Private student loan companies are having difficulty proving ownership of student debt in courts, leading to the dismissal of dozens of lawsuits against borrowers, The New York Times reported.
The Times found that judges in several states have thrown out lawsuits brought by National Collegiate Student Loan Trusts, an umbrella name for the multiple trusts that hold $12 billion in private student loan debt. Court filings show that more than $5 billion of that debt is in default, the paper reported, but important paperwork has gone missing for many of the loans involved as they were passed between multiple private companies.
Unlike federal direct loans, private student loans are not backed by the federal government and come with higher interest rates and fewer protections for consumers. Those features make them similar to home loans taken out ahead of the subprime mortgage crisis, the Times reported.