Missing Paperwork May Erase $5 Billion In Student Debt

The New York Times reported Monday that the missing paperwork could result in tens of thousands of delinquent borrowers having their private student loan debt cleared. It is struggling to prove in court that it has the legal paperwork showing ownership of its loans, which were originally made by banks and then sold to investors. The College Board estimates that the average cost of attending a for-profit institution is $16,000 a year, roughly 4.5 times more than the cost of the average two-year college, and 1.7 more than the cost of the average four-year public college for in-state students.

A group of creditors may not be able to collect on the loans even after taking student borrowers to court because of the missing paperwork, The New York Times reported.

National Collegiate's troubled loans did not start out with the organization. These private loans were not guaranteed by the federal government, which is the nation's largest student loan lender. Private student loans account for around $108 billion of student loans, according to The Times. 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.

Document: National Collegiate's Audit of P.H.E.A.A. Judges have only dismissed cases in which National Collegiate sues borrowers who aren't paying their debts.

More news: Seven Hindu pilgrims killed in militant attack in Indian Kashmir

Additionally, according to a court filing, some 2,000 borrowers who have requested forbearance or other help with their loans have had their requests go unanswered because none of the parties can agree on who has the authority to make decisions pertaining to the loans.

While experts say National Collegiate is one of the most aggressive private loan holders, it still doesn't usually bring a lawsuit until borrowers are at least several months overdue on their payments, Gaudreau says.

Missing paperwork could wipe out billions...

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