Bank error in your favor. Your student loan may disappear.

[ttf_robcat2075]

You may already be paying on a loan that doesn't exist.

The companies that buy up student loans from banks and collect on defaulted ones have often lost their ownership paperwork or never legitimately owned the loans to begin with.


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


QuoteAt the center of the storm is one of the nation’s largest owners of private student loans, the National Collegiate Student Loan Trusts. It is struggling to prove in court that it has the legal paperwork showing ownership of its loans, which were originally made by banks and then sold to investors. National Collegiate’s lawyers warned in a recent legal filing: “As news of the servicing issues and the trusts’ inability to produce the documents needed to foreclose on loans spreads, the likelihood of more defaults rises.”


National Collegiate is an umbrella name for 15 trusts that hold 800,000 private student loans, totaling $12 billion. More than $5 billion of that debt is in default, according to court filings.
As i see it, the catch is that one has no way on knowing without first defaulting on payments and getting sued.


Of course I'm not suggesting that you default on your loan held by National Collegiate Student Loan Trusts to find out. 

On the other hand, a responsible adult might want to be sure they are sending their money to the right place and not merely someone who claims to own their loan. 

[ttf_JohnL]

Quote from: robcat2075 on Today at 03:37 PMAs i see it, the catch is that one has no way on knowing without first defaulting on payments and getting sued.I wonder if one could make a request that they provide proof that they own the loan? After all, it's only reasonable, given the recent reports that they have been collecting on loans that they can't prove they own.

I can see some hungry attorneys turning this into a cottage industry, much like the mortgage modification, income tax relief, and general debt reduction stuff that's already happening.

[ttf_bonearzt]

I wonder if DeVos has anything to do with it?

[ttf_harrison.t.reed]

It's not like the $12 billion just up and vanished. Someone still has to pay. I already paid my loans off. I don't want to pay someone else's too once their debt gets shifted onto tax payers because some loan company folded...

Hopefully it's just the investors that take this hit, or the students do the right thing and pay what they owe.

[ttf_robcat2075]

Quote from: bonearzt on Jul 17, 2017, 06:33PMI wonder if DeVos has anything to do with it?

I don't see a DeVos or Education Department connection in this on either side. She seems not to have had any experience with/knowledge of student loans prior to her current gig.

[ttf_BillO]

Quote from: harrison.t.reed on Jul 17, 2017, 08:01PMIt's not like the $12 billion just up and vanished. Someone still has to pay. I already paid my loans off. I don't want to pay someone else's too once their debt gets shifted onto tax payers because some loan company folded...

Hopefully it's just the investors that take this hit, or the students do the right thing and pay what they owe.
Without the paperwork, it the students default, the investors will take the hit.  This is all in private hands.

[ttf_harrison.t.reed]

Quote from: BillO on Jul 18, 2017, 06:54AMWithout the paperwork, it the students default, the investors will take the hit.  This is all in private hands.

I just remember the last time vast quantities of money were lost by poor bets and mistakes in tge financial sector. The banks didn't pay and neither did the investors. I remember them getting bailed out.

Luckily $12 billion is not close to the 2008 meltdown.

[ttf_robcat2075]

Quote from: harrison.t.reed on Jul 18, 2017, 06:57AMI just remember the last time vast quantities of money were lost by poor bets and mistakes in tge financial sector. The banks didn't pay and neither did the investors. I remember them getting bailed out.

Luckily $12 billion is not close to the 2008 meltdown.


I'll note that in the 2008 bailout the original plan floated by the Bush administration was to just give the banks $800 billion.  There was a big Dem freakout over that and the bill that was crafted required the banks to repay the money.

One incentive for them was that it put severe limits on executive pay and compensation until they pay the loans off. Some of them paid it off so quickly I wonder if they ever really needed it. 

Ultimately the federal government made about a 3% profit on the whole thing over 4 years.


However I do recall the S&L bailout of the late 90s. That really was a bailout that did not get paid back. About $85 billion? Basically that was to prevent any rich people who had S&L accounts above the limit that was insured by the FSLIC from losing any money.

[ttf_B0B]

Quote from: BillO on Jul 18, 2017, 06:54AMWithout the paperwork, it the students default, the investors will take the hit.  This is all in private hands.
Only if going to court...

Otherwise, collection companies still will report credit problems on accounts and trash the person's credit.

The housing crisis had a lot of this. I seem to remember in FL especially that banks were trying to foreclose left and right, but a judge kept finding they didn't have the full paperwork and threw many cases out. But that still took going to court... and with the homeowners in the vulnerable position... lots and lots of stress.

[ttf_harrison.t.reed]

Quote from: B0B on Jul 18, 2017, 12:18PMOnly if going to court...

Otherwise, collection companies still will report credit problems on accounts and trash the person's credit.

Right. This comes down to the fact that a group of clowns at the financial institution in charge of the fund that bought the debt did not do their paperwork correctly. If I was the investor (read big bank) who had put my money in the fund and now the students or ex students were off the hook, you better believe I'd be demanding that the clowns be replaced and the paperwork be put into order so that the original debtors would pay up. That interest doesn't make itself.

Now, if it turns out that the financial institution cannot legally put the paperwork in order, and the debtors really are off the hook, I would be doing some kind of class action suit against the fund to extract the $12 billion from the fund's parent organization, unless that organization was me. In that case, the smaller fry would be building the class action suit against me. In effect, investor money was used to pay off the debt of 800,000 people and through criminal negligence, there was no hope that the investor would see any return or even get their principal back.

So the parties involved should either go after fixing the paperwork or the bank owning the fund will be eaten up, until the investors get some of their money back.

What makes me sick is the attitude amongst many people with student debt. That it's somehow not their fault that they have it and that there is no need to pay it. Sure, schools charge way more than the education they provide is worth, but people keep going to school to learn basket weaving and how to play the trombone. Not my fault.

So this topic and the glee I imagine many people will feel about the prospect of having their student loans erased through a technicality and them having no remorse over passing their mess on just makes me really bummed out for our society. I paid all my loans off by age 24 and did the honest, right thing. Even if this kind of news came to me when I graduated, I still would have paid my loans (barring the company I owed just folding outright) because I really did go to school and I took out loans to do it. The student debt bubble has gotta burst at some point if this attitude towards debt keeps going the way it's going.

[ttf_harrison.t.reed]

Quote from: B0B on Jul 18, 2017, 12:18PMOnly if going to court...

Otherwise, collection companies still will report credit problems on accounts and trash the person's credit.

Right. This comes down to the fact that a group of clowns at the financial institution in charge of the fund that bought the debt did not do their paperwork correctly. If I was the investor (read big bank) who had put my money in the fund and now the students or ex students were off the hook, you better believe I'd be demanding that the clowns be replaced and the paperwork be put into order so that the original debtors would pay up. That interest doesn't make itself.

Now, if it turns out that the financial institution cannot legally put the paperwork in order, and the debtors really are off the hook, I would be doing some kind of class action suit against the fund to extract the $12 billion from the fund's parent organization, unless that organization was me. In that case, the smaller fry would be building the class action suit against me. In effect, investor money was used to pay off the debt of 800,000 people and through criminal negligence, there was no hope that the investor would see any return or even get their principal back.

So the parties involved should either go after fixing the paperwork or the bank owning the fund will be eaten up, until the investors get some of their money back.

What makes me sick is the attitude amongst many people with student debt. That it's somehow not their fault that they have it and that there is no need to pay it. Sure, schools charge way more than the education they provide is worth, but people keep going to school to learn basket weaving and how to play the trombone. Not my fault.

So this topic and the glee I imagine many people will feel about the prospect of having their student loans erased through a technicality and them having no remorse over passing their mess on just makes me really bummed out for our society. I paid all my loans off by age 24 and did the honest, right thing. Even if this kind of news came to me when I graduated, I still would have paid my loans (barring the company I owed just folding outright) because I really did go to school and I took out loans to do it. The student debt bubble has gotta burst at some point if this attitude towards debt keeps going the way it's going.