$5B in Student Loan Debt Could Be Gone Thanks to Missing Paperwork

As Least $5 Billion Of Private Student Loan Debt May Be Erased Because Of Missing Paperwork

A graduating student's cap during City College graduation

National Collegiate - which includes 15 trusts that hold 800,000 private student loans - has brought tens of thousands of lawsuits in the past five years against borrowers who have fallen behind on their loan payments.

At least $5 billion in private troubled student loans may be dismissed because paperwork that proves loan ownership is missing.

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One of the biggest holders of private student loans appears to have flunked Bookkeeping 101-and that could be very good news for a lot of borrowers.

According to the New York Times, almost 200,000 private student loans issued by the National Collegiate Student Loans Trust are missing critical paperwork.

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A recent legal filing by National Collegiate's lawyers stated the following, "As news of the servicing issues on the trusts' inability to produce the documents needed to foreclose on loans spread, the likelihood of more defaults rises".

In a review of court records, the newspaper found several similar cases contain incomplete ownership records, as well.

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Some borrowers say the company has sued them trying to collect on high-interest loans that they never even took out. The debt passed through too many hands before reaching National Collegiate's trusts, and imperative paperwork that documented who owned the loans disappeared. Of the almost 50% of respondents who reported having a 401 (k), almost one-quarter said they would prefer student loan assistance over their 401 (k) plan. Disorganized or missing paperwork has made it hard for National Collegiate to prove it does indeed own the defaulted loan it's demanding repayment on.

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