walkitout (walkitout) wrote,

Debt Sausage Factory: Student Loan Edition

The Upshot at NYT has this article saying, how come we can't get detailed information about student debt?


It has a variety of reasons for wanting the detailed information, assertions that privacy can be preserved, it impugns the competency of the Education department, argues we need this data to "help" borrowers before they get into trouble (ha ha ha ha ha -- the way to help most student debt holders who get into trouble would have been _before_ they borrowed that money from that lender to go to that school. Problem is not fixable thereafter). At no point does it get anywhere near suggesting that perhaps the data do not actually exist. However, it has quotes like this:

"David A. Bergeron spent 34 years at the Education Department, ending up as an assistant secretary for postsecondary education. He left in 2013 and is now vice president for postsecondary education at the Center for American Progress, a Washington research organization. Mr. Bergeron says he is frustrated by the incomplete data. “The department releases only very high-level summary statistics, which do not allow us to understand the problems facing individual student borrowers,” he said. “Trying to solve a problem with incomplete information leads you to the wrong solutions.”"

Have we truly forgotten the recent structured debt debacle? Let me tell you my subbasement in the Rainier Bank Building story once again, because I like telling that story and I Am Old so listen up, pups, ya might learn something.

Once upon a time, in the world of paper (gasp! The Horror), every mortgage had a file and that file had to have certain documents meeting certain criteria in that file. When the mortgage moved from the originator (in this case, Rainier Bank) to Someone Else (I have No Fucking Clue), Every Last Freakin' File had to be checked, because That Is Due Diligence. My part of the story involved getting to wear shorts while working in a bank, because (a) there was no AC in these rooms and (b) it was a subbasement, so no customers. I had to painstakingly go through thousands of files that were about to be transferred to make sure they were all right and tight. Did I find errors? Yes! I did. My favorite errors involved neighboring houses in southern California owned by a half dozen or more names. This really did happen more than once, and I assume these were some kind of family business or family compound or extended family occupying two neighboring houses or whatever, but their files were predisposed to confusion and were incredibly difficult to fully disentangle because of similar addresses and similar names.

Or I should say, that _was_ due diligence.

Then, in the early world of electronic documentation, mortgages became entries in spreadsheets and the spreadsheets were transferred _without the files_. But, the law had not caught up with daily practice, so when this stuff landed in court, you had to track back through all the transfers to find the paper. A couple things happened. (1) A bunch of big operations (WaMu, I am looking at your corpse) went under and that made finding paperwork that may or may not have passed through them ... difficult to find and (2) I'm completely convinced that a whole lot of strip mall mortgage brokers just binned the original paperwork and is was never around to be found thereafter. There were efforts to recreate the paperwork, which were generally found to not actually be legal (that was the robosigning part of the scandal, IIRC).

I would like an explanation why this didn't also happen with student loans. Because for damn sure it did. The paperwork is not there to be found, so as long as your loan isn't actually being held by the Feds, you can probably slow-walk all collections attempts and demand the paperwork be produced. They'll never produce it so you never have to pay. (If the Feds have it, they might hold any taxes you were hoping to get back in a refund and do other things, so exercise due caution out there adult children!)

Voila. Problem. Solved. (Not really. But we can dream!)

I am not a lawyer or a financial advisor. This is not advice. This is political speech.

However, other people have been doing this for a while and it seems to work at least part of the time:


The usual debt collection rules apply: go get good advice from a lawyer who practices in this area before making _any_ payment or signing _anything_, especially if it goes to collection and ESPECIALLY if a debt that was removed gets reinstated. You lose a ton of legal rights to question the validity of the debt claim if you make a payment.
Tags: economy, politics

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