Missing paperwork could wipe out billions in private student loan debt
One of the largest owners of private student loans is struggling to show it has the necessary paperwork to prove ownership of loans that have gone into collection.
Tens of thousands of people whose loans are held by National Collegiate Student Loan Trusts could have their debts wiped out because of the missing paperwork, the New York Times DealBook blog reports.
The troubled loans that have gone into default total at least $5 billion. Most borrowers who are sued either default or reach settlements. But some cases that are being fought by lawyers have revealed the problems.
Judges throughout the country have already tossed dozens of collection lawsuits filed against borrowers because of missing documents. According to DealBook’s review of court records, “many other collection cases are deeply flawed, with incomplete ownership records and mass-produced documentation.”
The paperwork documenting the chain of loan ownership disappeared as the bank loans were bundled together and sold to investors through the securitization process. The debt collector who typically sues, Transworld Systems, usually swears to the accuracy of loan records in its court papers.
Transworld did not respond to a request for comment by DealBook.