He subsequently took the companies to court in his home state to find out if they were in fact holding his loan. They failed to respond and he got an automatic win from the court known as a default judgment.
"In my experience, none of these student loan servicers / loan sharks kept proper chain of title," Manookian tweeted. "You challenge their ownership, they decline to respond, you get a default judgment."
Seems simple enough. The original lender sold the loans to some obscure entity, and some time later they didn't even know they were holding them.
This worked some number of times (I cannot state the general nor overall frequency) during the financial crisis 2006-2009. The bundling/unbundling of loans into and out of tranches thrashed the recordkeeping trail. And furthermore, the documents proving the ownership of the mortgages in many states had to have so-called wet signatures on them, so there were lenders who legitimately owned loans but did not have the required original copies of the docs.
Sure seems like a worthwhile gambit; you could blow $2500 in a failed suit to assemble the originating docs and if the lender can’t come up with them, you could gain well into 5 figures.