Paperwork Errors Could Wipe Out $5B in Student Loans

Private Lenders Struggle to Prove Ownership of Student Loans in Court

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

But according to a New York Times report this week (paywall), the trusts have been failing in court to produce the legal paperwork showing that they actually own numerous $5 billion in loans now in default, meaning that judges across the country have already dismissed dozens of the trusts' lawsuits against students.

The entire $5 billion of loans that are in default right now stand a chance at being basically wiped away.

Donald Uderitz, the founder of the private equity group that is the beneficial owner of National Collegiate's trusts, said he wants the group to end its lawsuits against delinquent borrowers, unless it can prove that it owns the loans.

At the center of the storm is one of the nation's largest owners of private student loans, the National Collegiate Student Loan Trusts. The debt collector who typically sues, Transworld Systems, usually swears to the accuracy of loan records in its court papers.

Since IonTuition's 2015 study, the number of student loan borrowers has increased by almost 4 million and they are carrying higher balances - those carrying over $30,000 in student debt rose to 30 percent, a 50 percent increase from 2015.

The defaulted loans were first issued by a number of banks, before being bundled together and sold to investors. "We need answers on this".

Student loan borrowers throughout the USA may have reason to celebrate if their debts are forgiven because of missing paperwork.

Already, judges across the country have tossed out dozens of collections lawsuits because of missing documentation, essentially erasing borrowers' debts, according to the Times.

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