By Annie Waldman, ProPublica

The New Jersey Senate voted unanimously on Thursday to approve a bill requiring that the state’s student loan agency forgive the debts of borrowers who die or become permanently disabled.

The measure, approved by a 34–0 vote, passed the state assembly last month, and now heads to the desk of New Jersey Gov. Chris Christie, who has 45 days to sign or veto it. The legislation would end the agency’s efforts to seek repayments from the families of deceased students, a practice disclosed in July after an investigation by ProPublica in collaboration with The New York Times.

“The trauma a family must be dealing with when they lose their child and then to have someone banging on their door for money?” said Sen. James Beach, a Democrat who was one of the sponsors of the measure. “I think that’s outrageous.”

New Jersey’s nonpartisan Office of Legislative Services projected this month that, if the bill becomes law, almost 70 loans to disabled and dead borrowers would be forgiven each year, costing the state about $1.5 million. The Senate also passed other bills Thursday aimed at reining in the loan authority and easing the financial burden on student borrowers. One would require the agency to obtain a court order before garnishing wages, taking state tax refunds, or suspending professional licenses. Another would set a borrower’s monthly payment at a level that is considered affordable based on his or her income.

The ProPublica and New York Times investigation uncovered a range of aggressive tactics employed by New Jersey’s Higher Education Student Assistance Authority, the largest state-based student loan program in the nation, which has almost $2 billion in outstanding loans. Because of the high cost of college education, students often seek alternative sources of funding, such as loans from state programs or private banks, to supplement federal aid. The federal government forgives student loans upon the borrower’s death or permanent disability.

The agency offers student loans with stringent terms that have caused financial ruin for many families, the investigation found. The loans have higher interest rates than similar federal programs.

If a borrower fails to keep up with payments, the state agency can seize wages, rescind tax refunds and suspend professional licenses, all without getting a court’s approval.

The investigation found that the agency did not accept death as a sufficient reason for the loans to be forgiven.

After her son was murdered last year, Marcia DeOliveira-Longinetti requested that the state agency forgive her son’s student loans, which total about $16,000. The agency refused, requiring Ms. DeOliveira-Longinetti, as the co-signer of her son’s loans, to continue to pay off his debt.

Nearly a dozen people testified before legislators at a Senate hearing in August, saying they were troubled by the agency’s loan program. Several families described how they had resorted to bankruptcy to manage their high debt burden.

The agency’s own executive director, Gabrielle Charette, declined the legislature’s request to testify at the hearing. Ms. Charette instead sent a letter to legislators, stating that the agency had undertaken an internal review of its practices, and would brief the lawmakers when it was completed.

Ms. Charette was appointed by Gov. Christie, who also has the power to appoint a majority of the agency’s board members and can overrule any action taken by the board.

The agency’s chief of staff, Marcia Karrow, called the investigation by ProPublica and The Times a “salacious narrative” that misrepresented the agency’s practices. Karrow has previously said that the agency was merely meeting its statutory obligations in seeking repayment of all debts. (Read the agency’s full response to questions from ProPublica and The Times).

Over the past five years, the agency has increasingly pursued borrowers in the courts to settle delinquent loans. In 2010, fewer than 100 borrowers and their co-signers faced litigation from the agency. Last year, the agency filed more than 1,600 suits. Because the state loan program is supported by tax-exempt bonds, the agency is required to keep its losses minimal. The state loan agency and the governor’s office declined to comment on the Senate action.

This story was co-published with The New York Times.

To Learn More:

New Jersey Lawmakers Vote to Forgive Dead Students’ Loans (by Annie Waldman, ProPublica)

Bill 743 (New Jersey Senate)

Nation’s Biggest Student Loan Agency Won’t Reveal Loan Forgiveness Policy Unless Asked (by Annie Waldman, ProPublica)

New Jersey Student Loan Program Seen as ‘State-Sanctioned Loan-Sharking’ (by Annie Waldman, ProPublica)