Richard Cordray, a close ally of Senator Elizabeth Warren who served as the first director of the Federal Consumer Financial Protection Bureau in the Obama years, has been elected as the new head of federal student aid in the Biden administration, a position that will place him at the center of the swirling debate about student debt forgiveness.
The issue is difficult for President Biden. Although he has agreed to cancel up to $ 10,000 per. Borrowing through legislation, Mr. Biden has been pressured by some Democrats to forgive much more and to sign a decree that will make it happen if Congress fails to act.
Mr. Cordray is a former attorney general in Ohio who worked with Ms. Warren on financial issues prior to her election to the Senate. He headed the Consumer Protection Agency from 2012 to 2017, leaving Trump’s first year to make a failed bid for governor of Ohio.
Administration officials said he and Ms. Warren maintain a close relationship and raise questions about how closely their views align with the issue of canceling student debt. Mrs Warren has argued that it is a crushing burden on young people and that relieving it will reduce economic inequality. Some critics say that forgiving student loans would disproportionately help the rich who use them to pay for advanced degrees, rather than helping the poor, who are often not educated in college.
In a statement after his appointment was announced Monday, Mr. Cordray on student debt as an overriding concern, saying he looked forward to working with department heads, the Biden administration and Congress to “create more avenues for students to graduate and move on, not be burdened by insurmountable debt.”
However, he did not state his position on whether some debt should be canceled. A spokeswoman for the education department, Rachel Thomas, said the agency is working with the Department of Justice and the White House to review the options for the topic.
Republican critics tried to block Mr. Cordray’s appointment to the Consumer Financial Protection Bureau under Mr. Obama and have complained that the agency had too much power and saddled companies with unnecessary rules. But his new appointment as executive director of federal student aid, made by Education Secretary Miguel Cardona, takes effect Tuesday and needs no other approvals.
In a statement announcing the appointment, Mr Cardona said it was “critical” that student borrowers could rely on the department “for help paying for college, supporting loan repayments and strong oversight of post-secondary institutions.”
Mr. Cordray, and five times “Jeopardy!” champion, has also been a vocal critic of for-profit colleges. “I hate how these eroded companies and sub-colleges are cheating consumers, employees, and entire communities,” he wrote in a guest essay in The Plain Dealer, Ohio’s largest newspaper.
Mr. Cordray succeeds Mark A. Brown, who was appointed CEO of Federal Student Aid by President Donald J. Trump in March 2019 and resigned in March this year. Mr. Brown became a target for consumer and working groups cheering his resignation. Mrs. Warren greeted Mr. Brown resigned with a tweet saying it was “good for student borrowers.”
Consumer advocates were very happy for Mr. Cordray’s appointment. “This is a unique choice,” said Seth Frotman, a former student loan ombudsman at the Consumer Protection Agency who worked closely with Mr. Cordray. Frotman is now CEO of the Student Borrower Protection Center, a law firm.
“This is a very promising sign of a sea change in thinking in the Department of Education,” Frotman said.
Mr. Cordray oversaw student loans to one of the Consumer Protection Agency’s priorities, and in early 2017 – two days before Trump took office – the agency sued Navient, one of the Department of Education’s largest student loan officers, for errors and omissions, which Mr Cordray said incorrectly added billions of dollars to the borrowers’ tabs.
The trial is ongoing, and six state attorneys have filed similar cases. The lawsuits describe routine errors and omissions of supervision that over time added systematic errors, eerily similar to the mortgage industry’s bungling of borrower accounts and property foreclosures in the 2008 recession.
Sir. Cordray has described the country’s soaring student loan debt – which darkens all consumer debt except mortgages – and the often slippery way it is managed as a mature problem for government intervention. “The dominoes of tuition fees and loan service problems are holding back the next generation and hampering the economy,” wrote Mr. Cordray in his 2020 book, “Watchdog.”
The Department of Education is the primary lender for Americans who borrow to pay for higher education. It owns direct loans to nearly 43 million people totaling $ 1.4 trillion.
In one of the government’s most sweeping pandemic relief measures, in March 2020, the department allowed borrowers to stop paying on their federal student loans and temporarily set the interest rates on the loans at zero percent. This break is scheduled to continue through September.
Because of this freeze, currently less than 1 percent of borrowers are making federal loans. Restarting loan collections will be one of the biggest challenges facing the education department this year.
Mr. Cordray will inherit an abundance of other issues in the Department of Education, including extensive failures and obstacles in the Department’s Public Service Loan Forgiveness program, which are designed to forgive debts from teachers, military members, nonprofits, and others in the public service career.
The agency also struggles with claims from hundreds of thousands of borrowers seeking emergency assistance through a program aimed at eliminating debt from people who were deceived by schools that violated the Consumer Protection Act.
Susan C. Beachy contributed research.