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Meet the man now at the center of the student debt debate



Richard Cordray, a close ally of Senator Elizabeth Warren, who was the first director of the Federal Bureau of Financial Protection during the Obama years, has been elected the new head of federal student aid in the Biden administration, a post that will put him at the center of the revolving debate on student debt forgiveness.

The issue is difficult for President Biden. Although he approved the cancellation of up to $ 10,000 per borrower through legislation, Mr. Biden was pressured by some Democrats to forgive much more and sign an executive order to do so if Congress did not take action.

But with his new position in the federal Ministry of Education, the main lender for higher education, Mr. Cordray may be able to relieve the president of this burden by abolishing students’ administrative debt. Democratic leaders are pushing for a relief of up to $ 50,000.

Mr. Cordray is a former Ohio Attorney General who worked with Mrs. Warren on financial matters before her election to the Senate. He headed the Consumer Protection Bureau from 2012 to 2017, leaving the Trump administration to make a failed bid for governor of Ohio in the first year.

Administration officials said he and Ms. Warren have a close relationship, raising questions about how exactly their views align on the issue of student debt cancellation. Ms Warren argues that this is a crushing burden on young people and that alleviating it would reduce economic inequality. Some critics say forgiving student loans would disproportionately help the rich, who use them to pay for degrees, rather than the poor, who are often uneducated in college.

In a statement after his appointment was announced Monday, Mr Cordray focused on student debt as a primary concern, saying he looked forward to working with leaders in the department, the Biden administration and Congress to “create more ways to complete students and progress, do not be burdened with insurmountable debt. “

However, he did not specify his position on whether any debt should be canceled. Education spokesman Rachel Thomas said the agency was working with the Justice Department and the White House to reconsider options.

Republican critics have tried to block Mr Cordray’s appointment to Mr Obama’s Consumer Financial Protection Bureau and complained that the bureau had too much power and burdened businesses with unnecessary regulations. But his new appointment as chief operating officer of federal student aid, appointed by Education Minister Miguel Cardona, takes effect on Tuesday and needs no further approval.

In a statement announcing the appointment, Mr Cardona said it was “critical” for student loan borrowers to rely on the department “for help with college payments, loan support and strong oversight of institutions after graduation”.

Mr. Cordray, a five-time Danger Champion, is also a vocal critic of nonprofit colleges. “I hate how these carved businesses and colleagues are fraudulently cheating on consumers, employees and entire communities,” he wrote in a guest essay on The Plain Dealer, Ohio’s largest newspaper.

Mr. Cordray succeeds Mark A. Brown, who has been appointed chief operating officer of federal student aid by President Donald J. Trump in March 2019 and resigned in March this year. Mr Brown has been the target of consumer and labor groups who have welcomed his resignation. Ms. Warren welcomed Mr. Brown’s resignation with a tweet that said it was “good for student borrowers.”

Consumer advocates were pleased with Mr Cordray’s appointment. “This is an exceptional choice,” said Seth Frotman, a former student loan ombudsman at the Consumer Protection Bureau who works closely with Mr Cordrey. Mr. Frotman is now the executive director of the Center for Borrower Protection, an advocacy group.

“This is a very promising sign of a maritime shift in thinking in the Department of Education,” Mr Frotman said.

Mr Cordray made supervising student loans one of the priorities of the Consumer Protection Bureau and in early 2017 – two days before Mr Trump took office – the agency filed a lawsuit against Navient, one of the largest serving students at the Department of Education, for mistakes and omissions that Mr. Cordray said he had incorrectly added billions of dollars to borrowers’ sections.

The case is ongoing and six state prosecutors have filed similar cases. The lawsuits describe routine supervisory errors and omissions that, over time, add to systemic failures, ominously similar to the confusion of borrowers’ accounts and foreclosures during the 2008 recession.

Mr Cordray described the country’s growing student loan debt – which overshadows all consumer debt other than mortgages – and the often elusive way of managing it as a problem ripe for government intervention. “The domino effects of student debt burdens and loan servicing problems are holding back future generations and hampering the economy,” Mr. Cordray wrote in his 2020 book, Watchdog.

The education department is the main lender for Americans who take out loans to pay for higher education. It directly owns loans to nearly 43 million people, totaling $ 1.4 trillion.

In one of the largest government measures to alleviate the pandemic, the department in March 2020 allowed borrowers to suspend payments on their federal student loans and temporarily set the interest rate on loans at zero percent. This break should last until September.

As a result of the freeze, less than 1% of borrowers on federal loans are currently making payments. Restarting loan collection will be one of the biggest challenges facing the education department this year.

Mr Cordray will inherit a number of other problems in the Education Department, including major mistakes and obstacles in the civil service loan forgiveness program, which aims to forgive the debts of teachers, military, non-profit workers and others in the public service career. .

The agency is also battling claims from hundreds of thousands of borrowers seeking relief through a program designed to eliminate the debts of people who have been deceived by schools that have violated consumer protection laws.

Susan K. Beachy contributed research.


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