Student Loans Are The New Robo-Signing Crisis

You may remember the term “robo-signing” from the recent financial crisis, where lenders would put homeowners in foreclosure without an actual person reviewing the documents, which is required in many states. The same thing is reportedly happening again with s different debt crisis: student loan lenders are robo-signing those, too.

Most debt in this country is in the form of home mortgages. Credit card balances used to come in at #2, but Americans have paid down those debts and now student loans are the biggest source of outstanding debt. When people miss payments or enter default, collection agencies come after them…but the robo-signing menace is back thanks to the student loan industry.

Yes, lenders packaged up private student loans and sold them as securities: specifically bones, which funnel borrowers’ student loan payments to investors. Only, much like in the mortgage crisis, record-keeping is sloppy and the chain of who owns which loan can be difficult to prove.

When lenders sue student loan payers in court, it’s possible to force the financial company suing you to prove that they are the ones who rightfully own the debt. If they didn’t, buy not having a human being review the documents before filing in court, it’s possible to have a payment judgement vacated for a private student loan: meaning that since the current owner of your debt can’t prove that you own it, you don’t have to pay them.

The Lawsuit Machine Going After Student Debtors [Bloomberg]

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