The Biden administration named
the former head of the Consumer Financial Protection Bureau, to oversee the $1.6 trillion federal student-loan program.
Mr. Corday will join the administration as chief operating officer of Federal Student Aid, the Education Department agency that manages the loan program, the department said Monday.
The position, which doesn’t require Senate confirmation, has traditionally been more of an operational role than a political one. The Federal Student Aid office oversees contracts with private and nonprofit groups that provide customer service for and collect payments from the roughly 43 million Americans with federal student debt. While he was at the CFPB, Mr. Cordray regulated those firms, known as the loan servicers.
In 2012, Mr. Cordray became the first head of the CFPB, a watchdog created by Congress after the 2008 financial crisis to regulate lenders and other companies tied to consumer finance. An Obama appointee, he left the agency in 2017, after the Trump administration took office.
“Rich was a fearless and effective leader at the Consumer Financial Protection Bureau where he held big banks accountable and forced financial institutions to return $12 billion directly to the people they cheated,” Sen. Elizabeth Warren (D., Mass.), who conceived of the CFPB’s founding, said in a written statement. “I’m very glad he will get to apply his fearlessness and expertise to protecting student loan borrowers and bringing much needed accountability to the federal student loan program.”
Rep. Virginia Foxx
(R., N.C.), the top Republican on the House Education and Labor Committee, criticized the appointment. “I am skeptical that a failed Democrat politician, who has a history of getting consumed by politics instead of caring for consumers, has the capability and serious character required to carry out the duties of COO of FSA,” she said in a written statement.
Mr. Cordray said in a written statement that he planned to work with other Biden officials and Congress “to ensure that Federal Student Aid does exactly what it was intended to do—create more pathways for students to graduate and get ahead, not be burdened by insurmountable debt.”
During his tenure, the CFPB stepped up regulation of finance, including requiring that lenders impose tighter underwriting for mortgages. The agency was also a political lightning rod, with Republicans fighting Mr. Cordray’s regulatory efforts.
The student-loan program is racked with its own set of problems, including a high level of defaults and a dispute within the government about accounting practices.
As of Sept. 30, 5.5 million borrowers were in default—meaning they had gone a year without making any payment—on $122 billion in student debt, Education Department data show. Millions of others are months behind on payments or have sought refuge through federal options that lower monthly payments and ultimately forgive debt. According to the Federal Reserve Bank of New York, nearly one-fifth of all outstanding student debt in the repayment cycle—most of it from the federal program—is at least 90 days delinquent.
In response to the coronavirus pandemic, the federal government has allowed most borrowers with federal loans to suspend payments, under legislation passed by Congress and a series of executive actions from the Trump and Biden administrations.
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Source: WSJ – US News