Barnegat couple left with $81,000 in student loans when son dies

In the wake of their son's death, a Barnegat couple finds that student loans carry a heavy financial burden.

June 27, 2010  Asbury Park Press

Vincent Grande was 25 years old, living in Florida and studying to becoming a stock broker when he was killed one night last November after driving into the back of a truck.

Devastated by the loss of their only child, Ralph and Joan Grande of Barnegat were stunned to find a notice in the mail explaining that they were on the hook for more than $81,000 in student loans from NJ Class, the state's college loan program.

"They said, "We sympathize with you, but you co-signed for it. Our bondholders want their money,' " Ralph Grande said.

The Grandes' plight shows the perils of student loans, a complicated maze of government and private programs that can put students on the path to financial success, but also leave them — or their parents — deep in debt.

The federal government has tried to ease the sting in recent months. But observers say other loan programs, including NJ Class, operate with little regulation. The Grandes, for one, are calling for legislation that at least would require NJ Class loans to give a break to families in case of death.

"It is a cautionary tale to be told," said Chuck Drawbaugh, owner of College Funding Associates, a Rumson company that advises parents on the cost of college education. It leaves parents to consider once unthinkable options such as buying life insurance for their teenagers. "Often times, they're not going to buy it. Money's tight, especially trying to get their kids through college."

It was not a scenario the Grandes envisioned. Vincent Grande was a left-handed pitching star at Southern Regional High School in Stafford. He chose to go to school at Monmouth University in West Long Branch, where he could continue his baseball career.

Grande had a solidly middle-class upbringing; Ralph, 54, is a car salesman and Joan, 51, is a social studies teacher at a private school. When it came time to pay for tuition, room and board at Monmouth — about $30,000 a year — he cobbled together loans.

After four years at Monmouth and another semester at Thomas Edison State College in Trenton, he had nearly $90,000 in loans from the New Jersey Higher Education Student Assistance Authority's NJ Class program and about $12,000 from the federal government.

Grande graduated in 2007, briefly took jobs coaching baseball at Southern Regional and substituting as a teacher for special needs students, and then moved to Florida for an internship at a brokerage, paying off some of his college debt as he went along.

Two weeks before he was scheduled to take his Series 7 exam to become a stockbroker, he hit the back of a truck.

His parents said police haven't figured out what happened that night; they said toxicology reports came back negative. But they were left to pick up the pieces. Among them: What to do about the thousands of dollars in college loans that their son now can't repay.

At first, it seemed no problem. Sallie Mae, a company that administered the federal loan that Vincent received, waived the debt after being sent a copy of the death certificate.

But the bills from the New Jersey Higher Education Student Assistance Authority, or NJHESAA for short, kept coming. They amounted to $685 a month. And, since Ralph Grande co-signed the loan, guaranteeing the payments if his son didn't make them, the authority wouldn't balk.

"Although we are sympathetic to the difficult circumstances involved, under the terms of the bond indentures that finance the NJ Class loan program, HESAA is not permitted to forgive student loans as a result of the death of a borrower since the repayment of the NJ Class loans financed through the bond issues is how the debt service on these bonds is paid," said AnnMarie Bouse, a spokeswoman for the authority.

A college education is considered key to a life of financial stability. But the average tuition, room and board last year ranged from $15,213 for an in-state public school to $35,636 for a private school, according to the College Board, a research group.

With prices climbing faster than inflation, few families can navigate a college career without digging themselves a hole.

In 2008, 67 percent of students graduating from four-year colleges had student loans averaging $23,200. The average debt has climbed 82 percent since 1996, according to The Project on Student Debt, a research group based in Oakland, Calif.

Experts often look first to federal loans, because they have flexible repayment terms, a fixed interest rate and, if the student can't pay it back, the federal government picks up the tab, even at the risk of harming their credit score.

The Obama administration and Congress recently revamped the federal loan program, in part by allowing students borrowing money beginning in 2014 to spend no more than 10 percent of their discretionary income on loan payments.

"We would first have them take the federal money available," said Jordan S. Celkupa, a financial planner at Robert J. Oberst Sr. & Associates in Red Bank.

Still, undergraduate students can only borrow a maximum of $31,000 from the federal government, often leaving them to search for alternatives, such as the NJ Class loan.

The money from those loans comes from investors who buy bonds. One main difference: The loans aren't forgiven if the student defaults, leaving the co-signer, instead of the state of New Jersey, to pay it off.

While the state doesn't guarantee that investors will be repaid, it does have an obligation to keep the reserve fund solvent. If lots of borrowers default and the reserve fund falls below a threshold, the state may have to use taxpayer money to prop it up. They could pay 80 percent of the balance immediately to retire the loan. They could pay $1,100 a month for 15 years. Or they could pay $550 a month for 30 years, retiring the debt only when they are well into their 80s.

Meantime, interest is piling up. A bill arrived last week for $797 due July 17.

"How am I going to afford an extra $1,100 a month in this economy?" Ralph Grande asked. "It's impossible."