New Jersey student loan lottery

Rising student loan debt has become a contentious issue across the United States. (Image: Getty Images)

Student loan debt has become a major issue in the United States, as Americans now owe about $1.2 trillion in college debts.

Those debts have proven crippling for many former students who are just starting their careers, leading to many calls to find a way to help reduce or forgive at least some of the debt.

One particularly unusual proposal has come this week from New Jersey State Assemblyman John Burzichelli (D-Gloucester), who says that those with student loans should have the chance to gamble away their debts.

He is proposing that New Jersey become the first state to establish a lottery that would be exclusively designed to eliminate student debt.

“We have people graduating from universities with just too much on their shoulders,” Burzichelli said. “That hampers them from doing other things when they reach the workforce.”

New Jersey Students Deeply In Debt

New Jersey has a particularly high rate of student debt.

Seventy percent of 2013 graduates in New Jersey had at least some student loan debt, and the average borrower in 2014 had $28,109 in loans.

The student loan lottery would seek to remedy this by awarding prizes that are designed to be just enough to pay off each student’s loan debt.

The lottery would be operated by a private company and conducted by the New Jersey Lottery Commission.

Before signing up for the lottery, a current or former student would have to register information about their debt.

If they were chosen as the winner, they would receive only enough to cover their student loans; any additional money would roll over and additional winners would be chosen until the pool was exhausted.

Tickets would be required to cost three dollars or less, and students would be limited to spending a maximum of 15 percent of their student loan debt on tickets. Others could also buy tickets on behalf of a student.

Meanwhile, the company running the lottery would take 25 percent of the money collected. Other details are still being worked out, Burzichelli says.

The main appeal, however, would be the limited focus of the lottery.

While the prize pools for these lottery games would certainly be smaller than a game like Powerball (or even a typical state lottery), the chances of winning would also be higher.

Student Loan Experts Question Lottery Effectiveness 

But while the prospect of suddenly having one’s student loan debts disappear thanks to a winning ticket may sound appealing, many activists who are working on the nationwide issue believe that a lottery is simply the wrong way to go.

“Gamble to pay off your student loan? It’s all kinds of wrong,” said Natalia Abrams of Student Debt Crisis, a Los Angeles-based advocacy group. 

The issues with the lottery could be numerous. There’s the fact that for most players, losing in the lottery will add more debt rather than help solve their problems.

Plus, the taxes a winner would face on their winnings could result in a hefty tax debt to replace the loans that are now paid off.

And then there is the 25 percent that will be kept by the company running the lottery.

Because this money is coming out of the prize pool, it means that far more student loan debt would be paid down if players just used the money for tickets to pay those loans rather than risk it on the lottery.

“The only winner would be the company running the lottery who gets 25 cents on every dollar,” said Lauren Asher, president of the Institute for College Access and Success.