TRENTON — Sued by a collection firm and on the verge of losing her home, New Jersey mother Tracey Timony sees an advancing piece of legislation as her "last ray of hope" to avoid financial ruin.

She had co-signed on her daughter's student loans. Her daughter fell behind on payments and defaulted, and the problems grew from there.

Advanced by a state Senate panel in mid-May is a measure that requires the creation of a Loan Modification and Consolidation Program for borrowers of New Jersey college loans who've defaulted. The program would consolidate those loans into one, with a fixed interest rate, and vacate any collection or late fees added to the loan balance.

Under the measure, the state's Higher Education Student Assistance Authority would be required to notify all eligible borrowers of their program's existence, and make a consolidation application readily available and accessible to defaulted borrowers.

"We need to move this bill forward so we can get out of bankruptcy, so my child can have a life," Timony told the Senate Higher Education Committee, adding that thousands of former students "are caught in this entrapment."

The bill applies to borrowers in default on two or more NJCLASS (New Jersey College Loans to Assist State Students) loans. Those who defaulted within the last 10 years, and who've been employed full-time for at least three consecutive years at a minimum salary of $40,000, would have those loans consolidated with a fixed monthly payment and fixed interest rate. HESAA would be able to require a co-borrower or co-signer for borrowers who've been employed less than three consecutive years or those earning an annual salary less than $40,000.

The bill also applies to loans that have resulted in a judgement lien against the borrower.

Deborah Gumpper, whose son defaulted on his loans after making more than $10,000 in payments over 18 months, said a $22,000 fee was added on top of his balance by outside counsel that was tasked with collecting the debt.

"Death is the only way out of default," she told the panel of legislators. "I don't see how we can just keep these kids in default and not do something to get them out."

The sponsor's measure, Sen. Sandra Cunningham, D-Hudson, said the goal of her legislation is to make loan repayment manageable, allowing borrowers to maintain a reasonable monthly budget and still contribute to the economy.

The measure is one of several created following a hearing on student loans 18 months ago.

"It was amazing in a hearing to hear 24-year-olds and 25-year-olds sit and tell you that they felt that their life was over because they would be in debt for the rest of their lives," Cunningham said.

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