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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 It is struggling to prove in court that it has the legal paperwork showing ownership of its loans, which were originally made by banks and then sold to investors.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 It is struggling to prove in court that it has the legal paperwork showing ownership of its loans, which were originally made by banks and then sold to investors.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.
Why should one pay loans back, because it lifes lessons, live up to a contract, real people pay their debts.
There is a free lunch somewhere but you might have to hoof it. Because every collage grad walked up to a education lunch counter and ate the lunch special and not the internet soup line. It is not even like one has to walk between my metaphorical soup kitchens to gain knowledge, entire subject matters are 3 clicks away.
An education can be had for free online in multiple places for free. The accreditation and the degree that go with a what was thought as an education a commodity that has a decreasing value every day past that day in may.
"deeply flawed" documentation.
I really wonder about that. I had difficulty getting a job after college, and like a lot of others my student loan went into collection. Two years after graduation, in another state, I landed a well paying job, contacted the collection agency through an old notice and made payments, eventually paying it off.
And then, about a year later, I got contacted by a collection agency (the same or a different, I don't know -- didn't keep track) that I still owed $500-something on my student loan. I was doing well at the time, so I paid it off again just to make it all go away.
Three years later, I moved to a different state and got a new job, and a collection agency *again* contacted me about my student loan, saying I still owed a little over $200. I argued vehemently that I had already paid off the damn thing twice. They got really rude over the next few weeks, called work and home at all hours, and being nasty to whomever answered. I swallowed my pride and paid it off for a third time.
That was a couple decades ago, and I haven't gotten any calls since. But here's the punchline. My most recent job required that I provide evidence of my degree. I'd never been asked this before, and looking through all my decades-old paperwork, some never opened through moves from one state to another to another, I couldn't find my diploma.
No problem, right? Contact the school, get a copy of the diploma, send it to HR.
The school had no record that I had ever attended.
Let that sink in for a moment.
So I went backwards from the student loan docs, which showed that I attended the school from year1 to year2. The school eventually had to admit that I had been a student there, but they had lost all records of that time. I got them to put that in a letter, which my work grudgingly accepted. Next time I'm not putting my education on my resume.
Oliver's law of assumed responsibility: If you're seen fixing it, you will be blamed for breaking it.
You responded to a post about the most publican of republican States, where they didn't just take the word of the corporation...
Sheesh...
"So long and thanks for all the fish."
.... the magic words are "Show me the paperwork indicating that I owe you this debt.". Most collection agencies have ZERO paperwork showing that they are entitled to collect, but rely on intimidation to get people to comply. Fight back! Make them at least show the paperwork! Chances are, they don't have it.
It's not the colleges as institutions that are leftist and anarchic. It's the people being 18 years old. If we create completely different types of youth educational institutions they will come up as leftist and anarchic too, because the people attending them are.
It's the old adage: Parents don't understand how their children are at the age of 18 can be so full of anarchic and socialist ideas, because they are now in their 40ies and 50ies and have a quite conservative worldview. And they totally forget how they were at the age of 18 themselves. We hear the constant "oh the Youth". And the parents are quick to blame the colleges for that, because those are the first places the children go without constant parental supervising. Of course it's the colleges' fault that people of young age act like people of young age and people of old age forget how they were when they were at young age.
I thought you might be joking so I did a brief look. I'm not a tax accountant so it's a bit indecipherable to me this early in the morning but the IRS most definitely wants you to report it as income on the year the debt is canceled. I just can't tell if this debt cancellation is an exception to canceled debt. This looks to be a fairly brutal tax hit. The minimum that you would owe the IRS should be $3578.75 for the $31,000 and that's assuming no income (besides the debt cancellation) and the standard deduction. You'd pay 10% on $9,275 and 15% on $17,675. It definitely doesn't qualify as an exception to gross income because the debt isn't being cancelled as part of bankruptcy.
"Lack of speed can be overcome. In the worst case by patience." --Znork
Well there should not be many defaults, since student loans are not secured against collateral they have been made legally much harder to discharge in bankruptcy and related proceedings/actions.
I still say the problem is student loans are even a thing. College costs so much because the have a starry eyed clientele that is by and large unfamiliar with the amount of money involved. Many may have never even had a sum on the same order of magnitude their total debt will be when they finish school if they take the loan. A large portion have never even used credit before, other than borrowing $20 from mom!
Its a very abstract concept to them. They can't rationally judge if its better to pay a little less at South Harmon Institute of Technology, or go Harmon with its nicer dormitories, better food, and amazing sports complex. The market place is completely distorted by all the easy loan money running around.
If we stopped doing federal loans, and removed the bankruptcy protections, these collateralized loans would mostly disappear form the market place. Two things would happen, collage would get cheaper, and focus on core objectives. There is no point in having a fancy school students can't afford to attend. Many people would probably delay college until they had something to borrow against. I suspect this might also have a positive effect in terms of people having a better idea of what they want out of college.
Repeal the 17th Amendment TODAY! Also Please Read http://www.gnu.org/philosophy/right-to-read.html
Having dealt with a debt collector that screwed the pooch bad I can understand the courts frustration. When you have a debt collector trying to collect a debt from you that is older than you are and the only match is on the first name something is very wrong with the system. That debt collector screwed up bad enough and I was meticulous enough in my documenting of the incident that my State Attorney General, State Department of Commerce, and Federal Consumer Financial Protection Bureau all opened investigations into them. It didn't hurt that they broke several laws, did in in writing, and then continued to do so over the course of the correspondence, and then denied saying things that there was a provable paper trail for. Things like lie to someone, threaten to garnish their wages and seize assets, disclose information about the debt to an unauthorized 3rd party, calling multiple times a day after making initial contact that day, refusing to identify themselves on the phone, continuing to call after being contacted in writing informing them to no longer call, etc. It also didn't hurt that I can be a vindictive dick who will see things like this through.
Time to offend someone