Watchdog agency signals less focus on student loan abuses
NEW YORK (AP) — The Trump administration signaled Wednesday that it intends to pull back on investigating potential abuses by companies in the $1.5 trillion student loan market.
The Consumer Financial Protection Bureau will shutter its student lending office, according to a bureau-wide memo written by its acting director, Mick Mulvaney. The student loan office at the CFPB had been responsible for returning $750 million in relief.
Its responsibilities are being moved under the broad umbrella of “financial education.”
The office had been primarily responsible for an investigation into the troubled student lender Navient, which the CFPB sued last year for unfair and abusive practices. The office also investigated and sued for-profit education company Corinthian Colleges.
While bureau spokesman called it a modest reorganizational change, this isn’t the first time Mulvaney has reshuffled the bureau to change the CFPB’s priorities. He took similar action with the bureau’s Office of Fair Lending earlier this year, moving the entire department under the bureau’s education department. That office had been focused on discrimination issues, particularly in the auto lending industry.
“The work of the office continues, personnel are all on the job and working on the same material as they were before,” said John Czwartacki, chief spokesman for the bureau and a long-time Mulvaney aide, in a statement.
Mulvaney has said repeatedly that he planned to curtail the bureau’s operations to only what it is required by law. He had been a long-time critic of the bureau while he was a Congressman from South Carolina, and while acting director has pleaded with Congress to trim the bureau’s mandate and make it more subject to Congressional oversight.
While the housing and stock market have recovered from the 2008 financial crisis, the problems in the student loan market have only become more exacerbated. Roughly 4.6 million Americans are in default on their student loans as of December 31, 2017, according to the Department of Education, more than double what it was four years ago. That’s more than 10 percent of the total 42.8 million Americans who currently have a student loan outstanding backed by the Department of Education.
Consumer advocates immediately denounced the change, saying the CFPB should be conducting tough oversight of the student loan industry, given its size and number of borrowers impacted, particularly young people.
“Education alone cannot stop predatory behaviors on the part of for-profit schools and servicers, nor can it help hundreds of thousands of Americans in serious debt because of these practices,” said Whitney Barkley-Denney, senior policy counsel with the Center for Responsible Lending.
Ken Sweet covers banks and the Consumer Financial Protection Bureau for The Associated Press. Follow him on Twitter at @kensweet.