Richard Cordray, the former director of the Consumer Financial Protection Bureau, will oversee the federal government’s $1.5 trillion student loan portfolio, the Department of Education announced Monday.
Cordray will become the chief operating officer of the Department’s Office of Federal Student Aid, which is responsible for a range of tasks related to students’ and borrowers’ experiences paying for college and repaying their debt.
Secretary of Education Miguel Cardona said he’s confident that under Cordray’s leadership 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 said. “Cordray has a strong track record as a dedicated public servant who can tackle big challenges and get results.”
Though FSA isn’t exactly a household name, the office oversees a variety of functions that are operationally complex and also high stakes for borrowers. FSA is responsible for disbursing the loans and grants that go out to schools on behalf of students, monitoring the companies that collect borrowers’ student-loan payments, implementing relief and repayment programs, and more.
The challenges plaguing America’s student loan program are the result of a variety of factors, including high college costs, stagnant wages, state disinvestment in higher education and corporate malfeasance. Cordray’s track record as well as his long-time association with Senator Elizabeth Warren, a Massachusetts Democrat and a critic of the student loan industry, signals that the administration will be looking at student loan borrower issues with a focus on consumer protection.
“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 said of Cordray in a statement.
Seth Frotman, who worked under Cordray as the CFPB’s student loan ombudsman, said 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,” said Frotman, the executive 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 critical of the office under Brown’s leadership. Months after the CARES Act had paused student-loan payments and collections, the agency struggled to halt the garnishment of some borrowers’ wages to repay loans, for example.
Even before Brown’s tenure, FSA had been plagued by management challenges. Brown was the third person since 2017 to run the office. In May of that year, James Runcie, who was appointed to the position during the Obama administration, resigned three years early, writing in a letter to staff at 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 replaced Runcie with A. Wayne Johnson, a former private student-loan and credit-card executive, who was replaced by Brown in March 2019. He ultimately left the agency in October of that year, calling for student-loan cancellation on his way out.
Cordray, who served as the attorney general of Ohio and helmed the CFPB for five years before making an unsuccessful run for Ohio governor, faces a daunting task ahead of him. Borrower advocates and lawmakers have been calling for a series of reforms, including making student loan forgiveness that’s already on the books more accessible. They also want to increase oversight of colleges that receive student loan funds, particularly for-profit schools. Both of those goals will require cooperation and leadership from FSA.
Student loan payments and collections are scheduled to resume in October and the head of FSA will play a crucial role in ensuring that the payment system turns back on smoothly and borrowers don’t slip into default. The Department of Education is also in the middle of revamping the student loan servicing system, which FSA oversees.
If Cordray’s record as CFPB head is any indication, he’ll likely take an aggressive approach to oversight of the companies under his purview. During Cordray’s tenure, the CFPB returned more than $750 million to student loan borrowers.
In addition, the Obama-era CFPB filed high-profile lawsuits in the student-loan space, including one against student-loan servicer Navient NAVI, 0.56%, accusing the company of making it unnecessarily difficult for borrowers to repay their loans — allegations which the company says are false (they’ve moved to have the suit dismissed) — and another against for-profit colleges over 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 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 said 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.”