As Paperwork Goes Missing, Private Student Loan Debts May Be Wiped Away

Robyn Valdez
July 20, 2017

Although $5 billion may be a lot of money, its only a fraction of both the private student loan market and the student loan market as a whole.

That's a big number, but it accounts for a relatively small fraction of overall USA student debt. The issue of who owns the debt on $5 billion worth of student loans is at the center of a legal battle that is resulting tens of thousands of people having their debt wiped away. National Collegiate is struggling to prove in court that it owns the loans, which were originally made by banks and then sold to investors.

National Collegiate's troubled loans did not start out with the organization.

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The private student loan business is actually much larger even. And most student debt holders don't owe National Collegiate. And it is this trust which has reported the loss of this paperwork, which documents the chain of ownership for these loans.

As a matter of fact, judges have already dismissed several dozen lawsuits against borrowers in default on their student loans from these private creditors. Because of those steep rates, the size of the loans can quickly balloon, leaving borrowers to pay hundreds and, in some cases, thousands of dollars each month.

Has National Collegiate sued me for nonpayment?

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Borrowers who can't afford an attorney can contact their local Legal Services office, Smith says.

One woman the Times spoke with, 33-year-old Samantha Watson, had $31,000 in debt wiped out in court after her lawyer realized that National Collegiate's paperwork was a mess, and after the group tried to claim in court that Watson had enrolled at a school that she had never attended.

The messy paperwork may be something of a miracle for burdened students, but it is a nightmare for the thousands of borrowers who are now in the middle of the storm, unable to get answers about the state of their loans.

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