Student Loan Watchdog Quits, Saying Trump Administration Is Harming Students

• Aug 27, 2018

Stacy Cowley, The New York Times

A top federal official in charge of handling complaints about student loans stepped down on Monday, blasting the Trump administration for protecting predatory lenders at the expense of borrowers.

Seth Frotman, the student loan ombudsman at the Consumer Financial Protection Bureau, said in his resignation letter that millions of borrowers had been harmed by “sweeping changes” at the bureau under Mick Mulvaney, President Trump’s budget director, who became the bureau’s acting director in November. A copy of the letter was obtained by The New York Times.

“You have used the bureau to serve the wishes of the most powerful financial companies in America,” Mr. Frotman wrote to Mr. Mulvaney. “The current leadership of the bureau has abandoned its duty to fairly and robustly enforce the law.”

A spokesman for the consumer bureau did not immediately respond to a request for comment.

Mr. Frotman’s position was mandated by Congress eight years ago, when it created the bureau, to serve as a watchdog over the $1.5 trillion student loan market. The office fields about 23,000 complaints a year, covering problems with lenders, debt collectors and a growing number of companies selling “debt relief” services — a market often plagued with fraud. Mr. Frotman had held the job since 2016.

The ombudsman’s office works to resolve individual complaints. It also watches for systemic problems and presses lawmakers and other agencies to address them. Since its creation, the office has forced companies to pay $750 million in refunds and other relief to student borrowers, according to the consumer bureau.

In his letter, Mr. Frotman accused Mr. Mulvaney and his top lieutenants of undermining the bureau’s career staff and interfering with their efforts to oversee student lenders. Last year, Mr. Mulvaney’s team suppressed the publication of a report drawing attention to legally questionable fees charged on college students’ bank accounts, Mr. Frotman said.

Three months ago, Mr. Mulvaney folded the ombudsman’s office into the bureau’s consumer information unit, removing some of its independence.

Mr. Frotman is departing as consumer advocates are watching anxiously to see how Mr. Mulvaney will handle the bureau’s highest-profile lawsuit, a case against Navient, one of the nation’s largest student loan collectors. In 2017, just days before Mr. Trump’s inauguration, the bureau sued Navient for what it said were extensive abuses and mistakes that harmed millions of borrowers struggling to repay their loans.

Mr. Mulvaney has not directly commented on the details of the case, which the bureau is still pursuing. In February, Navient’s chief executive, John F. Remondi, wrote a letter to Mr. Mulvaney urging him to drop the lawsuit, which Mr. Remondi called “a prime example of what was wrong with the bureau” under Mr. Mulvaney’s predecessor.

Mr. Frotman is not the only federal student lending official to leave after clashing with the Trump administration. The Education Department, which manages the government’s $1.4 trillion portfolio of federal student loans owed by nearly 43 million borrowers, lost its top student aid executive last year. James Runcie, the head of the agency’s Federal Student Aid office, quit over what he said was political interference with his unit’s work.

Leave a Comment

Please check your e-mail for a link to activate your account.