The body of Mark Pych, 22, was found inside his Nissan Altima, the Jersey Journal reported. A security guard witnessed the car plunging into the canal at about 3:30 a.m., police spokesman Bob McHugh said.
McHugh said New York City police divers retrieved the body. The car was pulled from the canal at about 10 a.m. with the help of a U.S. Army Corps of Engineers crane.
Pych's family said he just graduated from Rutgers University's Newark campus. His father, Wieslay, said he planned to begin job hunting after the holidays.
His sister, Bernadette, 17, told the Journal her brother had planned to spend New Year's Eve with friends at the Surf Club, near the spot where his car went into the canal.
Most of the Morris Canal, which once connected the Delaware and Hudson rivers, has been filled in in Jersey City. A short stretch remains adjacent to Liberty State Park on the Hudson.