An eerily familiar scenario is unfolding among those who find themselves swimming in unmanageable debt. Tens of thousands took out loans, but haven’t been able to keep up. And yet, those debts could be wiped clean because important paperwork is missing.
But this isn’t the housing crisis of 2008. It’s the student loan crisis of 2017.
The New York Times reports these troubled loans, valued at an estimated $5 billion, are the subject of a drawn-out legal dispute between students and creditors who have aggressively gone dogged those who have fallen behind on their payments. Debt defense attorneys recognize that prevailing in these cases requires a litigator experienced in going toe-to-toe with large banks and institutions. No student is going to be able to count on an automatic win in court, but there are strategies that could prove helpful.
As it now stands, judges have dismissed dozens of lawsuits filed against underwater students, effectively erasing their student loan debt. The primary reason is plaintiffs in these cases – the creditors – aren’t able to prove who actually owns the loans. Critical documentation is missing.
The New York Times conducted a review of pending cases, and found that many of them are deeply and inherently flawed, with many cases relying on records of ownership that are not complete. Some of the documents used to present plaintiffs’ cases are mass-produced and lack the basic proof of ownership.
The private student loan market encompasses approximately $108 billion in private student loan debt. It’s all highly reminiscent of the subprime mortgage crisis we saw play out 10 years ago. Billions of dollars were deemed by courts to be uncollectible because documentation used to support ownership was either phony or missing entirely.
Similarly, many of these private student loans come with interest rates that are much higher – and consumer protections that are much fewer – than standard federal loans. This fact alone means they are often the most vulnerable borrowers, with many of whom having attended for-profit schools.
In the middle of all of this is National Collegiate Student Loan Trusts. It’s one of the largest owners of private student loans. The organization is reportedly having a very difficult time proving in court that it owns the loans it purports to own. These were loans originally made by banks that were later sold to third party investors.
The organization explained in court documents that as its inability to prove ownership of the loans becomes more well known, there is a greater likelihood that more students will default on their loans.
This is an organization that holds approximately 800,000 private student loans, which total more than $12 billion. Of those, approximately $5 billion is currently in default. The trust has a well-earned reputation of vigorously going after those who are in default. The organization has filed tens of thousands of lawsuits in the last five years.
Ensuring consumer rights are protected is a top priority of our dedicated debt defense attorneys. We recognize that many times, debtors are victims who had been purposely targeted for these loans. They were promised an education, told it was their only way out, only to find that the education itself had kept them tied down. The jobs weren’t as plentiful as they were led to believe, so the ability to repay the loans was significantly curtailed.
If you’re battling debt collection in Miami or the surrounding areas contact Jacobs Legal 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.
As Paperwork Goes Missing, Private Student Loan Debts May Be Wiped Away, July 17, 2017, By Stacy Cowley and Jessica Silver-Greenberg, The New York Times
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