Christmas has come early for a few thousand borrowers. According to The New York Times
, billions of dollars in loans may be up for dismissal because critical paperwork is missing. It’s the best possible outcome for student borrowers – so who is it affecting and why?
*Information compiled from Forbes and The New York Times.
- Who: National Collegiate Student Loan Trusts, which hold 800,000 loans that total $12 billion in student loan debt. Of the 800,000 loans, there are roughly 160,000 that are in default.
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- What: The 160,000 loans that are in default were originally issued by banks and then sold to securitization investors, which is a common practice with mortgages, auto loans, credit card debt, etc. During this transference, the paperwork proving ownership was lost.
- When: Many of these loans were taken out a decade ago.
- Where: Lawsuits have been brought against borrowers in default in New York, New Hampshire, Ohio and Texas. During the court proceedings, however, it has become clear that the Trust’s documentation of ownership of the defaulted loans is questionable. With that, judges have dismissed the cases AND the student loan debt.
- Why: With no proof of ownership on the loans, National Collegiate Student Loan Trust is committing fraud by collecting payment.*
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It should be noted that National Collegiate Student Loan Trust is owning up to the issue. Donald Uderitz, the founder of Vantage Capital Group that is the owner of National Collegiate’s trusts, told The New York Times
that he isn’t happy with the situation. “We don’t like what’s going on. We don’t want National Collegiate to be the poster boy of bad practices in student loan collections, but we have no ability to affect it except through this litigation,” Uderitz said in an interview.
Essentially, there is nothing National Collegiate Student Loan Trust can do except go to court with borrowers who have defaulted. At this point, THAT is the solution.
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With $5 billion on the line as well as the possibility of student loan dismissal, many borrowers are wondering if the situation applies to them and what they can do about it. Unfortunately, the answer is nothing.
Currently, the issue is only affecting those borrowers who have defaulted on their student loans
with National Collegiate Student Loan Trust. Many of these borrowers have entered into delinquency and are being taken to court by the Trust. It is through these court cases that they are learning that the student loans aren’t technically owned by anyone because papers proving ownership have gone missing.
And if you’re thinking that you could just default on your student loans in order to have them forgiven (in a very roundabout way), stop right there. Student loan default goes into effect after 270 days of missed payments, which means a huge increase in the total amount you owe.
If your student loans are owned by a private lender, like National Collegiate Student Loan Trust, they can take you to court. Though the end result may be dismissal of your student loan debt
, there is still a costly battle to get to that point. In addition to accruing legal fees, you also have to show up to every court date, be there on time and not miss any deadlines. Not doing so could result in a win for National Collegiate, which means paying the entire loan amount, accrued interest and delinquency fees.
If, by chance, you’re one of the lucky thousands that have defaulted student loans with National Collegiate Student Loan Trust, accept the challenge in court and commit to making it your top priority. You may just walk away with your student loans eliminated.