President Biden’s plan to cancel up to $20,000 in federal student loans was invalidated by the Supreme Court in June, affecting the financial future of 43 million individuals, including myself. Personally, I had a federal loan of $10,459 that was at risk.
Due to fortuitous timing, I found myself relieved from the burden of my remaining student loan debt. Specifically, the private loan I had defaulted on, amounting to approximately $12,700, became uncollectible. These debts were now inaccessible to debt collectors and beyond the grasp of the intricate web of complex financial instruments that asserted ownership over them.
In Pennsylvania, the time limit for filing a debt recovery lawsuit is four years. I had been anticipating this opportunity. Based on my discussions with a credit counselor and multiple lawyers, it seems that although the debts remain documented, the institution I owe has failed to secure them in court. Consequently, the only viable option to forcefully recover the money is through legal means.
The National Collegiate Student Loan Trust, a major holder of private student loan debt in the country, has consistently displayed a concerning lack of concern towards the money it owes me. Despite my default, they have never negatively impacted my credit score and their debt collectors have rarely contacted me, with only two letters sent per year.
I never anticipated such a situation, and it’s not something you can foresee happening to yourself. Even though there is a time limit for legal action, National Collegiate might still attempt to sue me. However, my experience highlights the flaws in our student loan system and the unpredictable consequences of debt that many individuals will face in the end.
According to Joshua Cohen, a student loan attorney in St. Albans, Vt., the repercussions of defaulting on student loans are not easily predictable. There isn’t a specific set of consequences that apply universally. However, the aftermath can be severe, resulting in a negative impact on credit scores, persistent harassment from debt collectors, or even facing legal action.
In 2005, I completed my studies at the University of Pittsburgh, earning a bachelor’s degree in English Writing. However, this achievement came with a burden of $42,207 in debt. Over the subsequent years, I diligently made monthly payments of approximately $370 while working as a journalist and pursuing freelance writing opportunities. Eventually, I managed to pay off a total of $57,347, which amounts to 136 percent of the initial loan balance.
By the end of 2019, the balance stood at around $22,000, and based on my current payment rate, it would take 13 years to fully repay the loan, resulting in a substantial 250 percent profit for the loan servicers. Unfortunately, this progress was disheartening and fell short of expectations.
That year some regular sources of writing work dried up. I struggled to make them up and fell behind on payments. After six months of non-payment, the private debt went from a servicer to a debt collector. (The one silver lining of my very bad year was that my federal student loans were on an income-based repayment plan, and those payments dropped to $0 a month.)
In February 2020, the initial correspondence from a debt collector was received.
In an effort to maintain control over my finances, I made the decision to schedule a complimentary session with a credit counselor at a nearby nonprofit organization.
Similar to numerous relationships formed during the pandemic, my credit counselor was someone I solely knew through their voice on the phone. However, they swiftly transformed into a genuine therapist, to whom I confided all my deepest fears and shame. Their warmth and openness made me feel comfortable being completely honest. In return, I opened up about my difficulties in finding a career with a history degree.
During our first session, he took credit for me. When my original student loan servicer, American Education Services, reported late payments, my score took an impact. But the loans were not reported as recovered.
In our initial meeting, he claimed credit for my actions. As a result of late payments reported by my original student loan servicer, American Education Services, my credit score suffered a setback. However, the loans were not reported as being resolved.
She suggested monitoring it.
After the passage of three years, I found myself dealing with the consequences of private student loans. Technically, these loans consist of two separate entities, and every six months, I receive a series of letters from a collection agency, clearly stating their intention to collect the outstanding amount.
I consistently replied by using a modified version of a template letter provided by the Consumer Financial Protection Bureau. This letter denied any accountability for the debts, yet respectfully requested the collection agency to furnish evidence supporting their validity. Occasionally, the agency would send me copies of promissory notes dating back to 2003 or 2004, accompanied by documents purportedly demonstrating the loan’s chain of custody. On certain occasions, however, there was no response from them.
Initially, sending these letters served as a temporary measure, but as I realized its effectiveness, I decided to persist with the practice. After a period of inactivity, the cycle will reset and repeat itself in six months without any significant outcome.
Following the advice of the credit counselor, I consistently requested written communication whenever collectors contacted me. Surprisingly, the collectors hardly ever reached out to my father, who had co-signed my loan. Instead of responding to the letters, he chose to express his grievances over the phone.
My credit counselor recommended waiting for the statute of limitations to expire after discussing it with my coworkers.
The government now holds a 92 percent stake in the country’s $1.7 trillion student loan market, entitling it to a range of protections and benefits. These include income-based repayment options, loan forgiveness for individuals employed in public service, and payment deferrals during the ongoing pandemic.
Private loans do not offer any leniency, but they do possess a distinct advantage: They are governed by the state’s statute of limitations, just like any other contract. In the event of non-payment, the loan holder has a restricted timeframe to seek repayment through legal means (ranging from three to 15 years, depending on the state). Furthermore, the loan owner can initiate a lawsuit in the state where the loan originated or where the borrower resides.
Since the law was enacted, the loan remains unaffected. My understanding is that I will be protected by a golden shield in the event of a lawsuit.
To gain clarity on the reasons behind this occurrence and better understand my legal safeguards, I consulted with five attorneys, an additional credit counselor, and three individuals employed in organizations specializing in student loans. Surprisingly, their collective opinion was uncertain and inconclusive.
Mr. Cohen, a lawyer specializing in student loans, stated, “There are individuals who choose to file lawsuits, while others do not. Additionally, certain individuals employ an undisclosed criterion to determine whom they press charges against.”
Mr. Cohen, a lawyer specializing in student loans, observed, “Some people make the decision to file lawsuits, while others opt not to. Certain individuals seem to possess a secret approach in selecting whom they should take legal action against.”
Alan Colling, the founder of Student Loan Justice, an advocacy organization, speculates that due to your status as a freelance writer with a relatively modest income, it is likely that they overlooked your situation and shifted their focus towards more profitable objectives.”
The history of the National Collegiate Student Loan Trust was highlighted by others.
National Collegiate does not possess any headquarters or employees; rather, it solely holds claims on numerous student loans. Its existence is confined to certain incorporation documents in Delaware, while other investors and funds derive profits from it. The responsibility of interacting with debtors falls upon subcontracted collection agencies.
I obtained my private student loans from PNC Bank, a well-known institution in the Pittsburgh region. However, like numerous other banks, they sold packages of student loans to an unknown entity, devoid of any distinguishing features.
Previously, National Collegiate made significant progress in pursuing legal action against debtors, but in 2017, the Consumer Financial Protection Bureau filed a lawsuit against both National Collegiate and its main debt collector, Transworld Systems. The lawsuit alleged that they had wrongfully initiated foreclosure procedures on debt claims without proper documentation and had employed deceptive tactics while collecting student loans. As a result, National Collegiate and Transworld Systems were compelled to enter into a compliance agreement, which added complexity to their litigation strategies.
“I doubt your loans would have been in this group,” said Betsy Myatt, president of The Institute of Student Loan Advisors, a nonprofit organization. “So yes; You’re lucky and yes, it’s rare.”
There is no nationwide data on student loan lawsuits. Around me, at least, National Collegiate is suing very little. I searched for cases through the Pennsylvania Judicial Branch’s portal. In Allegheny County, National Collegiate filed 26 lawsuits in 2016. In 2017 it decreased to 11. It filed none in 2021 and four lawsuits in 2022.
Talking to someone at National Collegiate was complicated, as it was understaffed. For comment, I emailed three financial services companies that, according to their paperwork, have some role in the trust — Wilmington Trust, US Bank and Cognition Financial Corporation. I also sent a message to Transworld Systems, which appears to be the adjudicator on how to handle legal matters, in the lawsuits against National Collegiate. I only got a response from a US Bank representative, who referred me to Transworld.
I called a debt collector from Transworld, who once left a voicemail message for me. When I asked what would eventually happen to my loans, he said, “Collections will continue” and offered a one-time settlement of 40 percent of one loan, which, apparently, was still in the hands of Transworld.
It felt like a trap: The statute of limitations clock restarts if you pay anything for the loan. Is 40 percent worth giving up my Golden Shield? Should I even trust him?
There are other potential dangers as well. Another attorney who focuses on student loans is Adam S. Minsky told me that some debt holders remain embroiled in lawsuits even after the statute expires.
“In many cases, the person being prosecuted does not come forward,” he said. “I think it’s quite common. In this situation the person has stopped checking his mail, he has become overwhelmed with it.”
I couldn’t find anyone who could offer an explanation for why none of the borrowers for my loan decided to file a complaint with the credit reporting agencies. Despite this uncertainty, my credit score remains at a respectable 720, and I have been worried about the possibility of it dropping by 100 points for a long time.
My credit counselor said that after the statute of limitations passed, I should focus on other financial goals: savings, a retirement account, budgeting — concepts that have disappeared from the vocabulary of a public burdened by unmanageable student loan debt. And that’s what I will do.
According to my credit counselor, once the statute of limitations has expired, it would be wise for me to shift my attention towards other financial objectives such as savings, building a retirement account, and practicing budgeting. These are ideas that seem to have vanished from the thoughts of individuals overwhelmed by the weight of unmanageable student loan debt. Following this advice, I am determined to prioritize these goals.
In the end, I have managed to repay my student loans amidst financial strain and without any sense of moral duty. Rather than feeling obliged, I intend to minimize my payments towards the portion owned by the union, taking advantage of federal programs that offer more lenient terms. My plan is to wait for a political resolution to surface.
However, I find it difficult to rid myself of the fear that compelled me to pay back a larger sum of money than my initial debt for a duration of 13 years. The absence of response from the student loan-industrial complex only adds to my unease rather than providing any comfort. Nevertheless, I acknowledge my fortune and recognize that I am no more deserving of it than any other individual oppressed by this system.