Billions in student loan debt may be wiped away over missing paperwork
- Author: Ronnie Bowen Jul 20, 2017,
Jul 20, 2017, 0:50
The New York Times reported Monday that judges around the country have dismissed dozens of lawsuits against delinquent borrowers because the entity bringing the suits-which purchased loans from other originating lenders-can't produce paperwork to prove it owns the debt.
Comprised of 15 trusts, National Collegiate holds almost 800,000 private student loans totaling $12 billion, $5 billion of which are in default, court documents show. That leaves roughly $108 billion in private student loans, of which National Collegiate holds $12 billion, or 11%. National Collegiate is struggling to prove in court that it owns the loans, which were originally made by banks and then sold to investors. He is Donald Uderitz, the founder of Vantage Capital Group, a private equity firm in Delray Beach, Fla., that is the beneficial owner of National Collegiate's trusts. An audit from 2015 showed that about 400 randomly-checked loans did not have the proper paperwork. Borrowing to finance higher education is an economic decision that often pays off, but federal student loans - a much larger market, totaling $1.3 trillion - are directly funded by the government and come with consumer protections like income-based repayment options.
Missing paperwork may be to blame, or to thank, for possibly erasing student loan debt from tens of thousands of students.
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The trusts win numerous lawsuits they file automatically, because borrowers often do not show up to fight.
"It's fraud to try to collect on loans that you don't own", Uderitz told the Times. New York City's Civil Court dismissed four lawsuits filed by the NCSLT against Watson, and relieved the woman of $31,000 in debt. But some cases that are being fought by lawyers have revealed the problems. Once borrowers are sued, most either choose to settle or ignore the summons, which allows the trusts to obtain a default judgment. Transworld did not respond to a request for comment.