Private student loan debts are being erased because of incomplete and missing paperwork


Judges across the United States are wiping away student loan debts worth, in some cases, tens of thousands of dollars, all because National Collegiate Student Loans Trusts has been unable to show in court that it owns the loans it says it does.
National Collegiate is composed of 15 different trusts, collectively holding 800,000 private student loans. Those loans add up to $12 billion, and more than $5 billion is in default, court records state. The private loans were made by banks, then sold to investors, and when the borrowers struggle to pay back these loans — which often have high interest rates — National Collegiate takes them to court; on average, at least four new collection lawsuits are filed every day, The New York Times reports, and more than 800 have been filed this year so far.
When borrowers don't go to court, National Collegiate almost always automatically wins the case, but when they do show up, most of the time judges throw the suits out because National Collegiate was not able to produce the paperwork proving it owned the debt in question. A 2015 audit of the company, organized by one of the financiers behind National Collegiate's trusts, looked at nearly 400 random loans owned by National Collegiate, and found that none had the proper paperwork documenting the chain of ownership. This is similar to what happened in the 2000s during the subprime mortgage crisis, when judges ruled in favor of borrowers, saying the companies could not collect subprime mortgage loans because the documents were either missing or forgeries.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
The lawyer for Samantha Wilson, a 33-year-old mother of three, said when she was sued by National Collegiate, the paperwork was riddled with errors. She earned her degree in psychology from Lehman College in the Bronx and fell behind on payments when her daughter was ill and she had to quit her job. Documents claimed she attended a school she never went to, and a judge dismissed four lawsuits against her because trusts "failed to establish the chain of title" on her loans. Wilson told the Times she was "responsible" for the loans she took out and was prepared to pay them off over time, but "some of them I didn't take." In the end, $31,000 worth of debt was wiped clean. Read the entire report at The New York Times.
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Catherine Garcia has worked as a senior writer at The Week since 2014. Her writing and reporting have appeared in Entertainment Weekly, The New York Times, Wirecutter, NBC News and "The Book of Jezebel," among others. She's a graduate of the University of Redlands and the Columbia University Graduate School of Journalism.
-
June 28 editorial cartoons
Cartoons Saturday's political cartoons include stupid wars, a critical media, and mask standards
-
Thai fish pie with crispy turmeric potatoes recipe
The Week Recommends Tasty twist on the Lancashire hot pot is given a golden glow
-
Palestine Action: protesters or terrorists?
Talking Point Damaging RAF equipment at Brize Norton blurs line between activism and sabotage, but proscription is a drastic step
-
Economists fear US inflation data less reliable
speed read The Labor Department is collecting less data for its consumer price index due to staffing shortages
-
Crypto firm Coinbase hacked, faces SEC scrutiny
Speed Read The Securities and Exchange Commission has also been investigating whether Coinbase misstated its user numbers in past disclosures
-
Starbucks baristas strike over dress code
speed read The new uniform 'puts the burden on baristas' to buy new clothes, said a Starbucks Workers United union delegate
-
Warren Buffet announces surprise retirement
speed read At the annual meeting of Berkshire Hathaway, the billionaire investor named Vice Chairman Greg Abel his replacement
-
Trump calls Amazon's Bezos over tariff display
Speed Read The president was not happy with reports that Amazon would list the added cost from tariffs alongside product prices
-
Markets notch worst quarter in years as new tariffs loom
Speed Read The S&P 500 is on track for its worst month since 2022 as investors brace for Trump's tariffs
-
Tesla Cybertrucks recalled over dislodging panels
Speed Read Almost every Cybertruck in the US has been recalled over a stainless steel panel that could fall off
-
Crafting emporium Joann is going out of business
Speed Read The 82-year-old fabric and crafts store will be closing all 800 of its stores