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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 It is struggling to prove in court that it has the legal paperwork showing ownership of its loans, which were originally made by banks and then sold to investors.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 It is struggling to prove in court that it has the legal paperwork showing ownership of its loans, which were originally made by banks and then sold to investors.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.
paper in 2017?
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.
Even better for everyone with a PhD in Social Justice that is now cleaning storage closets and being an twitter hero.
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Maybe we can thank them for taking such good care of the loan documentation in the storage closets.
Nullius in verba
What about the fake bills for stuff like web services that some office secretary use to just pay with out checking them very hard.
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.
On the other hand, _if_ the lender can't demonstrate you owe them, couldn't it be that they no longer own the loan? What happens if you pay them and it turns out someone else bought the loan and now wants to be paid? I'm guessing there are scenarios where you'd end up paying twice.
You should pay your legitimate bills, but its reasonable to make sure you are paying the correct party to protect yourself.
"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.
Sure, those who provided loans should have tracked things better, but that doesn't eliminate the ethical responsibility borrowers have to pay back what they agreed.
True but one issue brought up is that the lenders can't prove what the borrowers loaned so it would be impossible for them to pay back. In one case mentioned, a woman disputes some of the loans in question because she claims that she never went to a college that the lender says she did. She doesn't dispute the other loans. However, then the judge had to ask the lender to prove what she owed. And they can't.
The end result will only be to raise the cost of loans for future borrowers.
How will the cost of loans be raised for future borrowers? Interest rates are what determines the cost. And the fact of the matter is that the lenders by law have to follow certain guidelines.
Well, there's spam egg sausage and spam, that's not got much spam in it.
Student loans need better regulation before we have the equivalent of the mortgage meltdown for education loans.
The mortgage bubble nearly threw us into Great Depression 2.0. (Yes, I do credit Obama for saving us. GOP's "recovery" plan was too close to Hoover's for comfort.)
Table-ized A.I.
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?
This sounds like a bunch of creditors that cannot show that the debtors owe those particular creditors those particular obligations. Ergo, the obligations cannot be assumed to be legitimate.
The borrower may owe someone, but they don't necessarily owe the plaintiff. If the original creditor isn't interested in collecting on the debt (because they've already sold it off) or helping the successor creditor fix their colossal screw-up, that's not on the debtor.
Ah, you're confusing legality and ethics. Legality relates to obligations specified by law and enforced by courts. Ethics relates to "feels," the dictates of invisible men in the sky, and anything that you can throw at a wall that advantages you at the time.
For example, ethics would say that private loans that were dischargeable in bankrputcy prior to 1998 should have remained so, and not been converted into non-dischargeable obligations by an after-the-fact change in the law. That was the bargain struck when the loans were made, right? Or is yours merely a creditor's ethics, where any discharge of a debt is the failing of a weak society rather than a penalty for creditors who fail to ensure that a debtor was credit worthy and/or a manifestation of the risk side of the risk/reward equation?
Proof required. Show me a substitute investment that is not dischargeable in bankruptcy, has an equivalent rate of return, and is virtually unregulated.
The end result will be a bunch of beneficiaries will sue a bunch of trustees responsbile for administrating the loan trusts for being incompetent idiots, and future, somewhat more competent trusts will arise to accept capital that is desperate for anyplace to go that is paying better than T-bill rates of return (2-3%).
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).
Account for yourself
By your logic, anyone can claim that you owe them money and not have to provide any evidence. I owe student loans but not to XYZ Corp. According to you I should just pay them. Wait, ABC Corp says I owe them the money, should I pay them too. The bare minimum these companies had to do was to keep up with paperwork. Why do you make them also equally accountable? Or are you just beholden to a corporation?
, assuming you learned basic math with your education.
I learned basic math but I seem to be more versed in the law than you. You have to prove what you say in court. If you can't then the court doesn't have to believe you.
Well, there's spam egg sausage and spam, that's not got much spam in it.
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?
"I'd bet that's the rare exception"
In 2013, 59% of all mortgages were sold to third parties. See Chart 2: http://bipartisanpolicy.org/wp...
The issue is that the holder of the loans have been passing it around like crabs in a frat house and no one knows whose faul... errr owns the loans.
Chances are the borrowers weren't informed at every step, and even if they did communication claiming to own a loan and to pay someone else now is a classic scam.
Their investors' failure to keep proper documentation is a reflection of their business plan - buy debt and then service it as cheaply as you can get away with. As few people as possibly manning the phones, no allowances for people who can't pay - just pay collectors to harass debtors until they choose paying the loan over food and shelter. The collection agencies that break the law get the best results...
They finally cheaped out to the point where they can't even prove they own the debt anymore. That's how the system works - if lenders do their due diligence before and after they lend the money, then lenders can make a tidy profit in exchange for lending their cash to those who can borrow responsibly. If they try to cheap out then they'll make loans to irresponsible borrowers while wrecking lives through extraordinarily strict collections until finally the lender screws up and loses it all.
I've never had any trouble paying my debts, but any idiot can see the student loan system is broken.
The right to protest the State is more sacred than the State.
Once again, being a responsible adult who pays their bills leaves you fucked.
I think I'm doing this adulting thing wrong.
Mod me down with all of your hatred and your journey towards the dark side will be complete!
Are you implying that it is (also) the borrower's responsibility to track sale and re-sale of the debt from corp A to corp B to corp C, and verify correct paperwork each time?
Yes, there's a moral obligation to pay your debts, but if the contract between borrower and lender can't be proven, then there's nothing to enforce.
If the borrower didn't enter the contract intending to find a loophole to skip repayment, but there's a failure on the other side to perform due diligence, then the lender can't really complain about having to write off the debt. It's the lender's problem, not the borrower's. Perhaps next time they purchase a debt from a bank/whatever, they'll remember to not cut corners and not do it on the cheap.
They sentenced me to twenty years of boredom
"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).
This sounds like a bunch of debtors who've found a loophole to get out of their legitimate obligations. Sure, those who provided loans should have tracked things better, but that doesn't eliminate the ethical responsibility borrowers have to pay back what they agreed. The end result will only be to raise the cost of loans for future borrowers.
Ethical responsibility? I agree there's a lack of ethical responsibility. It's on the part of the colleges and the loan companies that together have pushed college inflation at unfair and unjustified levels. If you're being beaten down by an unjust system over which you have no control, do you have an "ethical responsibility" to bow down to accept it? No, NEVER. You just survive as best you can, and if you play along with it then you do so only out of pragmatism. Signing the loan document -- "agreeing" in your words -- brings no more ethical obligations than signing a forced confession in which you agree that you committed crimes that you never did.
well I think that's the problem. They don't have the paper.
It's also not simply people lying to get out of loans, it's courts fed up with high pressure tactics to get payment on loans that were never made! Then when they are contested the loan companies dont' show up in court. It's the courts that are invaldating the loans for their own purposes not just because people are trying to weasle out
from the article:
“I tried to be honest,” Ms. Watson said of her court appearance. “I said, ‘Some of these loans I took out, and I’ll be responsible for them, but some I didn’t take.’”
In her defense, Ms. Watson’s lawyer seized upon what he saw as the flaws in National Collegiate’s paperwork. Judge Eddie McShan of New York City’s Civil Court in the Bronx agreed and dismissed four lawsuits against Ms. Watson. The trusts “failed to establish the chain of title” on Ms. Watson’s loans, he wrote in one ruling.
When the judge’s rulings wiped out $31,000 in debt, “it was such a relief,” Ms. Watson said. “You just feel this whole weight lifted. My mom started to cry.”
Some drink at the fountain of knowledge. Others just gargle.
They were "worth" sufficient during the bubble, but it was of course a bubble.
Similarly, if the financial worth of college education dropped across the board due to recession, outsourcing, automation/AI, fraud, or a combo, the bottom could fall out on college loan repayments.
Table-ized A.I.
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?
Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
Oh and for what it's worth, we have no income tax either.
.... 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.
Really, the borrower has no responsibility to track the loan, it's all on the lender?
Yep. Otherwise, I as the supposed lender can demand that you start repaying that 500k loan I claim that you took out and according to you, the onus is on you to prove that there never was a loan.
SJW n. One who posts facts.
...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...
Debt: The First 5000 Years is a stimulating read, bringing in quite different point of views on debt, loan, responsibility, ethicality and so on. Quite radical. Arguable. Not a short read. Cut and paste from WP :
Debt: The First 5,000 Years is a book by anthropologist David Graeber published in 2011. It explores the historical relationship of debt with social institutions such as barter, marriage, friendship, slavery, law, religion, war and government; in short, much of the fabric of human life in society. It draws on the history and anthropology of a number of civilizations, large and small, from the first known records of debt from Sumer in 3500 BC until the present.
A major argument of the book is that the imprecise, informal, community-building indebtedness of "human economies" is only replaced by mathematically precise, firmly enforced debts through the introduction of violence, usually state-sponsored violence in some form of military or police.
A second major argument of the book is that, contrary to standard accounts of the history of money, debt is likely the oldest means of trade, with cash and barter transactions being later developments. Debt, the book argues, has typically retained its primacy, with cash and barter usually limited to situations of low trust involving strangers or those not considered credit-worthy.
Graeber shows how the second argument follows from the first; that, in his words, "markets are founded and usually maintained by systematic state violence," though he goes on to show how "in the absence of such violence, they (...) can even come to be seen as the very basis of freedom and autonomy."
Z.
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 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.
I did some financial model implementation for a mortgage company. When we added the part about varying property values, it was about how fast they'd increase. Moreover, the models were based on cases where mortgages were never underwater, and there just wasn't the data to predict based on that.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes