NJ Student Lending Authority Sold Out Servicemembers on Loans

New Jersey Higher Education Student Assistance Authority’s (HESAA) greed has been exposed, as the organization has agreed to pay $50,000 to settle allegations that it violated the Servicemembers Civil Relief Act (SCRA).

The SCRA protects servicemembers from default judgments in circumstances in which, because of their military service, they may be unable to appear in court and defend themselves. Under the SCRA, if a lender files a civil lawsuit against a borrower and then seeks a default judgment, the lender must notify the court of the borrower’s military status.

HESAA, however, obtained default judgments against two SCRA-protected servicemembers by failing to disclose their military service and filing affidavits that inaccurately stated that they were not in the military. Lenders can verify an individual’s military status by searching the Defense Manpower Data Center’s free publicly available website (DMDC database) or by reviewing their files to see if there are applications, military leave and earnings statements, or military orders indicating military status.

Assistant Attorney General Kristen Clarke of the Civil Rights Division stated, “Congress enacted the Servicemembers Civil Relief Act to protect those who risk their lives serving our nation. This settlement clearly sends the message that the Department of Justice will continue enforcing the Act vigorously to protect servicemembers and to ensure that all covered industries, including providers of student loans, comply fully with the law.”

Acting U.S. Attorney Rachael A. Honig for the District of New Jersey added, “Through this settlement, we honor the brave members of our armed services by ensuring that their rights are protected when called to duty. This office remains steadfast in its commitment to protect the rights of servicemembers in New Jersey. We thank HESAA for its cooperation with our investigation and HESAA’s acknowledgement that protecting the rights of servicemembers under the SCRA is of significant public importance.”

The Civil Rights Unit of the U.S. Attorney’s Office for the District of New Jersey launched its investigation after Coast Guard legal assistance attorneys in Portsmouth, Virginia, reported that HESAA had obtained a default judgment in 2019 against a Coast Guard Petty Officer who had co-signed for two student loans.

Under the proposed consent decree, which was filed today in the United States District Court for the District of New Jersey and must still be approved by the Court, HESAA will pay $15,000 each to two servicemembers who had default judgments entered against them, and will pay a civil penalty of $20,000 to the United States. The consent decree also requires HESAA to provide SCRA training to its employees and outside counsel and develop new policies and procedures consistent with the SCRA.

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