Missing paperwork could wipe out billions in private student loan debt

Lucy Hill
Июля 19, 2017

Tens of thousands of people who have been unable to pay off their private student loans could see their debts erased due to missing paperwork and incomplete ownership records.

When borrowers don't go to court, National Collegiate nearly always automatically wins the case, but when they do show up, most of the time judges throw the suits out because National Collegiate was not able to produce the paperwork proving it owned the debt in question. The trusts hold loans totaling $12 billion, and more than $5 billion of that is in default, according to court filings analyzed by the Times.

Yet the massive mishap is just the latest controversy in the troubled student loan market, which often preys on vulnerable borrowers like students enrolled in for-profit schools and those from less-educated backgrounds. In 2015, he hired a contractor to audit the servicing company that bills National Collegiate borrowers each month and found not one of 400 randomly sampled loans had the documents showing a chain of ownership.

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The loans were originally granted to students by banks, bundled and then sold to the trust. Of the almost 50% of respondents who reported having a 401 (k), almost one-quarter said they would prefer student loan assistance over their 401 (k) plan.

"It's fraud to try to collect on loans that you don't own", Uderitz told the Times. Throughout the United States, National College Student Loan Trusts have brought at least four new collection cases every single day. "We need answers on this".

The 15 trusts have led a serious offensive to track down the borrowers who fall behind on their student loan payments.

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