US Government Advocate For Student Loan Borrowers Resigns

 

NEW YORK (AP) — The nation's roughly 44 million student loan borrowers have lost their advocate inside in the U.S. government.

Seth Frotman, the government's top official overseeing the $1.5 trillion student loan market resigned in protest Monday, citing what he says is the White House's hostility toward protecting the nation's student loan borrowers.

- Sponsors -

Frotman will be stepping down as student loan ombudsman at the end of the week, according to his resignation letter , which was obtained by The Associated Press. He held that position since 2016, but has been with Consumer Financial Protection Bureau since its inception in 2011.

His departure leaves a critical role inside the U.S. government unfilled at a time of crisis in the student loan market.

Student loan debt has ballooned from $638.9 billion in 2008 to roughly $1.5 trillion this year. Meanwhile 13.6 percent of all student loans are either in default or delinquent, according to the Department of Education, a percentage that has remained alarmingly high despite an improving economy and record low unemployment.

- Partner Content -

Entergy’s Energy Smart Program Brings Cost Conscious Innovation to New Orleans

Offering comprehensive energy efficiency at no cost to the consumer, Entergy’s Energy Smart program incentivizes Entergy New Orleans customers to perform energy-saving upgrades in...

Frotman is the latest high-level departure from the CFPB since Mick Mulvaney, President Donald Trump's budget director, took over in late November. But Frotman's departure is especially noteworthy, since his non-partisan office is one of the few parts of the U.S. government that was tasked with handling student loan issues.

The office was at the center of the lawsuits against for-profit colleges like Corinthian Colleges and is currently heading up a lawsuit between the CFPB and Navient, one of the nation's largest student lenders. The Navient lawsuit has been mired in bureaucratic red tape as the Department of Education, headed by Betsy DeVos, has been unwilling to help the CFPB with its lawsuit . Since its creation, the student loan office has returned $750 million to harmed borrowers.

"You have used the bureau to serve the wishes of the most powerful financial companies in America," Frotman wrote, addressing his letter to Mulvaney. "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."

- Sponsors -

Congress created the student loan ombudsman office when it established the CFPB, citing a need for a go-to person to handle student loan complaints nationwide. One previous occupant of that position is Rohit Chopra , who was appointed by Trump to be a commissioner at the Federal Trade Commission.

The ombudsman's office is quite powerful, able to work with the bureau's enforcement staff to target bad behavior in the student loan market as well as act as a voice inside the government on behalf of student loan borrowers. The office processed tens of thousands of complaints from student loan borrowers and was among the first major government offices to raise alarms about the growing issue of students being unable to afford repaying their loans.

But despite its work, Mulvaney downgraded the mission of Frotman's student loan office earlier this summer and moved it under the umbrella of consumer education instead of enforcement. While at the time Mulvaney's office said it was a minor organizational shake-up, consumer advocates saw the change as a move to downplay the CFPB's mission when it came to student loans.

Frotman also accused Mulvaney and his staff of deliberately hiding a report from the public that raised alarms that banks were overcharging student loan borrowers.

"When new evidence came to light showing that the nation's largest banks were ripping off students on campuses across the country by saddling them with legally dubious account fees, bureau leadership suppressed the publication of a report prepared by bureau staff," Frotman wrote.

The student loan office is not alone. Under Mulvaney, the bureau has scaled back its enforcement work and has proposed revising or rescinding all of the rules and regulations it put into place under the Obama administration.

"Seth Frotman is a public servant who treated every student loan complaint with the seriousness it deserved," said Debbie Goldstein, executive vice president at the Center for Responsible Lending. "His departure raises concerns about the priorities of Mulvaney and CFPB leadership and whether they are fulfilling the mission of the CFPB to focus on protecting consumers from financial abuse."

In a statement, a CFPB spokesman said it does not "comment on specific personnel matters" but also said "we hope that all of our departing employees find fulfillment in other pursuits and we thank them for their service."

– by Ken Sweet, AP reporter

Digital Sponsors / Become a Sponsor

Follow the issues, companies and people that matter most to business in New Orleans.

Email Newsletter

Sign up for our email newsletter