If you have debt from a student loan and you’ve fallen behind on your payments, you might be lucky enough to have that loan forgiven, thanks to some crucial paperwork which has gone missing.
The New York Times published a bombshell report on Monday that private loans issued by the National Collegiate Student Loans Trust are missing critical paperwork that could lead to 166,000 separate loans totaling $5 billion to be magically forgiven.
The loans are at the center of a legal battle in which the bank is struggling to prove that it has the legal paperwork showing ownership of its loans, which were originally made by other banks and then sold to investors.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.”
The scandal is reminiscent of the subprime mortgage crisis from a decade ago when billions of dollars in subprime mortgage loans were ruled uncollectible by courts because of missing or fake documentation.
Because the loans were originally granted to students by banks and then bundled and sold to National Collegiate, it is unclear who exactly owns the individual loans. If National Collegiate fails to show official documentation that they own the loans in court, a judge will be forced to throw them out.
Student loans account for $1.4 trillion of debt nationwide, and judges have begun clearing debts in New York, New Jersey, Texas and Ohio.
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