A settlement between the Consumer Financial Protection Bureau (CFPB) and Donald Uderitz, owner of Vantage Capital Group (VCG), has major implications for students with loan debt. Based on media coverage of the settlement, most casual readers might believe that hundreds of thousands of former students may see their student debt wiped away—all thanks to administrative errors by the trust holding the debt, National Collegiate Student Loan Trusts (NCSLT). Unfortunately, this narrative oversimplifies what appears to be an attempt by the CFPB to provide Uderitz with lucrative responsibilities using extrajudicial means.
NCSLT maintains a collection of over 800,000 private student loans that students entered into with banks. These banks sell the loans to a middleman, and the loans are eventually bundled into the NCSLT. Upon collecting debt payments from students, NCSLT pays out to investors such as the Bill & Melinda Gates Foundation. As Bloomberg notes, the loans were made to students with good credit scores and originally enjoyed generous risk protection until the nonprofit providing the protection went bankrupt in 2008. NCSLT hired American Education Services (in concert with Pennsylvania Higher Education Assistance Agency, referred to from here on as AES/PHEAA) to collect on the debt.