Lost Paperwork Might Erase Billions in Private Student Loans

Lost Paperwork Might Erase Billions in Private Student Loans

The National Collegiate Student Loan Trusts holds student loans for several thousand people of people. As countless court cases appealing defaults on student loans throughout the nation have shown, the private loan company has failed to produce the proper paperwork. “Judges have already dismissed dozens of lawsuits against former students,” the New York Times DealBook blog reported, saying that judges were “essentially wiping out their debt, because documents proving who owns the loans are missing.”
Many of these cases come from the sub-prime mortgage crisis of the last decade. During the crisis, billions of dollars of loans were erased by courts due to improper paperwork. Given the lax standards of the time, many banks gave equally unstable private student loans. This includes the National Collegiate Student Loan Trusts.
Now that many are recognizing these paperwork problems, the National Collegiate may have an insurrection on their hands. When people realize that the company filed improper paperwork, they may default on their loans, rather than continue payments.
As one of their lawyers pointed out: “As news of the servicing issues and the trusts’ inability to produce the documents needed to foreclose on loans spreads,” said the lawyer, “the likelihood of more defaults rises.” The loans total at least five billion dollars, and have come to media attention after a number of creditors pursued legal action against student borrowers after they defaulted on their loans. To their surprise, they were unable to produce proof of loan ownership in court, causing judges to dismiss the claims. The New York Times reviewed a number of cases, stating: “many other collection cases are deeply flawed.” It reported these flaws include: “incomplete ownership records and mass-produced documentation.”
The National Collegiate serves as an umbrella for twelve different trusts who control over 800,000 student loans. According to court findings, student borrowers have defaulted on a total of five billion dollars worth of that debt so far.

Changes To Michigan Law May Be Unconstitutional Says New Lawsuit

A new lawsuit from Oakland County in Michigan has alleged that recent changes to the state law may be unconstitutional. The law was originally voted through in 2013, but it has not yet been implemented. It is set to go into effect in November, but this lawsuit seeks a stay on that implementation.

The name of the law is the Michigan Indigent Defense Commission Act. They contest that the law takes away the constitutional authority of the Michigan Supreme Court’s authority to set the rules that govern law in the state of Michigan.

Attorneys for Oakland County state that they do not want to take away the ability for the indigent to have access to an attorney. They say that they just want to make sure that any changes to the law are constitutional. A spokesperson for the Attorney General in the state of Michigan has declined to give a comment on this case. She does not want to address something that has to work its way through the courts. It is the tradition of the government to not make statements about litigation that is still pending.

Detroit News says that the lawsuit intends to take aim at the idea that the state government must reimburse local governments when new state regulations come into play. This is written into the law because it is believed that it would not be fair for the local governments to take on too much of the burden of new regulations.

Oakland County has a budget of just $3 million for indigent defense and would like to be reimbursed to a greater extent for the new changes to the law. There is not yet a date set for the court to hear the case. This is something that will be an interesting test case in the courts.