Private Lenders Struggle to Prove Ownership of Student Loans in Court

Those student loans were originally issued by banks and then sold to investors including National Collegiate Student Loans Trust.

Before you take out a private loan be sure to take advantage of your federal student loan options.

National Collegiate's legal problems have hinged on its inability to prove it owns the student loans, not on any falsification of documents.

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National Collegiate's troubled loans did not start out with the organization.

You can ask your loan servicer to show you a promissory note proving who owns the loans, but the servicer isn't legally required to turn that over, says Robyn Smith, an attorney with the National Consumer Law Center.

National Collegiate isn't a lender, guarantor, or loan servicer.

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"We don't like what's going on", Mr. Uderitz said in a recent interview. A 2015 audit of the company, organized by one of the financiers behind National Collegiate's trusts, looked at almost 400 random loans owned by National Collegiate, and found that none had the proper paperwork documenting the chain of ownership.

Document: National Collegiate's Audit of P.H.E.A.A.

You see, trusts like the NCSLT typically win default lawsuits automatically-almost be default, pardon the pun-because borrowers typically don't even show up to court (probably assuming that they can not win the case). Because of those steep rates, the size of the loans can quickly balloon, leaving borrowers to pay hundreds and, in some cases, thousands of dollars each month. These students often tend to enroll in for-profit schools. Federal student borrowers can apply for a discharge in those circumstances, but private borrowers cannot. They aggressively hound student borrowers who fall behind on their bills and have brought tens of thousands of lawsuits against defaulters in the past five years. New York City's Civil Court dismissed four lawsuits filed by the NCSLT against Watson, and relieved the woman of $31,000 in debt.

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Very few cases ever make it to trial, according to court records and borrowers' lawyers.


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