?

Well, it gets worse. Because when a default on an NJCLASS loan happens, that also means NJHESAA can recover its own collection costs and attorneys fees from you. Those collection costs and attorneys fees basically get added onto your loan balance. If you receive a statement in the mail from NJHESAA’s attorneys, it might show that the new loan balance includes all of those costs and fees. And the attorneys fees that NJHESAA has you pay are very, very high – much higher than your student loan attorney would charge you to help you work through your NJCLASS loan problem.

The bottom line? Don’t default on your NJCLASS loan if you can help it. If you’ve already defaulted, you may want to contact a student loan lawyer for help. In New Jersey, Jennifer N. Weil, Esq. is available at (201) 676-0722.

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