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$12 Billion In Private Student Loan Debt May Be Wiped Away By Missing Paperwork (nytimes.com)
New submitter cdreimer shares a report from The New York Times (Warning: source may be paywalled; alternate source): Tens of thousands of people who took out private loans to pay for college but have not been able to keep up payments may get their debts wiped away because critical paperwork is missing. The troubled loans, which total at least $5 billion, are at the center of a protracted legal dispute between the student borrowers and a group of creditors who have aggressively pursued them in court after they fell behind on payments. Judges have already dismissed dozens of lawsuits against former students, essentially wiping out their debt, because documents proving who owns the loans are missing. A review of court records by The New York Times shows that many other collection cases are deeply flawed, with incomplete ownership records and mass-produced documentation. Some of the problems playing out now in the $108 billion private student loan market are reminiscent of those that arose from the subprime mortgage crisis a decade ago, when billions of dollars in subprime mortgage loans were ruled uncollectable by courts because of missing or fake documentation. And like those troubled mortgages, private student loans -- which come with higher interest rates and fewer consumer protections than federal loans -- are often targeted at the most vulnerable borrowers, like those attending for-profit schools.
At the center of the storm is one of the nation's largest owners of private student loans, the National Collegiate Student Loan Trusts. It is struggling to prove in court that it has the legal paperwork showing ownership of its loans, which were originally made by banks and then sold to investors. National Collegiate is an umbrella name for 15 trusts that hold 800,000 private student loans, totaling $12 billion. More than $5 billion of that debt is in default, according to court filings.
At the center of the storm is one of the nation's largest owners of private student loans, the National Collegiate Student Loan Trusts. It is struggling to prove in court that it has the legal paperwork showing ownership of its loans, which were originally made by banks and then sold to investors. National Collegiate is an umbrella name for 15 trusts that hold 800,000 private student loans, totaling $12 billion. More than $5 billion of that debt is in default, according to court filings.
This is exactly the scenario that countless spams and clickbait ads have promised,:that if you challenge the bank's record keeping, you can completely free yourself from your mortgage (and here's your $49 kit to help you do it). Except in this case, it's apparently not total bullshit.
And why should education put people in debt? Educating young people is what ensures the future of a country.
Looks like the average American will have to bail out yet another greedy creditor. I wonder how big the bonuses will be this time.
"And why should education put people in debt? Educating young people is what ensures the future of a country."
Great. How many scholarships are named after Anonymous Coward?
Even if one agrees that society should bear more of the cost of higher education, that's not a legitimate argument for not paying back a loan - did you justify holding up convenience stores because it went to pay for your attendance at Douchebag College of Illegitimate Rationalizations?
"National Security is the chief cause of national insecurity." - Celine's First Law
I love how we always talk about personal responsibility and corporate responsibility, but it's always the little guy that gets hit by it. Why is it the borrowers ethical responsibility to pay the loan back, but not the owner of the loan's responsibility to actually track what people owe them? Seems to me that ethically, if you can't prove someone owes you something, then they don't owe you jack.
cap student loans / income based pay back with say an max interest rate of 2-3% and max pay back time 20 years. And you are under X income then you pay 0.
or just have cheaper 11 or 7 come back for them as how meany banks would give someone 150K to get that PHD in medieval studies?
At the same time, odds are at least some are being hit up for more than they owe, perhaps being double billed. There may even be some that actually don't owe any money. We can't tell how many because the paperwork is too screwed up to show that the loans even exist.
Since these loans were bought, it is safe to say that none of the debtors agreed to owe the current holder of the loan.
It's more interesting to pull back a level. There we see a financial industry so high on itself that it figured it didn't NEED proof of anything. Just point and say "He owes me money" and the courts would oblige. Sadly, they weren't wrong at the time. But after screwing around for 10 years soiling their own reputation at every turn, it is no longer true. Now judges want to see proof (like they should have all along).
Silly communist. "Personal responsibility" means paying whatever your betters say you owe. Malfeasance doesn't exist; and alleged 'mistakes' are fake news.
If you're too stupid to keep track of the money you've paid out then you deserve to lose it.
These lenders are relying on intimidation and bullying to get paid when they don't have their paperwork.
So sorry, follow the letter of the law, sucker.
I don't read your sig. Why are you reading mine?
for decades. Yeah, bad or unfinished degrees from people who's lives are a mess. A lot of them not all there in the head (I had a rough upbringing, so I know a lot of flakes). I can't get too worked up by this. The college graduates that make it more than pay for the ones that don't. And the folks whining about paying are the ones benefiting from their labor.
I'm pretty sure the majority of people reading this would like to see free college. The question is when are we gonna put our votes where our mouths are?
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"In a country that is supposedly as great as ours, all education should be free."
Public education is free in the USA. It is also worthless.
Public schools in places like DC and Chicago give high school diplomas to those that cannot even read at an 8th grade level.
I'm sorry but the facts are facts. If you want an education then you have to pay for it.
To public schools students are just boxes on a conveyor belt. They get paid based on how many boxes reach the end. They don't care if the boxes are full of knowledge, full of misinformation, or just plain empty, they still get paid the same regardless.
Parents can complain but since they aren't paying the salaries the teachers are not accountable to them. In many cases the parents can't even "fire" the teachers by moving their children to another school because the government decided the only schools allowed are the public schools. Parents can't even home school because if you aren't sending your children to a "school" (as defined by the government) then you are obviously allowing your children to live in ignorance and therefore the children must be taken from you. For their own good of course.
"Remove the financial burden from a people, and see what inspiration could really accomplish."
You are correct. If freed from the tax burden of these failed schools then I can only imagine what we could accomplish.
I am armed because I am free. I am free because I am armed.
It's the responsibility of both. I'm a fiscal conservative and all for personal responsibility, but I have no sympathy for the lenders here. These were private loans. It was the personal responsibility of the lender to make sure the paperwork was in order and properly recorded before they loaned out the money (or paid to acquire the loan). If they fail to do that, well I guess their money wasn't really important to them in the first place.
Congrats to the borrowers - they got the equivalent to finding thousands or tens of thousands of dollars on the ground because the lender wasn't careful to make sure their pocket didn't have a hole in it.
Yes, the ethical thing for the borrower to do is to pay back the loan. But if there's no clear documentation for the loan, the borrower can't be sure they're paying back the right person. They could pay someone $10,000, then next day some other collector calls saying they're the actual owner of the loan and the borrower needs to come up with another $10,000 to pay them. Faced with this possibility, the most ethical thing a borrower can do is "pay back" the loan by putting it into a savings account. And when someone can prove that they're really the actual one who is owed the money, the borrower can transfer the account over to them (minus interest).
Really, the borrower has no responsibility to track the loan, it's all on the lender?
Yes, it is all on the lender.
I make an agreement with you to pay you $1000 a month until my $100,000 debt is repaid. You sell that debt to someone else. You are responsible for making sure they have all the appropriate paperwork to take over that debt. If they sell it to someone else, they are responsible. And so on and so on and so on.
If whoever ends up with it can't prove that they are the person who is supposed to be receiving my payments, that's their fault or whoever sold them the debt--not mine. I'm not just going to pay someone who walks up and says, "Hey, you owe me money!" Once someone can prove that they are the person who is supposed to be receiving my payments, I will gladly make them.
I can answer that. It's because the media conglomerates that push the narrative of personal responsibility are owned by billionaires using that narrative to lower their tax burdens and claim a larger piece of the economic pie. Do I get a gold star?
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That'll be $35,000 in legal costs
That's not wholly the issue.
There's often a difference between where the loan originates and the loan servicer. The entity that services the loans buys the debt from the original lender, which gets the original lender out of the loan for a small profit, while the servicer then collects principal and interest for their profit.
Loans may pass through several different servicers throughout their duration. Each time the loan is transferred it is the obligation of the entities in the transaction to properly document that transaction. This is typically easier with loans that are for an item that serves as collateral and has state-issued documentation upon it, like a vehicle or a property, as the act of transferring the loan requires the servicers to file with the state that transaction, but even in cases like that it can get messed up. The problems with subprime real estate and failure to maintain a chain of custody on the documentation is proof of that. When there's no item with a title or deed to serve as a state-mandated bit of ownership documentation though, it's a lot easier to lose track of all of the paperwork that proves who actually owns the loan.
It sounds like the entities that dealt with student loans bought them from the original lenders but didn't bother to properly document the transactions, and then they sold them, and that transaction was not properly documented either. Get too far from the original lender (or find that lender no longer in existence or having destroyed its own records as the completed sale may allow or mandate) and now it's basically impossible to prove anything. If a servicer presses a case in court and then has no documentation then who's to say that they ever owned the loan that they claim they have?
Do not look into laser with remaining eye.
Like the "real" people who own millons in offshore accounts paying their (tax) debt? These students learned from the best, found a loophole and got away with it. End of story.
sudo rm -r -f --no-preserve-root /
The court is saying the debt never existed, so it is not debt forgiveness. It should not be taxed unless the IRS is particularly cruel.
the parents can't even "fire" the teachers by moving their children to another school because the government decided the only schools allowed are the public schools.
Citation required.
Parents can't even home school because if you aren't sending your children to a "school"
Citation required.
I'm sorry but the facts are facts. If you want an education then you have to pay for it.
Ditto. If you want public schools that provide an education, then you have to pay for it. So the next time someone tells you "it's the teacher's fault!!!!", ask them why we pay teachers so little (thus getting reducing teacher quality), and why they keep insisting on further cuts to education budgets.