INDIANAPOLIS, Ind.– A problem with paperwork could clear the debts of thousands of people who took out private student loans.
The loans, which total at least $5 billion, are at the center of a dispute between borrowers and a group of creditors. The group says the creditors aggressively pursued them in court after they fell behind on payments, according to the New York Times.
Since the creditors do not have documents proving who owns the loans, judges have been dismissing the lawsuits. This essentially wipes out the debt.
The Times reports National Collegiate is an umbrella for more than a dozen trusts which hold 800,000 private student loans totaling $12 billion. More than $5 billion of that amount is reportedly in default. The loans were made to students by dozens of banks, and then bundled together by a financing company and sold to investors.
Those private loans were not guaranteed by the federal government.