National Collegiate Student Loan Trusts are one of the nation's largest holders of private student loan debt originally made by banks. The trusts have been embroiled in litigation with federal regulators, investors, and other stakeholders. But those lawsuits haven't stopped NCSLT from pressuring borrowers to repay the troubled loans.
National Collegiate comprises 15 trusts that hold 800,000 private student loans, totaling $12 billion. Lenders like Bank of America and JPMorgan Chase made the loans a decade or more ago. The loans were pooled together by a financing company and then sold to investors so the banks could get the debts off their balance sheets. The trusts collect payments from private student loan borrowers using a loan servicer (typically, American Education Services) or filing lawsuits in state court.
Ahead, learn your options for dealing with private student loan debt owed to National Collegiate Student Loan Trust.
Who is the National Collegiate Student Loan Trust?
National Collegiate Student Loan Trust is a group of 15 investment vehicles that own $12 billion of private student loan debt for hundreds of thousands of borrowers. The trusts were created by a company concentrated on education lending, First Marblehead.
More than a decade ago, First Marblehead bought loans made by banks, including US Bank, RBS Citizens, Charter One Bank, JP Morgan Chase Bank, and Citizens Bank, to students — many of whom were attending predatory for-profit schools. It transferred batches of loans to trusts it created, and then those trusts sold bonds backed by the loans through a process called securitization. The trusts are responsible for collecting student loan payments from borrowers and paying out interest to bondholders.
National Collegiate's debt collection practices have drawn the ire of the federal government and judges across the nation.
Long story short: NCSLT owns private student loan debt that comes with far fewer protections than federal student loans (e.g., limited forbearance, no loan forgiveness options, etc.).
Is National Collegiate Trust a federal loan?
National Collegiate Trust owns private student debt — not federal loans. That means that NCSLT loans aren't eligible for income-driven repayment plans, Public Service Loan Forgiveness, or other benefits the Department of Education offers its borrowers.
It also means that falling behind on your payments to National Collegiate Trust won't automatically result in your wages being garnished or your tax refund being offset. The company must sue you and get a judgment before doing any of those things—more on that below.
Learn More: Private Student Loan Debt Relief Programs
CFPB v. NCSLT
In 2017, the Consumer Financial Protection Bureau ordered NCSLT and the company handling its debt collection, TransWorld Systems, to pay $21 million for collecting debt it couldn't prove. However, banks, insurers, debt collectors, and hedge funds involved in the trusts' operations have tried to block the enforcement action, arguing the lawyers hired to act on the trusts' behalf lacked authority to deal with the CFPB. Last year, a federal judge agreed with their arguments and denied the settlement.
Litigation related to that fight persists. Meanwhile, NCSLT is still collecting from borrowers using its loan servicer, American Education Services, debt collection agencies, and law firms.
"[NCSLT Loans] have ranked among the worst-performing student loans ever packaged into securities." Bloomberg.
NCSLT has my student loans. What do I do?
If you owe a private student loan to one of the trusts, your options depend on your loan status.
If your NCSLT loans are with AES
American Education Services is the loan servicer for NCSLT loans. It's responsible for collecting student loan bills, keeping track of whether you pay on time, and explaining your repayment options. You also can ask AES how to qualify for a co-signer release.
If you need a lower student loan payment, consider these strategies:
- Ask for a temporary payment decrease. While an income-driven repayment plan isn't an option for private loans, you may be able to make interest-only payments for a limited time.
- Request a forbearance or deferment. Either option can stop payments for a short period of time.
- Apply for student loan refinancing. Borrowers with good credit scores and stable income can qualify for a lower interest rate and better repayment terms.
Learn More: AES Student Loan Forgiveness Programs
If your NCSLT loans are in collections
Your loans are moved to a debt collector if you don't make payments as outlined in your loan's contract, also known as the promissory note. You'll need to work with the collection agency to handle the debt following a student loan default.
Your options for recovering from default are limited. Private student loans don't offer student loan rehabilitation and consolidation. Instead, the collector will typically offer you three options:
- Pay the loan balance in full. When student loans default, the full amount owed is due immediately. If you can afford that, you can pay the balance and be done with the debt.
- Negotiate a payoff. You may be able to negotiate a student loan settlement for less than you owe, but don't expect to "pay for deletion". Most collection agencies are unwilling to remove student loans from a credit report if you pay the debt off.
- Make monthly payments. If you can't afford a settlement, the debt collector may offer to let you make payments towards the balance. Those payments typically won't help your credit and typically won't stop a lawsuit. But they can help lower your balance.
Learn More: How to Recover From Private Student Loan Default
If NCSLT is suing you
While the federal government has paused collections during the coronavirus pandemic, the National Collegiate Student Loan Trusts have stayed in court to recover past-due debts, according to the Washington Post.
Before it can win a debt collection lawsuit, NCSLT has to first prove you owe the debt, and it tried to collect the loan before the statute of limitations expired. Here's what to do if NCSLT is suing you.
Step 1 - Go to court. The summons will have a date for you to attend court. If that date has already passed, contact the clerk and ask the next date the judge hears student loan cases. Show up and let the judge know you're ready to respond. Also, consider hiring a student loan lawyer to represent you or give you advice about available defenses.
Step 2 - Defend the lawsuit. Start by demanding NCSLT prove it owns your particular student loan. The documentation should include a promissory note with your signature and an affidavit with paperwork showing how your loan was transferred from the original lender to the trust that is suing you. You can also use the statute of limitations as a defense if it's been years since you've made a payment or never paid the loan.
NCSLT loans have a statute of limitations, with lengths varying from state to state. Statute of limitations when collecting a student loan debt refers to how long a creditor has to sue for repayment. If the statute of limitations expires, a creditor can't sue you. But if it does, you can ask the court to dismiss the lawsuit because the time to sue you has passed. The debt is stale.
But that doesn't mean your student loans disappear. NCSLT may still try to collect the debt, but it won't use the court system to do so.
Step 3 - Get a resolution. If the judge doesn't dismiss the case, try to negotiate a settlement for less than you owe. The settlement can be a lump sum payment, monthly payments, or a combination of the two.
Learn More: How to Defend a Private Student Loan Lawsuit
If NCSLT is garnishing you
NCSLT can garnish your wages only after it sues you and gets a judgment from the court saying you owe it money. The court order allows it to send a garnishment notice to your job directing your employer to send it a portion of your pay. In some states, that order may also allow it to take money from your bank account and put a client on your home.
Your options are limited to stopping a garnishment from NCSLT. You can:
- Negotiate a lump-sum settlement. The creditor law firm that sued you may be willing to stop the garnishment if you offer a lump-sum student loan payoff that can be paid right away. Typically, you'll need to offer at least 40% of the outstanding balance. If you're not sure who to call, check the garnishment notice sent to your employer. The notice will list the collection agency.
- File bankruptcy. Bankruptcy won't get rid of the loan automatically, but it will stop the garnishment immediately. To wipe out the debt, you'll need to file a lawsuit in your bankruptcy case called an adversary proceeding. Not every lawyer handles these types of cases. You may need to hire a student loan bankruptcy lawyer. You can click here to learn how to prove undue hardship for student loans.
- File a motion to set aside the judgment. NCSLT wins many of the lawsuits it files because the borrower doesn't come to court, and it gets a default judgment, according to the New York Times. If you don't remember being sued, you may be able to ask the judge to get rid of the judgment and allow you to defend yourself. Contact a consumer rights attorney near you for help.
How to Contact NCSLT
NCSLT contact number:
TransWorld Systems contact number: 1-800-825-6523.
NCSLT address for legal service: ℅ Wilmington Trust, Rodney Square North, 1100 N Market, Wilmington Delaware 19890-0001.
- Original lenders — the banks that gave the loans to student borrowers and their co-signers.
- Depositor — the National Collegiate Funding LLC.
- Trust — the entities the loans were deposited into.
- Investors — the people who receive distributions after borrowers repay the trusts.
- Servicers — the businesses that handled the collections of the private loans. The servicers included US Bank, PHEAA, American Education Services, and Transworld Systems Inc.
- Guarantor — the company that pays off the loan when a borrower defaults on the loan. The Education Resources Institute (TERI) was the guarantor for NCT loans.
Who owns the National Collegiate Student Loan Trusts?
The New York Times has identified Donald Uteritz's private equity firm, Vantage Capital Group, as the beneficial owner of the trusts. Vantage Capital is entitled to receive any money remaining after noteholders of the promissory notes are paid.
The noteholders are a series of investment funds:
- Waterfall Master Fund, Ltd.
- Waterfall Delta Offshore Master Fund, LP
- Waterfall Sandston Fund, LP
- Baldr Sherwood Fund, Inc
- One William Street Captial Master Fund, Ltd
- OWS ABS Master Fund II, LP
- OWS COF I Master, LP
- OWS Credit Opportunity I, LLC
- OWS Global Fixed Income Fund (USD-Hedged), Ltd
- LibreMax Master Fund, Ltd
- LibreMax MSW Fund, Ltd
- AG Mortgage Value Partners Master Fund, LP
- AG TCDRS, LP
- AG Pisgah, LP
- AG Super RMBS LLC, and
- AG Opportunistic Whole Loan Select