If there's one struggle that nearly every post-college grad can relate to, it's the seemingly insurmountable task of paying back your student loans.
With loan officers just waiting for bright-eyed and bushy-tailed college hopefuls looking for a way to create a better life for themselves through education, only to slap them with variable interest rates with no promise of viable employment in the future, it's no wonder Americans are having difficulty paying off their debts.
Much like the housing crisis in the early 2000s, there's a bubble that's about to burst in education. Some private lenders are finding themselves unable to collect on the loans that they've given out, and it's all because of missing paperwork.
The New York Times reported that one of the biggest players that's losing big time when it comes to private student loan repayments is National Collegiate Student Loan Trusts. The lender is actually comprised of some 15 trusts that are constantly exchanging loans between each other, buying and selling them to other lenders who take over student debt.
As a result, Collegiate on many occasions can't provide sufficient paperwork to prove that the students they're suing for loan money repayments are actually on the hook for the payments. $5 billion worth of debt is in default and people's futures may hang in the balance.
The Times reported on an instance where one borrower was taken to court and National Collegiate presented documents saying that she took out loans to attend a college that never enrolled in classes for. Because the paperwork the firm submitted "was a mess," she was let off the hook for $31,000 in student loans.
National Collegiate, and student loan collectors like them, sometimes win their court cases simply because borrowers don't show up to court dates. Oftentimes, borrowers don't receive mailed notices from lenders as addresses change or they merely don't want to go to court. By default, they'll either have judgments taken out against them or they'll have their wages garnished.
As Richard D. Gaudreau, a lawyer in New Hampshire who has defended against National Collegiate in several lawsuits, explains to the New York Times, “It’s a numbers game. My experience is they 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.”
Now if you have federal loans, that's a different story entirely. (h/t the new york times)
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