At Least $5 Billion in Private Student Loan Debt May Be Wiped Clean Because of Missing Paperwork
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National Collegiate Student Loan Trusts, one of the nation’s largest owners of private student loans, is squarely in the middle of a controversy involving missing paperwork, lawsuits, and at least $5 billion in student loan debt that may be wiped away.
The New York Times broke the story regarding National Collegiate Student Loan Trusts yesterday, July 17, 2017. The trust organization is facing trouble proving in court that it has the legal paperwork to prove ownership of its loans. The loans in question were originally made by various banks and then sold to investors.
A recent legal filing by National Collegiate’s lawyers stated the following, “As news of the servicing issues on the trusts’ inability to produce the documents needed to foreclose on loans spread, the likelihood of more defaults rises.”
National College Student Loan Trusts is an umbrella name for 15 trusts that hold a combined total of 800,000 private student loans. Those 800,000 private student loans are worth $12 billion, and more than $5 billion of that debt is in default. These numbers come from court filings.
The 15 trusts have led a serious offensive to track down the borrowers who fall behind on their student loan payments. Throughout the United States, National College Student Loan Trusts have brought at least four new collection cases every single day. There have already been 800 collection cases in 2017, and more than 10,000 lawsuits in the past five years.
Tens of thousands of people who used private student loans to afford college have not been able to make timely payments, yet they still may have those loans forgiven because of missing paperwork that is legally critical to defining who owns the student loans.
The loans that may be forgiven add up to a whopping $5 billion, at least. Judges throughout the U.S., including recent cases in Ohio, New Hampshire, and Texas, have thrown out lawsuits by National Collegiate because the trusts could not prove they owned the debt they were trying to collect.
Some of the loans held by National Collegiate were granted to students over a decade ago by tons of different banks, and then the loans were packaged together and sold to investors. The debt passed through too many hands before reaching National Collegiate’s trusts, and imperative paperwork that documented who owned the loans disappeared.
Since it is unclear who exactly owns the individual loans and National Collegiate is unable to provide official documentation in court, the debt, totaling at least $5 billion, may very well be thrown out.
There is currently $1.41 trillion in outstanding student loan debt in the U.S., and private student loans only make up a small percentage of that. According to LendEDU, outstanding private student loan debt in the U.S. totals roughly $165 billion. Additionally, there are 1.4 million Americans each year that take out private student loans.
