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Jasey & Moriarty Bill to Eliminate State Aid For Post-Secondary Schools Requiring Students to Enter Arbitration Agreements Becomes Law

(TRENTON) – Many for-profit institutions of higher education and job-training schools require students to consent to arbitration agreements that prohibit them from going to court to raise complaints about the institution. Students are often prevented from sharing information about their complaint, shielding the school from public accountability.

Aiming to dissuade institutions from compelling students to enter arbitration agreements, Governor Phil Murphy signed legislation into law to prohibit State grants, scholarships and loans from being used at post-secondary schools and job training providers that require students to enter arbitration agreements.

The new law (formerly bill A-4407) applies to schools that require students to resolve complaints related to the student’s enrollment through an internal dispute process; require students to waive their right to file a civil action, class action or complaint or notify government agencies of a violation of their rights; or prohibit students from disclosing the terms of student’s enrollment agreement or violating the agreement.

The sponsors of the new law, Assemblywoman Mila Jasey (D-Essex, Morris) and Assemblyman Paul Moriarty (D-Camden, Gloucester) released the following joint statement:

“Mandatory arbitration agreements prevent students from having their day in court. The arbitration process is typically as expensive and time-consuming for students as going through the legal system. Unlike judges, arbitrators often have incentive to favor the institutions. Without going through the courts, post-secondary schools are protected from being held publicly accountable, and students are unable to speak freely about their complaint. It also prevents future students from understanding the practices of the institution to which they will commit significant money and career prospects.

“State aid should never be used to support institutions which require students to trade their legal rights and consumer protections for their choice of school. These clauses are often unfair and not understood. Under this new law, this practice will now be prohibited in institutions which should be serving the student’s best interests.”

The measure previously passed the Assembly in March 65-4-1, and the Senate in January 28-1.