The Student Loan Debt Collection Problem
Student loan debt today exceeds $1.3 trillion. The total has more than doubled from the $611 billion it was nearly nine years ago. Almost one in 10 student borrowers is behind on repaying and are subject to debt collection suits. It is the highest delinquency rate for any type of loan. Debt collectors can be merciless. They seize tax refunds and garnish wages. A bankruptcy filing can help people get rid of credit card debt, stop debt collection suits and free up money to make payments on student loans. But, bankruptcy cannot wipe out the loans entirely in most cases. For older debtors, with serious disabilities, a “hard ship discharge” may be available. There are rumors Congress is thinking about rewriting the student provisions of the Bankruptcy Act. Don’t expect anything on that front anytime soon. Bankruptcy options for student loans are presently limited.
National Collegiate Funding Lawsuits
Tens of thousands of people, who took out private loans to pay for college but have not been able to keep up payments, may be able to get their debts wiped away because critical paperwork is missing. The troubled loans, which total at least $5 billion, are at the center of a protracted legal dispute between the student borrowers and a group of creditors who have aggressively pursued them in court after they fell behind on payments. National Collegiate Funding (NCF) is an umbrella name for 15 trusts that collectively hold 800,000 private student loans. The loans total $12 billion. The only problem is roughly $5 billion worth of those loans, or over 40%, are currently in default!
Judges have already dismissed dozens of lawsuits against former students, essentially wiping out their debt, because documents proving who owns the loans are missing. Many collection cases are deeply flawed. They have incomplete ownership records and mass-produced documentation. Some of the problems playing out now in the $108 billion private student loan market are reminiscent of those that arose from the subprime mortgage crisis. Like those troubled mortgages, private student loans are often targeted at the most vulnerable borrowers, like those attending for-profit schools.
Getting Legal Help
If you are being sued by a debtor collector for a student loan you cannot afford to pay seeking immediate legal help is essential. Please visit our web site for information about the bankruptcy process. In addition to challenging the collector in a civil collection case, challenging the validity of the debt in a bankruptcy filing may also be explored. Our office offers litigation defense and bankruptcy services for those overwhelmed by debt and can evaluate your options in terms of reining in your student loan debts. Please contact us to set up a free consultation.