Richard Cordray, the previous director of the Consumer Financial Protection Bureau, will oversee the federal authorities’s $1.5 trillion student loan portfolio, the Department of Education introduced Monday.
Cordray will change into the chief working officer of the Department’s Office of Federal Student Aid, which is accountable for a variety of duties associated to students’ and debtors’ experiences paying for faculty and repaying their debt.
FSA has been with no chief since March, when Mark Brown, who was appointed to the submit by Betsy DeVos in 2019, resigned amid stress from advocates and lawmakers. Cordray is arguably the highest-profile individual to ever lead the workplace, indicating its purview could also be a precedence for the Biden-era Department of Education.
Secretary of Education Miguel Cardona stated he’s assured that underneath Cordray’s management FSA “will provide the kind of service that our students, families, and schools deserve.”
“It is critical that students and student loan borrowers can depend on the Department of Education for help paying for college, support in repaying loans, and strong oversight of postsecondary institutions,” he stated. “Cordray has a strong track record as a dedicated public servant who can tackle big challenges and get results.”
Though FSA isn’t precisely a family identify, the workplace oversees a wide range of capabilities which can be operationally advanced and likewise excessive stakes for debtors. FSA is accountable for disbursing the loans and grants that exit to colleges on behalf of students, monitoring the businesses that acquire debtors’ student-loan funds, implementing aid and compensation packages, and extra.
The challenges plaguing America’s student loan program are the results of a wide range of elements, together with excessive faculty prices, stagnant wages, state disinvestment in increased training and company malfeasance. Cordray’s observe file in addition to his long-time affiliation with Senator Elizabeth Warren, a Massachusetts Democrat and a critic of the student loan business, indicators that the administration will probably be taking a look at student loan borrower points with a deal with shopper safety.
“I’m very glad he will get to apply his fearlessness and expertise to protecting student loan borrowers and bringing much needed accountability to the federal student loan program,” Warren stated of Cordray in an announcement.
Seth Frotman, who labored underneath Cordray because the CFPB’s student loan ombudsman, stated that with Cordray taking the helm, “there’s a real commitment to put student loan borrowers, students first.”
“When we talk about the student debt crisis we often only focus on the ever increasing balances or the sheer amount that people owe, but an underappreciated element of the crisis before us is the predatory student loan companies that prey on the most vulnerable borrowers driving billions and billions of dollars of debt,” stated Frotman, the chief director of the Student Borrower Protection Center, a student loan borrower advocacy group.
“You couldn’t think of a better choice for this job than Rich Cordray, who has just spent a lifetime standing up for consumers,” Frotman added.
Progressive advocates and lawmakers had been crucial of the workplace underneath Brown’s management. Months after the CARES Act had paused student-loan funds and collections, the company struggled to halt the garnishment of some debtors’ wages to repay loans, for instance.
Even earlier than Brown’s tenure, FSA had been suffering from administration challenges. Brown was the third individual since 2017 to run the workplace. In May of that yr, James Runcie, who was appointed to the place in the course of the Obama administration, resigned three years early, writing in a letter to workers on the time obtained by The Washington Post that he was “incredibly concerned about significant constraints being placed on our ability to allocate and prioritize resources, make decisions and deliver on the organization’s mission.”
DeVos changed Runcie with A. Wayne Johnson, a former non-public student-loan and credit-card govt, who was changed by Brown in March 2019. He in the end left the company in October of that yr, calling for student-loan cancellation on his means out.
Cordray, who served because the legal professional basic of Ohio and helmed the CFPB for 5 years earlier than making an unsuccessful run for Ohio governor, faces a frightening job forward of him. Borrower advocates and lawmakers have been calling for a collection of reforms, together with making student loan forgiveness that’s already on the books extra accessible. They additionally wish to enhance oversight of faculties that obtain student loan funds, notably for-profit faculties. Both of these targets would require cooperation and management from FSA.
Student loan funds and collections are scheduled to renew in October and the top of FSA will play a vital position in guaranteeing that the cost system turns again on easily and debtors don’t slip into default. The Department of Education can also be in the course of revamping the student loan servicing system, which FSA oversees.
If Cordray’s file as CFPB head is any indication, he’ll possible take an aggressive strategy to oversight of the businesses underneath his purview. During Cordray’s tenure, the CFPB returned greater than $750 million to student loan debtors.
In addition, the Obama-era CFPB filed high-profile lawsuits within the student-loan house, together with one in opposition to student-loan servicer Navient NAVI, 0.56%, accusing the corporate of constructing it unnecessarily troublesome for debtors to repay their loans — allegations which the corporate says are false (they’ve moved to have the go well with dismissed) — and one other in opposition to for-profit faculties over their private-loan packages.
Cordray advised MarketWatch final yr that underneath the Biden administration he anticipated the CFPB and the Department of Education to cooperate extra carefully on student loan points.
“I think the bureau will tend to go back in the direction of where we were when I was the director and the Obama administration was in place,” Cordray stated in a November interview. “The approach was close cooperation between the CFPB and the U.S. Department of Education. That was all nixed when Betsy DeVos came into office.”