Finance

Biden taps ex-consumer bureau chief to oversee student loans

Former Consumer Financial Protection Bureau (CFPB) Director Richard Cordray will serve as head of the Education Department’s student loan office, Secretary Miguel Cardona announced Monday.

Cordray was appointed Monday as chief operating officer of Federal Student Aid, giving a fierce critic of the student loan industry oversight of the Education Department’s $1.6 trillion loan portfolio.

“Education has made all the difference in life for my family and me, and it has been the foundation of progress in this country for generations. But too many students find that access to affordable, good-quality higher education remains far out of reach,” Cordray said in a statement, vowing to help “create more pathways for students to graduate and get ahead, not be burdened by insurmountable debt.”

Cordray, a Democrat, served as the first full-time director of the CFPB, the consumer watchdog agency created through the 2010 Dodd-Frank Wall Street reform law. He led the bureau from 2012 to 2017, elating progressives and enraging the financial industry with strict new regulations and aggressive penalties for misconduct.

In 2017, the CFPB under Cordray sued Navient, one the biggest U.S. student loan servicers, alleging that it “created obstacles to repayment by providing bad information, processing payments incorrectly, and failing to act when borrowers complained.” Navient has denied the allegations from both the CFPB and similar cases filed by state attorneys general.

“Cordray has a strong track record as a dedicated public servant who can tackle big challenges and get results. I am confident that under his leadership, Federal Student Aid will provide the kind of service that our students, families, and schools deserve,” Cardona said in a Monday statement.

Cordray, who will take his new post Tuesday, joins the Education Department as the Biden administration faces immense pressure to reduce the federal student loan burden and clean up years of servicing errors and program failures.

Democratic lawmakers and progressive activists are boosting pressure on Biden to forgive up to $50,000 in federal student debt per borrower through executive action. Supporters for unilateral forgiveness say doing so will help the hardest hit Americans rebound from the pandemic and reduce longstanding racial wealth disparities. 

The White House said in February that Biden would review his legal authority to forgive student loans through executive action after the president previously expressed resistance to acting unilaterally. While Biden has opened the door to a debt relief executive order, he has explicitly ruled out going as high as $50,000 for every borrower.

Cordray has not taken a public stance on student loan forgiveness, but has expressed concerns about the financial toll student loans can take on borrowers, particularly those who attended defunct or fraudulent for-profit colleges.

Even so, Cordray may still be able to chisel down the federal student loan balance sheet through revamping the department’s failed student loan forgiveness programs. 

Under former Secretary Betsy DeVos, the Education Department stifled the CFPB’s attempts to investigate student loan servicers and the department’s administration of the Public Service Loan Forgiveness Program. The CFPB had sought to find out why the public service forgiveness program rejected 99 percent of its applicants.

“Appointing Cordray to lead the Department of Education’s office of Federal Student Aid is a great step, showing that this Administration is serious about doing what’s necessary to protect borrowers and address the student debt crisis,” said Seth Frotman, executive director of Student Borrower Protection Center, a legal and policy nonprofit, who also served under Cordray as the CFPB student loan ombudsman.

Cordray served as attorney general of Ohio from 2009 to 2011 before his appointment to the CFPB in 2012. He resigned from the CFPB to run for governor of Ohio, but was defeated in 2018 by Gov. Mike DeWine (R), who also beat him in the 2010 election for attorney general.

Tags Betsy DeVos Consumer Financial Protection Bureau Federal Student Aid Miguel Cardona Mike DeWine navient Public Service Loan Forgiveness Richard Cordray Student debt forgiveness Student loans

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