Many people take our student loans from state or federal authorities to fund their schooling. Loans give access to education to people who may not otherwise have it, and can help people achieve their dreams. Repayment of loans is generally deferred until after the student finishes his or her education.
Nonetheless, it often takes years or even decades to repay these loans. Like any other loan, the borrower will have to repay the principal and any accrued interest. A New Jersey Appeals Court in the case of New Jersey Higher Education Student Assistance Authority v. Siaw recently looked at a case and decided whether interest payments were due – when they were not disclosed to the student borrower.
In 2007, Abigail Siaw began taking out student loans to attend Rutgers University. Her loans totaled $24,309. Her payments were not due while she attended school, but were due soon after she finished. She defaulted on her repayment, and became “liable for the entire balance of the loan” under state law. Siaw then came to an agreement to make monthly payments.
Five years later when Siaw defaulted again and the Authority filed a lawsuit for the principal, interest, and collection costs. At trial, the Authority introduced the loan documents into evidence. When the trial court reviewed them, it found that the interest rates were not included in the information the Authority provided to Siaw. The Authority then referenced another document, which referenced yet another document, to identify the interest rates. It claimed that it had these disclosure statements readily available, but the trial judge found that it had never provided these statements, and therefore the interest rate information, to Siaw.
The Appeals Court agreed with the lower court. The main issue it focused on was that Siaw was never provided with the interest rates. First, the Authority was required, but did not, produce the loans’ disclosure statements. Without that disclosure, the Authority could not provide sufficient evidence to support its case. The Authority was also not able to produce the original disclosure statements or even duplicates of them. Even if the documents could be reproduced, they did not include the interest rates of the loans. So, the Authority lost its right to make claims for the interest payments. Siaw conceded that she owed the principal, so the Appeals Court entered judgment for the remaining principal balance due.
The law can “fill in the gaps” where an essential term of a contract is omitted but “sufficiently defined” in the contract where the circumstances are “reasonable.” The Court here had an opportunity to apply this concept but did not. It found, instead, that Siaw and the Authority never agreed to the interest rate, the missing term, in the first place; “filling in the gaps” here would have been inappropriate.
In any contract you sign, be sure that you fully understand the terms and can locate each provision in the agreement itself. Any term that is not included in the contract may not be considered a binding term.