$5B in student loan debt could be forgotten thanks to missing paperwork

As Least $5 Billion Of Private Student Loan Debt May Be Erased Because Of Missing Paperwork

Those loans add up to $12 billion, and more than $5 billion is in default, court records state.

Unlike federal direct loans, private student loans are not backed by the federal government and come with higher interest rates and fewer protections for consumers.

National Collegiate Student Loan Trusts, one of the country's largest owners of private student loans, is locked in a prolonged legal battle with borrowers who have fallen behind on their loan repayments.

Judges have recently thrown out lawsuits brought by the trusts in New Hampshire, Ohio and Texas.




Donald Uderitz, the founder of the private equity group that is the beneficial owner of National Collegiate's trusts, said he wants the group to end its lawsuits against delinquent borrowers, unless it can prove that it owns the loans.

The 15 trusts have led a serious offensive to track down the borrowers who fall behind on their student loan payments.

The ongoing student loan debt crisis is causing comparisons to the sub-prime mortgage crisis 10 years ago when billions of dollars in loans were wiped away because of missing or false documentation. For the economists who have always been anxious about the US's impending student-loan crisis, it's even worse. Judges throughout the USA, including recent cases in Ohio, New Hampshire, and Texas, have thrown out lawsuits by National Collegiate because the trusts could not prove they owned the debt they were trying to collect.

The defaulted loans were first issued by a number of banks, before being bundled together and sold to investors.

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