Protest, Reassurance Greet Shift in Student Loan Watchdog Office
A move by the Consumer Financial Protection Bureau to reorganize an office that helped student borrowers has triggered protests by Democrats in Congress and student advocates.
The Students and Young Consumers Office will become a part of the bureau’s Financial Education Office, according to a May 9 memorandum from Mick Mulvaney, acting director of the CFPB. Mulvaney said that and other structural changes will help “make the Bureau more efficient, effective and accountable.”
The office’s responsibilities aren’t being ended and all personnel will continue their work, said CFPB spokesman John Czwartacki.
More than 40 million Americans owe $1.5 trillion in public and private student loans as of March 2018, according to the Federal Reserve. Those figures mean the office is more important than ever, said Rep. Suzanne Bonamici (Ore.), a Democrat on the Education and the Workforce Committee.
“It is clear there is more work to be done to support and protect student loan borrowers, and the Office of Students and Young Consumers is the only office in the CFPB working for student loan borrowers,” she said in a statement asking Mulvaney to reverse the decision.
Czwartacki said the change is a modest organizational one and the office would still be operating in the same division. “The bottom line is there is no functional or even practical change.”
Concerns for Borrowers
The students office was behind the CFPB’s ongoing lawsuit against student-loan servicer Navient Corp. for misallocating payments and misleading students. The office handled 50,700 complaints from student borrowers and helped returned $750 million to them between July 2011 and August 2017, according a 2017 report from the bureau.
The student office also coordinated with state attorneys general in cases against for-profit schools including Corinthian College schools, ITT Technical Institute and Bridgepoint.
Several senators also weighed in, equating the move to closing the office altogether and saying it was the latest move by the Trump administration that would reduce oversight of student loan servicers.
Sen. Elizabeth Warren (D-Mass.) said between Mulvaney’s actions and those of Education Secretary Betsy DeVos exempting student loan servicers from state regulations, “the Trump Administration has declared war on America’s students.”
Sen. Patty Murray (D-Wash.) the ranking member of the Senate’s education committee, said the Trump administration was “giving student loan corporations the green light to take advantage of students without fear of repercussion.”
At least a dozen progressive, student or consumer advocacy groups also spoke out against the decision, including the National Student Legal Defense Network and the Institute for College Access and Success.
Supporters of the office raised concerns in August 2017 when the Education Department announced it would no longer be sharing student borrower data with the CFPB, an arrangement to help the agencies cooperate on overseeing student financial services. In a letter to then-CFPB Director Richard Cordray, department officials said the change was in retaliation to the bureau withholding some student complaints from the Education Department.
Student borrowers would still be protected by laws and federal offices, including the student loan ombudsman in the Education Department, House Education and the Workforce Chairwoman Virginia Foxx (R-N.C.) said through spokesman Michael Woeste.
“The student loan program is not run out of CFPB and, therefore, the function of it would not be impacted by this organizational restructuring,” Woeste said.
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