Student loan paperwork goes KAPOOF
Collectively, Americans owe $1,400,000,000,000 — that’s trillion — in student loan debt. The average 2016 college grad left campus $37.2k in the hole, the highest in history.
But a crazy story in the New York Times on Monday indicates that soon, a bunch of students may be off the hook.
Turns out, someone at the National Collegiate Student Loan Trusts filed some paperwork incorrectly — and it could result in $5B in student loan debt being forgiven.
Paying the piper
So, here’s the deal: When a student takes out a college loan from a big bank, that bank will often “bundle” multiple loans together and sell them to a “depositor.” The depositor will then offload this bundle to a trust.
In the case of this story, that trust is the NCSLT — one of the largest owners of student loans in the country. They control 800k private loans in 15 trusts that total upwards of $12B.
Of those loans, about 160k are in default — meaning people failed to make timely payments. And for years, the NCSLT has aggressively gone after tens of thousands of these defaulters in court.
Just one problem with that…
It appears the NCSLT has been — shall we say — “schooled” by improper filings of loan records.
According to the report, sloppy or missing paperwork has made it impossible to prove the creditor actually owns the loans, and many of these default cases are being dismissed as a result.
For example, Samantha Watson, a 33-year-old mother of three who got out of $31k in debt from her 2013 psych degree thanks to crappy paperwork.
Bigger fish to fry
It’s always satisfying to see a David vs. Goliath story end well for the little guy.
But, an estimated 44m Americans still owe some form of student debt — and 11% of them default every year.
So celebrating the debt forgiveness of tens of thousands of students is kind of like a cheering on the one person who survives the zombie apocalypse in a grindhouse flick…
Let’s see what happens when the 5 billion in errors start to kick in.