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July 17, 2017
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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.

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. Catherine Garcia