Who is National Collegiate Student Loan Trust?

When you dig behind the official sounding name, the answer might surprise you. They are a company that bought packaged and securitized private student loans – just like the toxic subprime mortgage backed securities that sank the economy into a recession in 2006. Here’s how the song and dance goes.

Who is National Collegiate Student Loan Trust?

1. A bank originates a student loan.

2. The loan is transferred to National Collegiate Funding LLC.

3. National Collegiate Funding deposits the loans into the National Collegiate Student Loan Trust.

4. Packages of securitized loans are sold to investors who want to make money. The more loans in the bundle that pay, the more money investors make.

5. Another company services your loan on behalf of National Collegiate Student Loan Trust.

6. National Collegiate Student Loan Trust pays the servicer for managing your account and for the attorneys who sue you if you default.

Along the way, the student’s loan is treated the same way that securitized mortgages were. And with that packaging comes a lot of the same problems. In fact, many students have no idea who they’re dealing with until they get a letter informing them that they’re being sued. Much like the subprime mortgages, there’s not a lot of paperwork to track whose loan went to where, when, and who has it now. Bloomberg has named the securitization of student loans “Robosigning 2.0.” The repercussions are still being felt today with clouds on the titles of millions of homes that may have been improperly foreclosed.

So what happens when you hear from them?

The first and most important thing is not to panic, and not to default. Keep making your payments and ask National Collegiate to show that they have standing to sue you for that debt. You need to have that paper trail on your side and most of all you need to respond. Not responding leads to a default judgement and that’s not a good thing. Essentially if you fail to respond, National Collegiate wins because they showed up and you didn’t.

There are a few different pathways to argue against them. One key here is NCSLT 2006-1, 2007-4 v. Glynnwherein the judge determined that since National Collegiate failed to provide the court with proof that it owned the loan, then National Collegiate could not sue and the motion for dismissal was granted. Further, attorneys are finding that their clients have never seen nor signed the Truth in Lending Act disclosures – where the interest rate and terms are laid out.

Very little is being done to give relief to those who hold private student loans but that doesn’t mean you are out in the cold. You have to be dealt with fairly from the origination of the loan to the time the debt collector calls your home. You need to gather your paperwork and you need to find a good lawyer with experience in National Collegiate’s tactics. The lawyer should also offer you a free consultation. That lawyer should really be me.

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