Washington D.C. – In the same week that Americans’ student loan debt topped $1.5 trillion, Acting Director Mick Mulvaney announced plans to shut down the Consumer Financial Protection Bureau’s (CFPB) Office for Students and Young Consumers according to sources familiar with the decision and documents obtained by the Consumer Federation of America. The Office for Students is the only unit in the federal government solely focused on protecting student loan borrowers and young adults from predatory actors in the financial sector. Since the CFPB opened its doors, the work of the Office for Students and Young Consumers has helped to return more than $750 million to student loan borrowers and halted predatory practices that harmed millions in pursuit of the American Dream.
“Shuttering the CFPB’s student lending office is an appalling step in a longer march toward the elimination of meaningful American consumer protection law,” explained Christopher Peterson, Financial Services Director at CFA. “This action actively promotes greater profits for a handful of debt collection businesses at the expense of mistakes, neglect, and confusion for millions of student loan borrowers.”
BACKGROUND: CFPB’s Office for Students and Young Consumers
For seven years, the Bureau’s Office for Students and Young Consumers, led by an independent Student Loan Ombudsman, stood up for student loan borrowers and young consumers:
- Returning more than $750 million to student loan borrowers and halting predatory practices that harmed millions in pursuit of the American Dream. Individual student loan borrower complaints handled by the Office for Students were the catalyst for a range of high-profile federal and state actions that shut down companies that defrauded consumers, halted widespread abuses, and returned more than $750 million dollars to students and student loan borrowers across the country.
- Helping more than 60,000 borrowers demand answers from student loan companies. Since 2012, borrowers in all 50 states submitted complaints to the CFPB describing widespread breakdowns at every stage of the student loan repayment process. For these borrowers, submitting a complaint often led to thousands of dollars in money back.
- Holding predatory companies like Navient and ITT Tech accountable for their predatory practices. Last year, the CFPB sued Navient, the nation’s largest student loan company, for cheating borrowers with every type of student loan at every stage of repayment. The CFPB also took on the largest for-profit colleges, including ITT Tech, Corinthian Colleges, and Bridgepoint Education, and halted illegal student loan servicing practices at the biggest banks, including Wells Fargo, Discover, and Citibank.
- Exposing the effects of student debt on the economy and society. The Office for Students and Young Consumers was among the first to raise alarms about the far-reaching effects of student debt. It exposed the heavy toll student debt takes on military families, described the growing debt burden shouldered by older Americans, revealed industry abuses that deny repayment rights to teachers, nurses and other public servants, and documented the significant impact of student debt on communities of color.
- Calling out widespread abuses by student loan debt collectors. The Office for Students and Young Consumers reported widespread student loan servicing failures and partnered with the Obama Administration and state law enforcement officials to develop expansive new consumer protections for borrowers. The Office for Students served as a forceful advocate expanding state-level oversight of the student loan industry, supporting state banking regulators and state legislators as they pushed for expanded borrower protections in state capitals.
- Getting results in a broken student loan system that fails current and former students across their financial lives. The Office exposed how student loan companies were driving borrowers into default when their cosigner died or filed bankruptcy, even when borrowers had been paying their bills on time each month. It also showed how credit card companies and banks continue to push students into high-fee cards and accounts and pushed for strong new rules to reign in high-fee providers. The Office exposed how federal debt collection contractors raked in billions of dollars of taxpayer money, while setting up the most vulnerable student loan borrowers to fail.
The Trump Administration is Erecting Barriers to Opportunity For Millions of Young Consumers
More than 44 million Americans now owe more than $1.5 trillion in student loan debt—a burden that has tripled in the past decade. Americans owe more in student loan debt than any other type of consumer debt other than home mortgages.
Distress in the student loan market is widespread. More than 11 million Americans are past due or in default on a student loan, despite the availability of income-driven repayment options for the vast majority of borrowers. For the last 3 years, one borrower has defaulted on a federal student loan every 28 seconds. Student debt distress damages borrowers’ credit, denies access to major economic milestones like homeownership, and drives economic and racial inequality.
Concerns over student loans is not a partisan issue. Republican Federal Reserve Chair Jerome Powell has noted that student debt could slow economic growth and cause long-term negative effects on borrowers.
As student loan borrowers suffer widespread abuses at the hands of a runaway student loan industry, the Trump Administration has taken a series of aggressive actions to pull back consumer protections, obstruct independent oversight, and ensure that the largest student loan companies are never held to account for predatory practices. These actions come as the Administration readies the rollback of rules to hold the for-profit college industry accountable, deny debt relief to defrauded student loan borrowers, and bar the courthouse doors to students and consumers ripped off by predatory actors.
“The Trump Administration’s decision to close the one office in the federal government exclusively dedicated to protecting student loan borrowers is an about-face on the President’s student lending campaign promises,” said Peterson. “The Trump Administration is turning its back on a generation of student loan borrowers.”
Contact: Christopher L. Peterson, 202-387-6121 x1020