The student arm of the Consumer Financial Protection Bureau is being folded into another office at the agency, a consolidation that some fear will limit its ability to stand up for student loan borrowers.
In a memo obtained Wednesday by The Washington Post, Mick Mulvaney, acting director of the CFPB, informed staffers of a reorganization that will tuck the office for students and young consumers into the bureau’s office of financial education. The memo offers no explicit details on how the consolidation will affect employees or their duties, other than to say that the bureau will coordinate with the National Treasury Employees Union before implementation of changes. A CFPB spokesman said the bureau has no further information at this time.
Still, advocacy groups, liberal lawmakers and former employees at the bureau are interpreting the news as an intentional move to dismantle the only unit in the federal government solely dedicated to protecting student loan borrowers from predatory actors in the financial sector.
“This is a very significant change in the mission of the student office,” said Christopher Peterson, a law professor at the University of Utah and former enforcement attorney at the CFPB. “It’s an incredibly clever and sneaky move.”
The office for students combs through complaints from consumers, interfaces with state attorneys general and talks to consumer rights organizations to identify problems in education lending and servicing. Staffers then come up with policy recommendations, including new regulations or guidance, to solve those problems. And when they identify clear violations of the law, they recommend that the bureau pursue legal action, Peterson explained.
Some of the most significant student lending cases brought by the federal government in recent years derived from the student office at the CFPB, Peterson said. Among them: a lawsuit against the now-defunct for-profit giant Corinthian Colleges for steering students into private loans that had interest rates as high as 15 percent. Corinthian set its tuition and fees for bachelor’s degrees at $60,000 to $75,000 to force students to borrow from the program, and the company then received a slice of the lender’s fees, according to the complaint.
The bureau took similar action against ITT Educational Services for allegedly providing zero-interest loans to students but failing to tell them that they would be kicked out of school if they didn’t repay in a year. When students could not pay, the CFPB said, ITT forced them to take out high-interest loans to repay the first ones. The office also played a role in the bureau’s lawsuit against student loan management firm Navient for allegedly misallocating borrower payments and steering people into costly plans — charges the firm vehemently denies as it continues to fight the case.
All told, the office for students has helped return more than $750 million to student loan borrowers across the country, according to the bureau. It has fielded tens of thousands of complaints and issued reports on abusive practices in student lending, such as private lenders placing people in default when the co-signer of their loan dies or declares bankruptcy.
But now there is no telling whether any of that work will continue. Folding the student office into the financial education arm of the bureau could mean that staffers will be solely tasked with financial literacy, an admirable mission, but one that strays far from the work in which the student office has made its name, Peterson said.
Alexis Goldstein, senior policy analyst at Americans for Financial Reform, called the consolidation a slap in the face to America’s student borrowers at a time when they need government allies more than ever.
“America is facing an ongoing student debt crisis, with outstanding student debt surpassing $1.5 trillion and over 8 million borrowers in default on their student loans. Closing the office for students is like shuttering the fire department in the middle of a three-alarm fire,” Goldstein said in a written statement.
Advocacy groups say dismantling the office for students follows a troubling pattern of Mulvaney weakening the consumer watchdog agency. Since his controversial appointment in November, the acting CFPB director has stripped the fair-lending unit’s enforcement powers, suspended the bureau’s collection of financial services data and asked Congress to curb the agency’s authority.
Last month, Senate Democrats wrote Mulvaney inquiring whether the bureau’s enforcement team is being “ordered to agree to terms that let Navient off lightly.” Lawmakers, including Sen. Elizabeth Warren (D-Mass.) and Richard Blumenthal (D-Conn.), asked for a list of all meetings, calls and documents shared between the student loan company and bureau leadership since January. Aides say lawmakers have yet to receive a response.
“President Trump is giving student loan corporations the green light to take advantage of students without fear of repercussion and sending a clear message to students that this administration is not interested in their best interests when it gets in the way of corporate profits,” Sen. Patty Murray (D-Wash.), ranking Democrat on the Senate Health, Education, Labor and Pensions Committee, said in a statement Wednesday.