student debt

The top official at the Consumer Financial Protection Bureau (CFPB) overseeing the federal government’s  $1.5 trillion student debt portfolio has resigned.

In his resignation letter, Seth Frotman accused acting CFPB Director Mick Mulvaney of deliberately ignoring the plight of the roughly 44.5 million borrowers with federal loans.

“The damage you have done to the Bureau betrays these families and sacrifices the financial futures of millions of Americans in communities across the country,” Frotman wrote in his resignation letter.

Until Monday, Frotman had served as the CFPB’s student loan ombudsman — a position he has held since 2016. During the Obama administration, the student loan ombudsman worked within the agency’s enforcement office to hold bad student debt servicers accountable who had defrauded borrowers. According to the Associated Press, the office of the student loan ombudsman returned roughly $750 million to borrowers impacted by student debt servicers’ bad business practices.

However, after Mulvaney became acting director of the CFPB in 2017, he would eventually move Frotman’s position under the purview of the education office, rather than the enforcement office, stripping Frotman of his enforcement power.

The lackadaisical attitude toward predatory student debt isn’t just held by Mulvaney. Education Secretary Betsy DeVos has repeatedly taken action that has benefited student debt companies at the expense of student borrowers.

Most recently, DeVos’ agency proposed a rule that would impose a higher burden of proof on debtors seeking debt relief. After nixing a previous borrower defense rule adopted by the Obama administration, DeVos’ new rule would only allow borrowers to apply for relief if the loan company in question knowingly made false statements in advertising or recruitment materials or made promises to borrowers with “reckless disregard” for the truth.

Senator Patty Murray (D-Washington state) called DeVos’ proposed rule “a clear sign that students cannot rely on Secretary DeVos.” A statement posted to her website said the new borrower defense rule would take away roughly $12.7 billion in debt relief.

“This rule would cut billions in debt relief to students who were simply trying to better themselves and instead were cheated out of their education and savings,” Sen. Murray stated. “[DeVos] will continue to give predatory for-profit colleges and corporations a free pass when they mislead, cheat and defraud students.”

Frotman will officially step down as student loan ombudsman at the end of the week.

 

Logan Espinoza is a freelance contributor specializing in economic issues. He lives in Phoenix, Arizona with his wife and daughter. Contact him at logan DOT espinoza AT yahoo DOT com.

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