Richard Cordray, the former director of the Consumer Financial Protection Bureau, will oversee the federal government’s $ 1.5 trillion student loan portfolio, the Education Department said on Monday.
Cordray will become the COO of the Department’s Office of Federal Student Aid, which is responsible for a range of tasks related to the experiences of students and borrowers in paying for college education and paying off debt.
The FSA has been leaderless since March, when Mark Brown, who was appointed to the post by Betsy DeVos in 2019, resigned under pressure from lawyers and lawmakers. Cordray is arguably the most prominent person running the office, indicating that his skill may be a priority for the Biden-era Department of Education.
Education Secretary Miguel Cardona said he is confident that under Cordray’s leadership the FSA “will provide the kind of service our students, families and schools deserve.”
“It is essential that students and student loan borrowers can count on the Department of Education for help paying for their university education, to repay their loans and to closely monitor post-secondary institutions,” he said. -he declares. “Cordray has a solid background as a dedicated public servant who can take on great challenges and get results.
While FSA isn’t exactly a household name, the office oversees a variety of functions that are operationally complex and also present high issues for borrowers. The FSA is responsible for disbursing loans and grants to schools on behalf of students, monitoring companies that collect student loan repayments from borrowers, implementing relief and repayment programs, etc.
The challenges facing the US student loan program are the result of a variety of factors, including high college costs, stagnant salaries, state disinvestment in higher education, and corporate mischief. Cordray’s track record as well as his long-standing association with Senator Elizabeth Warren, a Democrat of Massachusetts and critic of the student loan industry, indicates that the administration will examine the issues of student borrowers with an emphasis on consumer protection.
“I am very happy that he can apply his fearlessness and expertise to protect student loan borrowers and provide much needed accountability in the federal student loan program,” Warren said of Cordray in a statement.
Seth Frotman, who worked under Cordray as the CFPB’s student loans ombudsman, said with Cordray taking the helm, “there’s a real commitment to putting student borrowers first, students first.”
“When we talk about the student debt crisis, we often just focus on the ever-growing balances or the amount people owe, but an underrated part of the crisis that lies ahead is the predatory student loan companies that prey on the most vulnerable borrowers, generating billions. and billions of dollars in debt, ”said Frotman, executive director of the Student Borrower Protection Center, a student loan advocacy group.
“You couldn’t think of a better choice for this job than Rich Cordray, who just spent his life advocating for consumers,” Frotman added.
Progressive lawyers and lawmakers had criticized the office under Brown’s leadership. Months after the CARES law halted student loan payments and collections, the agency has struggled to stop the wage garnishment of some borrowers to pay off loans, for example.
Even before Brown’s tenure, the FSA had been plagued by management challenges. Brown was the third person since 2017 to lead the office. In May of the same year, James Runcie, who was appointed to the post during the Obama administration, resigned three years earlier, writing in a letter to staff at the time obtained by the Washington Post that he was “incredibly concerned about the significant constraints placed on our ability to allocate and prioritize resources, make decisions and fulfill the mission of organization. ”
DeVos replaced Runcie with A. Wayne Johnson, an old private student loan and responsible for credit cards, which has been replaced by Brown in March 2019. He finally left the agency in October of the same year, calling for the cancellation of the student loan. leaving.
Cordray, who served as Ohio attorney general and led the CFPB for five years before unsuccessfully running for Ohio governor, faces a daunting task. Borrower advocates and lawmakers have called for a series of reforms, including making it more accessible to cancel student loans already in effect. They also want to increase oversight of colleges that receive student loans, especially for-profit schools. Both of these goals will require the cooperation and leadership of the FSA.
Student loan repayments and collections are expected to resume in October and the FSA official will play a crucial role in ensuring that the payments system recovers smoothly and borrowers do not default. The Department of Education is also revamping the student loan management system, which the FSA oversees.
If Cordray’s record at the helm of the CFPB is any indication, he will likely take an aggressive approach to monitoring the companies under his responsibility. During Cordray’s tenure, the CFPB returned more than $ 750 million to student borrowers.
In addition, the Obama-era CFPB has filed high-profile student loan lawsuits, including one against student loan manager Navient NAVI, 0.56%, accusing the company of making it unnecessarily difficult to repay their loans. loans by borrowers – claims that the company said are wrong (they moved to have the lawsuit dismissed) – and another against for-profit colleges on their private loan programs.
Cordray told MarketWatch last year that under the Biden administration, he expected the CFPB and the Department of Education to cooperate more closely on student loan issues.
“I think the office will tend to go back to where we were when I was director and the Obama administration was in place,” Cordray said in an interview in November. “The approach was a close cooperation between the CFPB and the US Department of Education. It all sucked when Betsy DeVos took office.