Bill to address debt redefines the word

Senate’s solution would stop interest charge on defaulted school loans

In an effort to get creative on the intractable problem of college loan debt, state senators have hit the dictionary.

They wrote a bill redefining the word “debt.”

The purpose of the bill was to stop the state from assessing 22 percent interest on defaulted school loans — as required for all debts in default. To keep students from being charged that interest, the Senate decided school loans are not debt. (Car loans, mortgages and anything else for which people borrow money remain debt.)

Items that aren’t debt, in the bill, include: “tuition, fees, room and board, educational benefit overpayments, student loans, or other such charges incurred by a student in furtherance of such student’s education.”

It passed in the Senate, after an amendment that specified the point of the exercise: to stop assessing 22 percent interest on people who couldn’t pay their school loans.

It has not been sponsored in the Assembly. With just 12 working days over the next month left in the session, it’s unlikely to be enacted this year. The Assembly has referred it to its Ways and Means Committee and the legislation could be reintroduced at the start of the next session.

Bill sponsor Sen. Jamaal Bailey, D -Bronx, plans to keep campaigning for it to become law.

“Introducing legislation simply for the point of introducing it does nothing,” he said. “This is the time for the conversation. We can meet the moment.”

As he argued on the floor, charging 22 percent interest didn’t make sense. People in default clearly couldn’t pay what they owed before the interest was tacked on, Bailey said.

“Why should we be causing more economic harm? Why do we want to compound a mistake people make?”

Currently, the attorney general’s office must sue to try to collect on defaulted school loans.

So senators and the attorney general’s staff started brainstorming solutions.

“Just kicking around ways: What can we do to support our students?” Bailey said. “When you change the definition of debt, over time I think that can be an important step to limit costs.”

Last week, the Senate passed a slew of other bills along the same lines, including three bills it passed in 2021 that died in the Assembly, and four new bills. All of the legislation has been sent to the Assembly.

The other bills:

■ Increase income eligibility threshold for the Tuition Assistance Program: This bill, S.7916A, would increase the income eligibility threshold for the Tuition Assistance Program from $80,000 to $110,000.

■ Sixty-day determination for financial eligibility: This bill, S.4449, would require the Higher Education Services Corporation to make a determination of financial eligibility within 60 days after receiving a student’s financial aid application. It was passed by the Senate last year too, but died in the Assembly.

■ Loan repayment information in financial aid award letter: This bill, S.664, would require financial aid award letters to include an estimated monthly payment for loans.

■ New hire student loan repayment notice: This bill, S.859A, would require employers to provide new employees with information on student loan repayment options. It passed in the Senate last year as well, but died in the Assembly.

■ Notice of tuition liability policies: This bill, S.7914, would require all higher education students be informed of the financial implications of withdrawing from school. Most colleges require students to pay for the entire semester if they withdraw.

■ Private education loan protections: This bill, S.5136, would require lenders to provide information to cosigner applicants about their rights, annual notices regarding cosigner release, and timely notification if the borrower has submitted an incomplete application.

■ TAP for high school programs: This bill, S.552A, would allow TAP to be used for dualcredit high school courses accepted by a postsecondary degree program. The bill passed the Senate last year but died in the Assembly.