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

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

Post by DejaMoo » Mon Jul 17, 2017 5:04 pm

The financial market is deserving of less and less respect with its shoddy work and reckless lending standards. If you can't manage your business, I have no sympathy when your unprofessional actions/decisions end up costing you money.

As Paperwork Goes Missing, Private Student Loan Debts May Be Wiped Away
Tens of thousands of people who took out private loans to pay for college but have not been able to keep up payments may get their debts wiped away because critical paperwork is missing.

Judges have already dismissed dozens of lawsuits against former students, essentially wiping out their debt, because documents proving who owns the loans are missing. A review of court records by The New York Times shows that many other collection cases are deeply flawed, with incomplete ownership records and mass-produced documentation.

Some of the problems playing out now in the $108 billion private student loan market are reminiscent of those that arose from the subprime mortgage crisis a decade ago, when billions of dollars in subprime mortgage loans were ruled uncollectable by courts because of missing or fake documentation. And like those troubled mortgages, private student loans — which come with higher interest rates and fewer consumer protections than federal loans — are often targeted at the most vulnerable borrowers, like those attending for-profit schools.

At 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 It is struggling to prove in court that it has the legal paperwork showing ownership of its loans, which were originally made by banks and then sold to investors.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.”

Dan1100
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Re: As Paperwork Goes Missing, Private Student Loan Debts May Be Wiped Away

Post by Dan1100 » Mon Jul 17, 2017 5:15 pm

Some smart lawyer has got to figure out a way to force them to prove they own the loans without the borrowers having to go into default first. Some kind of class action where you ask for a declaratory judgement that they are falsely claiming to be the owners of the loans.
"Let's say you're on trial for armed robbery. You say to the judge, 'I forgot armed robbery was illegal.' "

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

Post by ZekeB » Mon Jul 17, 2017 5:48 pm

Blame Trump.

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

Post by DejaMoo » Thu Jul 27, 2017 12:54 pm

Related, from Minnesota:

Supreme Court says Globe U and MN School of Business made illegal loans
Students who borrowed money from Globe University and the Minnesota School of Business to cover tuition might be in for a refund thanks to a ruling Wednesday by the Minnesota Supreme Court.

The court found student loans offered by the two for-profit schools, which carried interest rates as high as 18 percent, were illegal and that the schools issued the loans without the proper license.

Under Minnesota law, loans made without a license are void and the borrower does not have to repay them. Minnesota Attorney General Lori Swanson said she would seek loans issued to up to 6,000 students be canceled and also try to get refunds on money already repaid.

The lawsuit was centered around criminal justice programs at Globe and the Minnesota School of Business that charged students as much as $89,000 for degrees that got them no closer to their dreams of becoming police and probation officers.

The fraud ruling led to the state Office of Higher Education pulling the schools’ operating authority and the U.S. Department of Education shutting the schools out of the federal student loan program.
Way back in the mists of time, I enrolled at Globe with plans to become an accountant. They ran me through a student loan financing scheme, which, being young and inexperienced, I didn't realize, setting me up with a loan for the first year of the course. The kicker: they held the money. That was their policy for all students, regardless of who they got their loan or grant money from. They'd disburse us a $30/week allowance and held the rest for tuition and books.

Halfway through the second quarter, I dropped out. (I realized I should go after having three of my instructors quit on bad terms with the school, one of whom made a point of telling his classes that Globe was run by crooks and we should all quit, too.) I then requested the balance of my money, since I was transferring to another school. "You don't have any money left," they said. I challenged that, since I'd only paid for two quarters and a few books, and at most 12 weeks of 'allowance'. No, they said, I'd been drawing substantial cash out, and here were their records to prove it. That's when I realized I'd been swindled, and worse, I couldn't prove it. They had (fake) documentation, I had nothing.

Paying off that student loan over the next decade gave me plenty of time to own my mistake and acknowledge my stupidity. It was a very expensive lesson, but I learned it well: don't assume everyone else is honest; read everything; manage your own finances and keep good records.

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