Questions
Questions on the NJCLASS Program:
1. How does the NJCLASS loan program differ from federal loans in terms of benefits to
borrowers?
HESAA Response: NJCLASS Option 1 and 2 loans have consistently offered borrowers
lower interest rates than the federal Parent Plus loan. For example, this coming
academic year, 2016-2017, the initial NJCLASS ten year Option 1 rate is 4.48% and 15
year Options 1 and 2 are 5.19%. As of July 1, 2016, the federal Parent PLUS rate will be
6.31%.
While the federal undergraduate Stafford loan interest rate will be 3.76% it should be
noted that Stafford loans have annual loan limits that in most instances do not cover the
full cost of attendance.
Federal loans do not provide borrowers with disclosures. NJCLASS loans provide all
parties to the loan with three disclosures (Application, Loan Offer, and PreDisbursement). Attached are copies of all NJCLASS’s disclosures.
2. How do NJCLASS loans differ from private loans in terms of benefits to borrowers?
HESAA Response: NJCLASS loans are not tier rated. For example, many private loans
offer low interest rates to borrowers with exceptional credit scores and high income and
higher interest rates to borrowers with lower credit and income. HESAA did an analysis
of a large private lender’s portfolio and it showed that, while the lender offered lower
interest rates to some borrowers, the majority of the lender’s portfolio was loans with
interest rates in excess of 9.0%.
Also, all NJCLASS loans are serviced in-house by HESAA staff. Other lenders may use
a variety of servicers which can cause confusion to borrowers.
3. Are NJCLASS loans as flexible as federal loan options, particularly when students are
struggling to pay back their loans? Why or why not?
HESAA Response: Federal loans are financed and subsidized with general tax
revenue.
NJCLASS loans are financed through the sale of tax-exempt bonds.
Therefore, NJCLASS loans must be administered in strict accordance with the bond
indentures and covenants.
Notwithstanding the above, NJCLASS does offer struggling borrowers a number of
deferments and forbearances, including: Recent Graduate, Financial Hardship,
Unemployment, Intern or Resident (only applies to medical professions), Armed Services
and Peace Corps.
It should be noted that the vast majority (over 90%) of NJCLASS loans are cosigned, and
as such, are family loans. HESAA requires cosigners because we believe it is important
that a responsible adult is standing behind the student. When an individual cosigns a
loan the individual is legally contracting to be responsible for the loan. If the student
borrower is struggling it is incumbent upon the cosigner to assist the student during that
period.
4. How about compared with private loans options?
HESAA Response: HESAA is not aware of the particulars with respect to other lenders’

 policies and options as there are a number of lenders with varying policies. Therefore,
we cannot answer this question.
5. How does HESAA work with NJCLASS borrowers to help them when they are struggling
or falling behind on their loans? What kind of default aversion practices does the agency
employ?
HESAA Response: HESAA believes default aversion is extremely important; the last
thing we want for our borrowers is to default. HESAA further believes that default
aversion starts when the loan is first taken not after the loan has gone into repayment.
To that end, HESAA counsels borrowers, before they take a loan, to borrow as little as
possible, and to select Option 1 or Option 2 as these options are the least expensive and
they establish a positive payment habit early in the life of the loan.
HESAA also sends Option 3 borrowers annual notices to remind them of their
outstanding obligation.
In addition to the disclosures which detail repayment
responsibilities, HESAA also sends borrowers who are in the fully deferred option, Option
3, a letter reminding them that as they approach graduation they are also approaching
loan repayment.
One of the criticisms of the federal loan program is that it gives borrowers an automatic
recent graduate deferment of 6 months. While this may seem like a borrower benefit, in
reality it is often not beneficial. Many students spend the first six months after graduation
working to secure a job, an apartment, maybe an automobile, and incur routine expenses
without consideration to their looming loan payment and, in many cases, accruing
interest.
HESAA offers struggling borrowers a program to bring their accounts current. To avoid
default, a delinquent borrower must make three consecutive on-time payments and
HESAA will re-age the loan and return it to current status.
FOR QUESTION 6, HESAA’S RESPONSES ARE EMBEDDED AFTER EACH INDIVIDUAL
QUESTION.
6. In conversations with borrowers and cosigners, many have expressed a lot of concern
with and criticism of the loans. We researched their concerns and compared them with
other state based loan programs. Specifically:
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The lack of automatic death and disability discharge: At least 10 state based loan
programs offer this benefit automatically to students (not to mention the federal
government and some private banks). In one case, I spoke with a cosigner, whose
son was murdered, yet his loans were not forgiven. Why does HESAA not
automatically discharge loans upon the death of a borrower? Why is it better to
encourage students/parents to get life insurance?
HESAA Response: If the student dies during the in-school period, HESAA forgives
the loan. If the student dies after leaving school, HESAA looks to the cosigners to
satisfy the loan. However, HESAA does allow these cosigners to seek forgiveness
due to severe financial hardship. It should be noted that in the last fiscal year,
HESAA granted over 50% of the requests received.
Also, HESAA understands that, while some families do not qualify for financial
hardship, they wish to achieve closure and resolve the debt. In those cases, HESAA
will consider a lump sum settlement.
The death of a loved one is always a difficult and emotional matter. While HESAA

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 tries to be as compassionate as possible, we must also meet our fiduciary duty to our
bondholders. Blanket forgiveness policies would increase HESAA’s cost of capital
and in turn increase interest rates for all NJCLASS borrowers across the program.
Hence, we believe our suggestion to secure life insurance is prudent advice.
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Higher interest rates: HESAA’s low-end interest rate is higher than more than half of
the state based loan programs in the country. The high-end interest rate is among the
top five highest of state based loan programs in the country. Why can’t HESAA offer
a lower interest rate or a flat interest rate to its students (the interest rate increases
several months/years after origination by 0.75%)?
HESAA Response:
According to HESAA’s research, 14 other states offer
supplemental loan programs. Interest rates range from a low of 4.24% to a high of
9.0% and origination fees range from a low of 0% to a high of 7.0%.
As noted above HESAA’s initial interest rates for the coming academic year, range
from 4.48% to 7.15%. Our origination fee is 3.0% for all our loan options, except our
variable rate option which does not carry an origination fee at all. Hence HESAA’s
interest rates and fees are well within the range of our sister states’ agencies.
The initial lower rate is a borrower benefit because it lowers the interest rate at the
start of the loan when the principal balance is largest. This allows more of the
monthly payment to go to pay down principal in the early years of repayment and, as
a result, lowers the overall cost to the borrower.

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Grace period of 45 days: Nearly all state based loan programs offer a grace period of
6 months. Why doesn’t HESAA allow NJCLASS borrowers an automatic 6 month
grace period—instead of just 45 days?
HESAA Response: HESAA offers a 6 month recent graduate grace period if
requested by the borrower. This grace period is not automatic because during the
grace, period the loan is still accruing interest. Therefore, it is not in the borrower’s
best interest to delay repayment and allow more interest to accrue.

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Deferment and forbearance options: Many state based programs offer generous
deferment and forbearance options. HESAA will not allow students to have a full
deferral requiring students to pay interest even in times of economic hardship or
unemployment. Why does HESAA not allow for greater flexibility when borrowers are
facing hard times?
HESAA Response: The above statement is completely erroneous. As noted
several times above, HESAA does offer a number of deferment and forbearance
options. Some of these options require no payments during the period of
deferment/forbearance and some of these options require interest only payments.

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Caps on loans: Nearly all of the state-based lending programs have monetary caps
on loans--set at an actual monetary amount, not just a general figure (i.e. “The full
cost of going to school.”). Why does HESAA not limit students aggregate loan
amounts in order to discourage over borrowing? A recent audit underscored this
issue, describing how one family took out over $800,000 in NJCLASS loans.
HESAA Response: While HESAA does not have a specific dollar cap on loans,
loans are limited to the cost of attendance less any financial aid. This provision helps
to prevent over borrowing.
As to the family with over $800,000 in NJCLASS loans, due to privacy laws, HESAA

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 cannot comment on a particular borrower’s account and we are not doing so here.
By way of general information, however, loans of this size are very rare and only tend
to occur in families with multiple children who are often seeking graduate and/or
professional degrees. Graduate and professional education is often in excess of six
figures. A hard dollar cap would limit our ability to assist students pursuing advanced
degrees. A hard cap would also require HESAA to turn away some students just as
they were about to earn their degrees (last semester/last year). It should be noted
that nay borrower must meet income and credit worthiness requirements to receive a
second or subsequent loans.
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Flexible Repayment: A few state programs have begun to offer flexible repayment
plans (such as graduated, extended, or income based repayment) to help struggling
borrowers. Why is HESAA unable to offer NJCLASS borrowers the same? I spoke
with one borrower who was diagnosed with cancer and lost his job within a few years.
He requested a full deferment/forbearance while he sorted things out, but the agency
could only defer the principal and some interest, leaving him with a monthly fee of
$500. This amount was too much for him, with his health expenses and without a
steady income, and now he is being sued by HESAA for over a quarter million
dollars. What are your thoughts on this?
HESAA Response: Due to privacy laws HESAA cannot comment on a particular
borrower’s account and we are not doing so here. By way of general information,
borrowers who suffer severe illnesses have the opportunity to have their loans
discharged under our Total and Permanent Disability provision. In order to avail
themselves of this option, borrowers must submit appropriate documentation from a
licensed medical provider.

7. Because NJCLASS loans are private loans, several borrowers have told us that they feel
it is not fair for HESAA to use statutory powers to go after struggling borrowers when
private lenders cannot. Why does HESAA view that it should have greater collection
powers than private bank lenders?
HESAA Response: As noted above, NJCLASS loans are financed through the sale of
tax-exempt bonds. These bonds are backed by the moral obligation of the State of New
Jersey. Were HESAA to default on its bond payments, the State of New Jersey would be
obligated to make bondholders whole. Hence, the legislature has seen fit to grant
HESAA certain collection tools that mirror those of the federal government. Were
HESAA not to utilize the tools provided by the legislature we would not be fulfilling our
statutory requirements or our fiduciary duties to our bondholders and ultimately to the tax
payers of the State of New Jersey. When the legislature created the program it did so
with the intent that the program be fiscally solvent and self sustaining.
8. In bond indentures, HESAA has said that the authority does not compete with federal
student loans, except with parent plus loans. Why does the agency not require that
borrowers max out on both subsidized and unsubsidized federal loans before turning to
NJCLASS?
HESAA Response: HESAA requires students to max out on subsidized loans (and any
other financial aid) before turning to NJCLASS because subsidized loans are considered
financial aid in that the federal government pays the borrower’s interest while in school
and during authorized periods of deferment. Unsubsidized loans are not considered
financial aid because they begin to accrue interest during the in-school period and there
are families who do not wish to avail themselves of unsubsidized loans.
9. As is mentioned on the website, HESAA provides financial aid education and advice to
thousands of New Jersey residents. The majority of borrowers that we have spoken with

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 say that they first heard about the loans from a high school financial aid night, their high
school counselors or college financial aid counselors. In powerpoints for high school
financial aid presentations, HESAA prominently advertises NJCLASS loans. Some might
critique this as using the agency’s access to the school to advertise the loans. How would
you respond to this?
HESAA Response: HESAA’s financial aid presentations outline all the available options
for students and families. All our presentations focus most heavily and prominently on
need based financial aid, such as federal Pell grants and New Jersey’s very generous
Tuition Aid Grant (TAG) program. However, not everyone qualifies for need-based aid.
New Jersey is a high income state and many of our families, after completing the FAFSA,
have Expected Family Contributions for the entire cost of attendance. HESAA believes
these families should be aware of all the financing options available to them.
10. Numerous borrowers have described feeling misled into thinking that the NJCLASS loans
were safe government options, not realizing that the loan is in fact a private loan. In
reviewing the language in applications, documentation, and the website, HESAA often
calls the loan program supplemental or alternative, but rarely (if at all) uses the term
“private loan.” Why is that? Do you think this is misleading to students in any way?
HESAA Response: HESAA is a public, not a private, entity and therefore the term
“private loan” is not appropriate for the NJCLASS loan program. HESAA does not
believe this is misleading at all since all of our disclosures and information distinguish
NJCLASS from federal loans as evidenced in our attached disclosures.
11. Some state-based lenders (Iowa and Indiana) have put warnings on their websites,
explaining that federal loans are always a better option than private loans and even
encouraging parents to look at PLUS loans. Why does NJCLASS not do this?
HESAA Response: HESAA does not believe that federal loans are always a better
option. As noted above, NJCLASS interest rates (Options 1 and 2) and origination fees
are lower than the federal Parent PLUS rates and fees. Again, HESAA’s disclosures,
attached, provide students and families with all federal options and interest rates. The
disclosures clearly advise students/borrowers to consider all loan options and to discuss
them with their financial aid office.
12. In bond indentures, HESAA has said that the authority does not compete with federal
student loans, except parent plus loans. Why does HESAA compete with Parent PLUS
loans? Upon consolidation, PLUS loans offer income contingent repayment and after 25
years the loans are forgiven. They are also subject to the public service forgiveness
benefit. Why does HESAA not advertise these benefits to parents if nearly 90 percent of
the loans are cosigned and the cosigners are often parents?
HESAA Response: As noted above, NJCLASS Option 1 and Option 2 loans consistently
offer interest rates below the Parent PLUS, and our origination fee on all our loan options
is less than the Parent PLUS fee. Many families wish to avail themselves of these lower
interest rates and do not qualify for, or wish to qualify for, public service loan forgiveness.
Also, many borrowers do not want to spend 25 years repaying their student loans, and
prefer our 10, 15 and 20 year options.
13. HESAA’s NJCLASS loan program has attracted some criticism online from borrowers
and family members of borrowers. Have you taken notice of this? What do you think of
this? There is an online petition with over 500 signatures—what are your thoughts on
their concerns?

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 HESAA Response: HESAA is always interested in borrowers’ valid concerns. There
are currently over 65,000 distinct NJCLASS borrowers. The vast majority of these
borrowers are happy with the program and are pleased that NJCLASS provided them the
opportunity to pursue the higher education of their choosing.
14. HESAA has received more complaints from borrowers in the Consumer Financial
Protection Bureau database than any other state-based private loan program. What do
you think this means?
HESAA Response: From June 30, 2014 to June 30, 2015 HESAA received 40
complaints in the CFPB database. Three of the complaints were from the same borrower
and 2 were from the same borrower. These 37 complainants represent 0.06% of our
base customers (as noted above). NJCLASS is one of the largest state sponsored
supplemental loan programs in the country, hence, it is not surprising that given the
number of borrowers we have, the number of complaints we have would also be slightly
larger than our smaller sister states’ programs.
Questions on Defaulted Loans:
1. According to meeting minutes, since 2010, the agency has been aware that “Option 3”
loans were defaulting at “significantly” higher rates than other loan options. What did the
agency do to help borrowers who were struggling with their Option 3 loans? Why did the
agency not end the Option 3 product during this time? Why does the agency still offer the
Option 3 product at all?
HESAA Response: First, while Option 3 loans default at a higher rate than Option 1 and
Option 2 loans, the vast majority of Option 3 loans don’t default and do perform. Only
8.7% of all Option 3 loans have defaulted in the 25 year history of the program. Second,
HESAA actively counsels borrowers that Option 3 loans are the most expensive option
and we try to steer borrowers to Options 1 and 2. We also limit the pool of Option 3 loans
available each year. Third, while HESAA encourages borrowers to choose Options 1 and
2, there are many families who believe that they simply can’t make any payment during
the in-school period. HESAA believes these families should have this financing option
available to them.
It should be further noted that the federal PLUS program makes this fully deferred option
available to all parental borrowers regardless of their ability to repay the debt.

2. By 2011, ratings agencies were beginning to adjust their expectations for the Option 3
loans. According to meeting minutes from October 2011, Eugene Hutchins said: “The
repayment [of] Option 3 has become increasingly negative over the last 3 or 4 years…the
ratings agencies look at those loans as very high risk and assign very high stress case
default assumptions. This means they assume 35% to 40% of the loans will default.” At
this point, why did the agency not end the Option 3 product altogether? With these
assumptions, how did the agency help struggling borrowers?
HESAA Response:
As noted above, some students and families wish to avail
themselves of this product and the vast majority of these loans do perform. Default
assumptions are not actual defaults they are multiples of defaults based not solely on
HESAA’s performance but on the industry as a whole. As also noted above, HESAA
encourages borrowers to consider Options 1 and 2 loans first.

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 3. In an earlier OPRA request, I asked for 2- and 3- year cohort default rates, and was told
by Ms. Grodman that HESAA does not track loans this way. But in an internal newsletter
from Spring 2014, HESAA compares its own CDR to the CDR of the federal government,
saying the CDRs have been declining. Where is this data from?
HESAA Response: The document to which you refer represents HESAA’s federal
guaranty agency cohort default rate, not NJCLASS’s default rate. This document is an
industry newsletter and therefore this distinction was understood by the industry
professionals to whom it was sent. In order to be responsive to your OPRA request,
HESAA sent you actual NJCLASS default rates.

4. According to public investor documents, the annual amount of defaulted loans has
slightly dropped by about 11 percent in the past three years (from $29 million in 2013 to
$25.7 million in 2015). However, the agency’s debt collection appears to be on the rise.
Over the last three years, the agency’s collection of defaulted loans has gone up nearly
25 percent, from $9.6 million in 2013 to $12 million in 2015. Why has collection gone up
so quickly even though default amount appears to be falling?
HESAA Response: Defaults are an annual calculation but collections are cumulative
over all defaults from prior years. In addition, collections have increased as New Jersey’s
unemployment rate has decreased in recent years allowing borrower’s more resources to
satisfy repayment and resolve defaults.
5. According to investor relations reports, of the nearly $2.6 billion in loans distributed in the
bond issues from 1998-2011, more than $250 million are default. What are your thoughts
on this?
HESAA Response: With any loan program there will be defaults. NJCLASS has some
of the lowest default rates. $250 million represents 9.6% over the 13 year period you
reference.
6. In past meeting minutes, the authority has said that it expects to recover nearly 100
percent of its defaulted loans. Why are the expectations so high?

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 HESAA Response: We are not sure to which particular minutes you are referring and in
what context this expectation was cited. Notwithstanding that, as detailed above, HESAA
has a fiduciary responsibility to attempt to collect all defaults. HESAA also expects that
individuals take NJCLASS loans in good faith and will fulfill their contractual obligations
under the promissory notes they executed.
7. According to a recent credit analysis from the ratings agency Moody’s, the recovery rate
of the authority is significantly higher than other private lenders because the agency
“aggressively” uses its state powers, like administrative wage garnishment. What do they
mean by “aggressively”? Is this in the best interest of borrowers?
HESAA Response: The term “aggressively” was used by Moody’s and not HESAA.
However, it is important that Moody’s views our management of the NJCLASS program
favorably so that NJCLASS bonds maintain their stellar credit rating which allows HESAA
to keep interest rates as low as possible for all borrowers.
As noted above, HESAA has a fiduciary duty to its bondholders, and ultimately the State
of New Jersey which backs HESAA’s bonds with its moral obligation, to utilize the
statutory tools granted to us by the legislature. Recoveries keep the program solvent for
future generations of borrowers and keep interest rates as low as possible for all
borrowers. If we were lax in our recoveries we would have to increase the interest rates
we pay bondholders, or they would not buy our bonds. And if we increased the rates we
had to pay bondholders we would in turn have to increase the rates we charge all
borrowers.
8. ProPublica has looked at all the lawsuits filed by the agency over the past 20 years and
filings appear to have drastically increased in the past five years
(source: http://www.judiciary.state.nj.us/). A preliminary analysis shows that in 2010, the
agency filed around 150 lawsuits against borrowers, but by 2015, the agency was filing
around 1500, an increase of around 900 percent. Why is the authority filing so many
lawsuits against borrowers in recent years? Is this consistent with your own record
keeping? How do you track the suits that are filed?
HESAA Response: HESAA is represented by outside counsel to handle the collection
of defaulted NJCLASS loans. Collections counsel files lawsuits as necessary to protect
the NJCLASS program and avoid any statute of limitations defenses. May borrowers
negotiate repayment arrangements with the attorney without the need to file a lawsuit or
obtain a judgement.
9. Since at least 1999, New Jersey state law has permitted the agency to offer rehabilitation
to its defaulted borrowers. But, according to bond indentures, HESAA documents, and
interviews with local attorneys, the agency has not allowed borrowers to take advantage
of this benefit. Why has the agency not offered this to defaulted borrowers? Will this be
offered?
HESAA Response: State law does not provide for the rehabilitation of NJCLASS loans.
HESAA’s regulations provide for the possibility of rehabilitation in the event that there is a
federal statutory change permitting such. 34 CFR 682.405 and 34 CFR 685-211 (f)
provide for rehabilitation of federal student loans only, where the default is removed from
a borrower’s credit report. In order to offer such a program for NJCLASS, there would
need to be a federal statutory amendment to authorize removal of a non-Federal loan
default from a borrower’s credit report. The law is clear and the National Council of
Higher Education Resources has confirmed that HESAA’s interpretation of the law is
accurate.

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 10. Because of the terms and lack of rehabilitation, an attorney from Legal Services of New
Jersey, a pro bono legal services nonprofit for low income New Jersey residents,
described the program this way (this was in a letter to the agency from 2014): “More so
than predatory mortgages, deceptive auto loans, or even illegal, usurious payday loans
marketed over the internet, a defaulted NJCLASS loans presents the very realistic
possibility of a lifetime of debt problems, with little meaningful prospect for relief--much
less financial stability.” How does the authority respond to this kind of critique?
HESAA Response: HESAA disagrees with this adversarial attorney’s opinion which is
not representative of the tens of thousands of satisfied NJCLASS borrowers over the last
25 years.
11. A student debt attorney described the lawsuits as a way to put pressure on the cosigners,
not just borrowers: ("The agency is looking to put as much pressure on the borrower and
be as aggressive as possible and the way you do that is you go after everybody that is
liable.”) How would you respond to this?
HESAA Response:
HESAA disagrees with this adversarial attorney’s opinion.
NJCLASS is a family loan. Cosigners voluntarily enter into a contract with HESAA to be
equally responsible to repay the loan and they are advised of their obligations on both the
application and the promissory note. Cosigners should uphold their contractual
responsibilities, particularly when the borrower, a family member, is struggling.
NJCLASS loans are approved based on the income and credit worthiness of the
cosigners as student borrowers generally do not meet these qualifications.
12. A bankruptcy attorney described the program as “state-sanctioned loan sharking” saying
that the program is set up so that you fail. How would you respond to this kind of critique?
HESAA Response: This is a completely scurrilous and unfounded statement made by
an adversary. The thousands of students and families who were able to obtain a higher
education, pursue a career and repay the loan in accordance with the terms and
conditions of the promissory note are testament to the complete inaccuracy of this utterly
sensational declaration.
Background Questions on HESAA:
1. In researching the other state-based loan programs, New Jersey’s appears to be the
largest with an outstanding portfolio of NJCLASS loans totaling $1.9 billion. We have
found the next largest programs are Texas’ HH Loans (with $1 billion in outstanding
loans, source: Texas Higher Education Coordinating Board) and North Dakota’s DEAL
program (with $990 million in outstanding loans, source: Bank of North Dakota). Why is
New Jersey’s state-based private loan program larger than other states?
HESAA Response: New Jersey’s program is one of the largest because it has been in
existence since 1991 and is one of the oldest and most respected programs. Many of our
families come back year after year and student after student. New Jersey is also a high
income state. Many families are not eligible for need-based aide and therefore require
loans to pay for school.
2. According to bond indentures from the program, the program initiated in 1991. What was
the rationale for the agency to develop a loan program?
HESAA Response: The legislature created the program in statute and directed that
HESAA administer the program. “There is hereby established within the authority a New
Jersey College Loans to Assist State Students (NJCLASS) Loan Program. Under the
NJCLASS Loan Program, the authority shall make loans available in such amounts as

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 necessary to ensure that student loans remain generally available to, or for the benefit of,
eligible student who are not eligible for, or have additional financial need beyond, a
federally insured student loan and who meet the eligibility criteria..” N.J.S.A. 18A:71C21.
3. An analysis of all of the agency’s bond indentures since 1991 shows that the agency
experienced rapid growth of the loan program between 2005 (when the aggregate
outstanding loan amount was $512 million as of February 2005) and 2012 (when the
aggregate outstanding loan amount was $2.011 billion). What was the reason for the
rapid growth? Why did the agency decide to expand the program?
HESAA Response: The growth of the program is a result of more people going to
college, increased cost of attendance and the low interest rates offered by the NJCLASS
program.
4. An analysis of meeting minutes and bond indentures shows the agency was very aware
that an end to the FFEL program would likely lead to a decrease in revenue. Did the
impending phase out of the FFEL program have any connection to the increase in
NJCLASS loans?
HESAA Response: No. The rising cost of higher education and more individuals
pursuing higher education has increased the demand for NJCLASS loans.
5. Many state guaranty agencies downsized or changed their direction/focus after the end of
FFEL. Why has HESAA continued on in the private loan space?
HESAA Response: Unlike HESAA, many of those agencies did not have supplemental
loan programs in place nor the statutory authority to initiate the programs. HESAA has
continued in the supplemental loan space because we are statutorily charged with
providing these loans and there is a demand for these products from the citizenry.
6. How have the responsibilities of the agency changed from before the days of the FFEL
program to now?
HESAA Response: As always, HESAA’s statutory mission is to further access to postsecondary education by loans, grants, scholarships or other means.
7. Why finance NJCLASS loans through bonds instead of through taxpayer dollars? Do you
believe that this structure is beneficial to student borrowers?
HESAA Response: In order to finance the program through taxpayer dollars the
legislature would annually need to appropriate the funds necessary to fund the loans.
8. How is HESAA funded? How much of the agency’s budget is funded through its loan
programs (NJCLASS and/or FFELP)? The meeting minutes from June 2015 show that
the $14,852,000 of the 2015 HESAA program revenue budget comes from NJCLASS—
this represents half of the budget. Without an NJCLASS program, how would the agency
support its programs? Is it fair to say that the agency relies on the revenue generated
from loan program to support itself?
HESAA Response: The agency’s operating funds are derived from NJCLASS, NJBEST,
and our contracts with the federal government. As a state agency, without the revenue
from NJCLASS, we would require a state appropriation to administer our grants and
scholarship programs. Given the importance of these programs and the State’s
extraordinary commitment to programs such as the Tuition Aid Grant (TAG) program
which will total over $400 million in Fiscal Year 2017, HESAA does not believe the loss of

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 NJCLASS revenue would impede our operations.
9. Does NJCLASS fund other programs/administration/any other part of the budget other
than specifically the NJCLASS program? Has any NJCLASS program revenue funded
any other part of the budget other than the NJCLASS program in the past 5 years?
HESAA Response: NJCLASS revenue is dedicated to the reserve fund against defaults
as well as the over capitalization fund for NJCLASS bonds to ensure that NJCLASS can
offer the lowest possible interest rates. In addition, NJCLASS revenue also funds
operational costs and investment in technology and training that allow the program to run
efficiently.
10. In the past, has HESAA received state appropriations from the budget? Does any of
HESAA’s budget come from state funds now?
HESAA Response: HESAA receives programmatic funding each year from the State,
100% of which is provided to students in the form of grants and scholarships which do
not need to be repaid and none of these funds support any administrative functions.
HESAA’s programs include: Tuition Aid Grant; Part-Time TAG for County Colleges,
Governor’s Urban Scholarship Program, Part-Time TAG for EOF Students, NJ Best
Scholarship, NJ STARS, NJ STARS II, World Trade Center Scholarships, Primary Care
Loan Redemption Program and Nursing Faculty Loan Redemption Program. Total
programmatic funding in FY 2016 was $404.6 million.
11. In 2007, HESAA was investigated by the NJ Attorney General for improperly marketing
Sallie Mae loans to colleges in exchange for an annual sum of $2.2 million. The authority
was ordered to undergo monitoring. What changes has HESAA made since the Attorney
General investigation and findings?
HESAA Response: This investigation occurred during a prior administration and has
since been completely dismantled.
12. Three years after the Attorney General investigation, the state Inspector General
investigated the authority and found that it was in “disarray” (source:
http://www.nj.com/news/index.ssf/2010/05/nj_college_financial_aid_group.html).
What
changes have been made since the IG’s report? What internal controls have been put in
place to insure better internal oversight?
HESAA Response: An independent review of the 2010 OIG report, conducted by the
Law Firm of Pashman Stein refuted many of the findings in that OIG report.
Notwithstanding the foregoing, HESAA is a very different agency today than it was in
2010. HESAA has a new Executive Director, Legal Director, Chief Compliance Officer,
and a new Director of Audits and Quality Assurance. HESAA has adopted a host of
internal policies and procedures and has implemented self testing exercises to ensure
compliance with them.

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