Student Loan Erased Due to Lack of Paperwork; Others Possibly Affected
The New York Times* recently published an article relating to private student loans held by the National Collegiate Student Loan Trust (the “Trust”) that should remind all individuals and businesses that maintaining proper records is essential to establishing any legal obligation. In this case, the Trust is having difficulties collecting private student loan debt due to missing paperwork. Ziemer, Stayman, Weitzel & Shoulders LLP attorneys, Molly Briles and Mike Luttrull, were recently successful in representing a student against the Trust, when it claimed it was the owner of student loan debt but could not provide the necessary documentation. As a result, $100,000+ in student loan debt was eliminated without a trial or an appeal.
Simply: Student acquires a student loan from a lending institution that requires the student and sometimes a cosigner to sign a promissory note for the loan. After student receives the loan, that lending institution often bundles it with other students’ loans and sells the loan bundle to a second entity that often further sells it to another entity (e.g., the Trust). Each transfer, however, must be documented in detail and sometimes the second or third entity cannot prove the prior transfers or even the underlying loan, due to missing paperwork. Thus, they cannot prove that they are the owner of each student’s loan that, together, comprises the bundle. Nonetheless, those entities still attempt to collect on the debt through a student debt servicer (e.g., American Education Services) or debt collector (e.g., Transworld Systems). Courts are now recognizing that those attempts should fail.
*Stacy Cowley and Jessica Silver Greenburg, “As Paperwork Goes Missing, Private Student Loan Debts May Be Wiped Away,” New York Times (July 17, 2017). The New York Times article can be found at https://www.nytimes.com/2017/07/17/business/dealbook/student-loan-debt-collection.html (last accessed July 18, 2017).
This alert has been prepared by Ziemer, Stayman, Weitzel & Shoulders LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.