NJ Lottery Proposal to Gamble Away Student Debt

Gambling, politics, New Jersey and student loans. One of these doesn’t fit, and I bet you can guess which one it is. New Jersey has been all over our radar in recent years as the first state to go full bore on legalizing online gambling and poker. A recent proposal by a New Jersey assemblyman seeks to throw student loans into the mix.

John Burzichelli introduced A4631 to create the “Student Loan Lottery” on June 29^th. As the name suggests, the proposal seeks to establish a state lottery that awards complete loan repayment in lieu of the cash prizes traditionally awarded by state lotteries.

If enacted, the proposal would allow anyone with student debt to purchase lottery tickets in the hopes of winning the jackpot and having all loans paid off immediately. Tickets would cost no more than $3 with no limit on the number of tickets that may be purchased, except that no one person may spend an amount greater than 15% of his or her outstanding loan balance. For example, a person with $100,000 worth of debt would be prohibited from purchasing more than $15,000 worth of lottery tickets.

Only people with verifiable student debt would be allowed to participate, and no cash would ever be paid directly to the winners. All winnings would be used to pay off the loan balance. If there’s anything left over in the pool after the winner’s debt has been paid, the lottery would choose a second person (or as many as it takes) to have the remainder credited to his or her outstanding debt.

The bill still has plenty of details that Burzichelli admits need ironed out. Questions remain about how much of a tax burden the winners would face and how any profits earned by the state would be spent. Below is a brief summary based on what the published draft of the bill:

• Tickets may be sold online
• Tickets may not cost more than $3
• The Student Loan Lottery may create multiple pools with various payout amounts
• All winnings are paid directly to the lender
• The state and a private vendor would keep 25% of each pool and pay the remaining 75% to winners
• Students must register and supply details of his loan to the lottery before being considered eligible to purchase tickets

Naturally, some are worried about any new proposal that encourages already-burdened college students to gamble away their money on the slim chance of winning the lottery. Natalia Abrams of the Student Debt Crisis told Inside Higher Ed that the lottery “sends the wrong message” while Lauren Asher of the Institute for College Access said that “the only winner would be the company running the lottery who gets 25 cents on every dollar.”

Burzichelli argues that there’s nothing stopping students from gambling anyways and that the pools would be smaller than the traditional lottery (and therefore easier to win). Burzichelli also told NJ.com that “any vehicle that could provide some relief seems to me it’s worth talking about.” He further explains that “we have people graduating from universities with just too much on their shoulders. And it hampers them from doing other things when they reach the workforce.”

Treating the Symptoms?

The New Jersey Student Lottery deserves credit for creativity, but it doesn’t seem to do much to address the underlying problems mentioned by Burzichelli. Yes, student debt is a serious problem, but the NJ student lottery does not offer any real solutions. This appears to me to be an attempt to treat the symptoms more than anything else. And even then, it would only treat the symptoms of very few while leaving everyone else with a few less dollars to put towards their debts.

The skeptic in me sees this is as just another cynical attempt to raise more revenue for the state or possibly hand out a favor to the business interest that originally came up with the idea. After all, Burzichelli did admit to NJ.com that the idea was proposed to him by lawyers representing a group of businesspeople who came up with the idea.

The answer to the $1.1 trillion student debt question will have more to do with rising tuition costs in the face of easy money than it will with randomly picking winners and losers in a lottery. Burzichelli’s idea is interesting, but something about it seems just a little… off.