Paperwork Errors Could Wipe Out $5B in Student Loans
- Author: Wendy Palmer Jul 20, 2017,
Jul 20, 2017, 0:48
The loans that National Collegiate holds were made to college students more than a decade ago by dozens of different banks, then bundled together by a financing company and sold to investors through a process known as securitization. Sometimes, explains student loan expert Mark Kantrowitz, such issues have arisen because documents have gone missing, particularly for older loans where actual hard copies were transferred.
Overall, there is about $1.3 trillion in outstanding student debt among Americans, Time Magazine reports. Of those, roughly 166,000 loans, worth some $5 billion, are in default.
Donald Uderitz, the founder of the private equity group that is the beneficial owner of National Collegiate's trusts, said he wants the group to end its lawsuits against delinquent borrowers, unless it can prove that it owns the loans.
Are my loans owned by National Collegiate? . These private loans were not guaranteed by the federal government, which is the nation's largest student loan lender. Statistics from website Student Loan Hero showed that Americans, overall, owe more than $1.4 trillion in student loan debt spread between almost 44 million borrowers.
You can ask your loan servicer to show you a promissory note proving who owns the loans, but the servicer isn't legally required to turn that over, says Robyn Smith, an attorney with the National Consumer Law Center. The New York Times reports that a review of court records shows many collection cases are flawed and have incomplete ownership records as well as mass-produced documentation.
Am I paying my loans on time? .
In fact, Judge Eddie McShan of New York City's Civil Court in the Bronx dismissed four lawsuits against Watson because National Collegiate failed to provide sufficient paperwork.
"It's fraud to try to collect on loans that you don't own", Uderitz told the Times.