NY, NJ Reach Settlements on Predatory Student Loan Practices

His New York counterpart, Letitia James, who has also sought and won relief for student loan borrowers subjected to predatory lending practices, announced a settlement with Transworld Systems, the debt collector for National Collegiate Student Loan Trusts.  

Transworld will voluntarily dismiss lawsuits filed after the statute of limitations has expired, end pending garnishments, levies, liens, restraining notices or other enforcement mechanisms associated with those suits and take steps to vacate any judgments obtained in the lawsuits. In addition, Transworld will pay $600,000 in penalties to the state or as restitution to certain New York borrowers.

Earlier this month, James renewed for the sixth time an order to halt the collection of student and medical debt owed to the state of New York for an additional 30 days due to the continuing financial hardship suffered by New Yorkers during the pandemic. The moratorium applies to student debt owed to the State University of New York campuses.

In related news, Gov. Gavin Newsom of California signed a bill that protects the state-sponsored ScholarShare 529 college savings accounts from collection proceedings by creditors.

"Saving for your child's college education is difficult enough under normal conditions, but with the economic collapse induced by the pandemic, it is especially tough for families today," said state Sen. Bob Wieckowski, who authored the bill that was also sponsored by State Treasurer Fiona Ma, chair of the board that oversees the state 529 plan.

The law adds ScholarShare 529 accounts to the list of assets that are exempt from money judgments in bankruptcy filings. The exemption amount for these accounts is set at a maximum $15,000 for the first and second years prior to a bankruptcy filing.