Many Student Loans are Uncollectible, Even When Lawsuits are Filed By Debt Collectors Like NCSLT
There is almost $1.5 trillion in student loan debt in the United States, and nearly 1 in 5 adults have student loan debt. On top of that, more than 10% of student loans are in default. What can you do if you’re behind on your student loans, or even worse, being sued by your lender in a debt-collection lawsuit?
An article from the New York Times Dealbook titled “As Paperwork Goes Missing, Private Student Loan Debts May Be Wiped Away” explains that many of student loans may not be able to be collected at all.
Why? It turns out that one of the major companies that owns student loans often does not have the paperwork to show it owns the loans. This company, National Collegiate Student Loan Trust (NCSLT for short), buys student loans from the banks that originate them. It then collects the payments, and if you fall behind, it just might sue you.
The paperwork to show who owns the loan goes through various hands to reach NCSLT, from the lender, to one or more intermediaries, and only then on to NCSLT itself. If NCSLT cannot prove under the rules of evidence that it owns the loans, then any debt-collection case it files should be dismissed.
The article explains that, unlike with many mortgage issues, the problems NCSLT has showing ownership come from inability to prove it owns the loans, not falsification of documents.
Unfortunately, however, most people do not talk to a lawyer once the loan goes into collection, and then NCSLT usually wins the lawsuit by default. It is therefore extremely important to seek legal counsel if you receive a notice of a student loan lawsuit – or any other debt-collection lawsuit.
Culik Law is a Massachusetts consumer protection law firm. Our attorneys have handled many cases involving National Collegiate Student Loan Trust, as well as other student loan companies. If you have student loans in collection, contact us to see if we can help.