Paperwork Goes Missing – Students May Not Have to Repay Their Loans?

So why can’t this be my life? I read an article in the New York Times where the headline was this: “As Paperwork Goes Missing, Private Student Loan Debts May Be Wiped Away”.  Seriously?  I will say it again – why can’t this be my life?  Honestly, these people are super lucky.  According to the New York Times, tens of thousands of people who took out private loans to pay for college, might get their debts wiped away.  Because the paperwork is missing, people! This also feels a bit like a comedy of errors, but one that is going to benefit a lot of people.  Especially since many of these people were struggling to repay their loans to begin with.

So what happened exactly?  These particular loans are at the centre of a legal dispute between the borrowers and a group of creditors who are aggressively trying to pursue them in court for non-payment. Judges have already dismissed dozens of lawsuits against former students, because the paperwork proving who owns the loan went missing.  Which means, these former students are getting their loans forgiven.  This is actually a bigger financial issue, but I’m still kind of thrilled to hear this.  As someone who relied heavily on student loans, and who is also still repaying them, this makes me happy.

It’s not really good to celebrate as this paperwork error is costing someone (or multiple someones) a lot of money.  In the billions.  The New York Times article details several cases where the borrower couldn’t repay the loan.  And in the cases documented, they all had their debts dismissed by a judge.  Again, this is really great news, but why couldn’t they pay the loans back?  Surely, they had to know when they borrowed the money that some day they would have to pay them back.  What seems to be common when it comes to student loans is this idea that it’s “free” money.  For some reason, they won’t have to pay it back.

Which I can kind of relate to.  It’s hard to see that far into the future when you’re so young.  Or at least it was in my case.  Hopefully kids out there are smarter than me, or at least can learn from my mistakes.  That being said, I always knew I would have to pay it back, but it didn’t seem real.  What was important at the time was keeping my head above water, while trying to get an education.  I worked all through university, so my loans wouldn’t be as high.  But that doesn’t mean I wasn’t solely living for the moment.

The legal ramifications for the missing paperwork is unknown at this time.  Based on how the court has ruled in individual cases, it’s possible that these loans will be wiped out.  The big issue will be whether or not the lawyers can prove that the paperwork has critical omissions or flaws.  Basically pointing the finger and saying that there is no proof that the individual took out the loan.  What a mess!  It is possible that these people will have to repay the loans, but it seems more plausible that the loans will be forgiven.  And what I wouldn’t do to be in that boat for a moment!