A foul-up over some lost paperwork has literally wiped away the student loan debt for a myriad of borrowers who collectively owed billions of dollars.
According to the New York Times, around $5 billion worth of private student loan debt has been eliminated due to the fact that creditors have lost a lot of critical documents, which validated their cases against borrowers. Practically all of the borrowers were people who had fallen upon hard times and were unable to keep up their monthly payments.
The New York Times also reported that the creditors at these private education funding companies were fighting borrowers in court to force them to pay. Dozens of lawsuits have already been dismissed because courts have seen many errors in these collection cases, including inadequate ownership records and mass-produced documents.
The entire $108 billion-dollar private student loan debt crisis has all of the hallmarks of the 1990s to early 2000s sub-prime mortgage disaster. During this decade-long economic quagmire, a vast number of collection cases were tossed out by judges who heard arguments from creditors with fake documentation and other forms of malfeasance.
Much like those awful sub-prime mortgages, student loans from private lenders have sky-high interest rates, as well as scant amounts of consumer protection benefits. The National Collegiate Student Loan Trusts is one of the largest private student loan service providers in the U.S.
This organization is one of the creditors that has had debtors get their troublesome loans wiped clean. Private student loan service providers have an obligation to abide by certain regulatory standards, which are based on ethics. Many of the for-profit colleges and universities that are benefiting from these loans have not upheld ethical practices.
Richard D. Gaudreau, a lawyer in New Hampshire who has won cases for debtors against private student loan service providers spoke with the New York Times about the nature of these creditors. “It’s a numbers game,” Gaudreau said in his interview with the New York Times.
“My experience is [creditors] try to bully you at first, and then if you’re not susceptible to that, they back off, because they don’t really want to litigate these cases,” he continued.
You can read the full and in-depth report for the New York Times’ investigation by visiting the link to the research source listed for this article below.