In order to win a student loan lawsuit, the lender needs to prove that it owns the debt and that the amount claimed is correct.
That first part, the lender’s ability to establish title to the student loan debt, is known as standing.
Unless the plaintiff is the same lender you borrowed the money from, it must prove purchase of the loan in order to win the case.
For private student loan companies such as Navient (click here for an article explaining the relationship between Sallie Mae and Navient), this is a major headache. That’s because most of the time, you’re not being sued by Navient – you’re being sued by someone else.
In order to win the case, Navient has to prove that it has legal ownership of the loan.
That would be a problem for most corporations – but for private student loans, it’s even tougher because they go through a number of transfers, and sometimes re-transfers.
Follow Your Private Student Loan
For example, if you have a private student loan from Navient, your actual lender may have been one of a number of entities including:
- Sallie Mae Bank;
- SLM Education Credit Finance Corporation;
- NM Education Loan Corporation;
- SLM Education Credit Management Corporation; or
- SLM Education Loan Corp.
Some private student loans are held by the lender, but many others are transferred to wholly-owned subsidiaries of Navient with names such as:
- VG Funding LLC;
- Blue Ridge Funding LLC;
- SLM National Funding LLC; and
- VL Funding LLC.
The loans are then transferred to SLM Funding LLC, which is yet another wholly-owned subsidiary of Navient. SLM Funding LLC holds the loan for a few minutes and then transfers it to a company with a name such as:
- Navient Private Credit Student Loan Trust
- SLC Student Loan Trust
- SMS Student Loan Trust
- SLM Student Loan Trust
This is known as securitization, the process of taking a group of assets that otherwise can’t be sold for immediate cash and, through financial alchemy, transforming them into a security that can be sold on the financial markets.
You Think You Owe the Money to Navient (But You Don’t)
That security, known as a trust, hires a company to send you bills and collect your payments. That company, known as a servicer, is usually Navient.
Navient sends your money to the trust that owns the loan, and the trust divides the money among the investors.
It’s easy to see why you think you owe money to Navient, but that’s not the case. Instead, you owe money to this shadow entity you’ve never heard of.
And that’s the company that will ultimately file a lawsuit against you.
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Proving Ownership of a Navient Private Student Loan
The transfer of your private student loan from Navient to the trust involves a number of complex documents that requires the participation of various other entities.
For example, the SLM Student Loan Trust 2007-8 (a trust that includes federally-guaranteed student loans originated by Sallie Mae before July 2010) involves all of these companies:
- The original lender, SLM Education Credit Finance Corporation.
- Subsidiaries of the lender, including VG Funding LLC, Mustang Funding I LLC, and Mustang Funding II LLC.
- The company that took the loans from the lender and its subsidiaries, SLM Funding LLC.
- The trust, SLM Student Loan Trust 2007-8, which took the loans from SLM Funding LLC.
As you can see, the private student loan was transferred at least 2 times – possibly 3. In order for SLM Student Loan Trust 2007-8 to prove ownership of a particular loan, it must show all of the purchase and sale agreements as well as the lists of loans that were transferred as part of each of those agreements.
Though this particular trust doesn’t involve private student loans, the scheme is largely the same for all of the Navient and Sallie Mae trusts.
Screenshot from the Prospectus Supplement to Base Prospectus dated October 16, 2007 for SLM Student Loan Trust 2007-8
Other Agreements Are Also Important
The trust documents refer to other agreements – and each of them plays a vital role in how Navient handled your loan.
According to documents on file with the US Securities and Exchange Commission, The Bank of New York Trust Company, N.A., holds legal title to the student loans for SLM Funding LLC under an interim trust agreement.
The Bank of New York Trust Company, N.A. also enters into guarantee agreements with agencies that guaranteed payments of the loans in the event that a borrower defaults.
Sallie Mae, Inc. (now known as Navient) acts as the administrator of the trust under an administration agreement. But Navient is allowed to transfer its obligations as administrator to another company.
Navient is also the servicer of the loans, responsible for servicing, maintaining custody of and making collections on the trust student loans under a servicing agreement. It also bills and collects payments from the companies that guarantee payment of the loans. If Navient fails to perform its duties, it may be required to buy the loans
Each of these agreements is important because they outline how the loans are to be handled. Rights and responsibilities such as rehabilitation options and collection procedures are clearly spelled out, and understanding those duties can help you determine whether your loan was managed properly.
Don’t Settle, Don’t Surrender
If you fall behind on a Navient or Sallie Mae private student loan, don’t settle without proper documentation. Though you have no right to copies of the agreements unless you’re defending an active court case, this isn’t bad news. A student loan lawyer with a deep understanding of student loan securitization can determine not only whether the loan was properly and validly transferred, but also whether Navient followed its own rules for properly managing your loan.
Fighting the lawsuit may well put you in a position for a better outcome than any settlement. Why settle for settling?
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