Student Loan Bundlers May Find Themselves in Same Boat With Mortgage Bundlers

The student loan industry in many ways is mirroring that of the mortgage industry, and financial crisis may soon be on the horizon.debt defense

The only reason it hasn’t completely erupted up until this point is that despite the large number of student loan debts that are in default or delinquent, the share of their total debt did not balloon to the point of completely unsettling markets or setting public opinions alight. In fact, until recently many held the attitude that it was borrowers, saddled with mountains of debt they could not shed through bankruptcy, who had made their own bed. That could soon change, as companies purchasing distressed student loan debts – also known as “bundlers” – are finding themselves in the very same spot as many subprime mortgage companies did a few years ago.

Specifically, it’s being revealed in a number of pending cases that these student loan debt bundlers are not able to prove who actually owns the debt or when. 

One of the primary players in all this is the National Collegiate Student Loan Trusts, which have taken ownership of loans from banks and resold them to investment firms who again bundled and sold them to various trusts. The New York Times reports there are approximately 15 of these trusts that hold 800,000 private loans, which total about $12 billion. However, nearly $5 billion of that is in default, even as tens of thousands of debt collection lawsuits have been filed over the last five years. But now, as it’s been shown, NCSLT is not able to prove they actually own these loans.

This is a company wherein success was buoyed by the failure of students to repay exorbitant loans, and is now finding itself at the mercy of the courts to try to collect on these default loans. As word of this problem spreads, so too will the likelihood of more default.

Private student loans are often one of the biggest obstacles to the financial health of young adults. While we have all long understood that credit card debts to be dangerous in terms of finances – particularly for young people who had limited credit and experience and were only allowed this credit at exorbitant interest rates. But in our modern lexicon, student loans have been understood as an important means to an end, something responsible and driven people incur along the way to success. What is happening instead is that students from every economic tier has found themselves grappling with sky-high debt for an education that has not opened the doors to the job market that it once promised.

Requests for Congress to act with some type of debt relief or forgiveness have gone unheeded. But if cash-strapped students and graduates recognize that they aren’t able to trust the trust that holds their loan, there may be little incentive to even try to pay it back, especially when one can barely afford to do so.

Our Miami debt defense lawyers would not necessarily encourage anyone to stop paying on their student loans. However, if you are in default, struggling with repayment or have been sued by the company that holds your student loan, there may be grounds to successfully challenge ownership of that debt, and therefore your obligation to pay it.

If you’re battling debt collection in Miami or the surrounding areas contact Jacobs|Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday at 5 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.

Additional Resources:

Student loan bundlers’ scheme blowing up in their faces: James Poulos, July 22, 2017, By James Poulos, The Daily News

More blog Entries:

Student Loan Debt Could be Erased by Missing Paperwork, July 27, 2017, Miami Debt Defense Attorney Blog