Missing Paperwork May Erase $5 Billion In Student Debt

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By Rob Shimshock

Missing paperwork may cause student borrowers to be forgiven more than $5 billion in debt, according to a Tuesday investigation of court records.

The National Collegiate Student Loan Trusts (NCSLT), an umbrella group for 15 trusts for student loans, has encountered difficulties proving that it owns $5 billion in student debt, according to The New York Times.

“As news of the servicing issues and the trusts’ inability to produce the documents needed to foreclose on loans spreads, the likelihood of more defaults rises,” the NCSLT said in a 2016 legal document. The NCSLT holds 800,000 student loans, amounting to $12 billion.

“I didn’t really understand about things like interest rates,” Samantha Watson, a college graduate sued by the NCSLT when she fell behind on loan payments, told The New York Times. “Everybody tells you to go to college, get an education, and everything will be O.K. So that’s what I did.”

Kevin Thomas, Watson’s attorney from New York Legal Assistance Group, alleged that the NCSLT submitted messy and sometimes erroneous paperwork. New York City’s Civil Court dismissed four lawsuits filed by the NCSLT against Watson, and relieved the woman of $31,000 in debt.

Judges nationwide have dismissed suits filed by the NCSLT, including in Ohio, New Hampshire and Texas, asserting that the organization cannot prove that it owns the debts. Some lawsuits filed by the NCSLT are won by default when borrowers do not show up to defend themselves. Other times, the NCSLT drops suits when contested by borrowers.

The Daily Caller News Foundation reached out to Joel Leiderman, vice president of Forster and Garbus, which represented the NCSLT against Watson, but received no comment in time for publication.