The student debt burden in America is a slow-moving crisis for millennials and Gen Z, as they continue to mortgage their futures to obtain an increasingly necessary college degree. It’s clear that the current system is completely unsustainable: Just last week, outstanding student debt in America surpassed $1.5 trillion. Over 8 million borrowers are in default on their student loans, and one in four borrowers are having trouble repaying.
But instead of helping, the Trump Administration just made things even harder for America’s student loan borrowers.
On Wednesday, Mick Mulvaney, the White House official installed at the Consumer Financial Protection Bureau (CFPB), quietly shut down the Office for Students and Young Borrowers, which was designed to protect student loan borrowers from predatory actors. Closing this office now is like shuttering the fire department in the middle of a fire.
Problems in the student loan industry are serious and systemic: Illegal activity by Navient meant borrowers had years added to their repayment; Citigroup deceived borrowers about tax benefits; and National Collegiate Student Loan Trusts sued consumers for debt the company couldn’t prove was owed or was too old for the company to go to court to collect.
Most failures in the student lending market, though, come down to two problems: A rogue industry consistently stomping on borrower rights, and a failure of public policy to address larger issues like the sheer volume of debt, bad incentives in how the government pays loan servicers and a lack of transparent, enforceable standards to ensure that those servicers are helping, not hurting borrowers. And the CFPB's Office for Students was the only place in the government tackling both these problems at once — or, really, at all, when one considers that Secretary DeVos is rolling back consumer protections and delaying rules meant to protect students from fraud.
The Office for Students was making a difference, spurring actions to hold bad actors in the student loan industry accountable, and getting real money back for defrauded borrowers — $750 million to be exact. The Office was crucial in referring cases to law enforcement when student loan companies broke the law. When the Department of Justice got more than $60 million returned to over 77,000 members of our military, for example, their actions were informed by a 2012 joint report by the Office for Students and the Bureau’s Office of Servicemember Affairs.
Without the Office for Students listening to borrowers and documenting problems, there is every reason to fear that enforcement actions will come to a halt.
Without the Office for Students listening to borrowers and documenting problems, there is every reason to fear that enforcement actions will come to a halt.
The Office for Students has also helped the entire country better understand the student loan market with their steady analysis of problems and policy proposals to fix them. The Office helped handle over 50,000 complaints about student loans, keeping meticulous track of the trends they spotted. Each year, after analyzing student loan complaints made by borrowers to the CFPB’s complaint database (a database Mulvaney wants to hide), the student loan ombudsman would compile a report highlighting the challenges borrowers face. This allowed the Office to not only paint a clearer picture of what’s currently wrong in student lending, but make concrete recommendations for ways to improve it.
For example, the office studied the kinds of problems borrowers tend to have with understanding their repayment options, and proposed a new approach called the “payback playbook” to help make student loan repayment easier and clearer.
Or, in 2015, the Office for Students took a close look at student loan servicing, top to bottom, documenting problems and outlining solutions. One of the problems they documented was that vulnerable borrowers often have trouble getting into an income-driven repayment plan that they can afford. As a result of the analysis, the Department of Education changed the contracts with these servicers to require them to be more proactive in their efforts to steer economically vulnerable borrowers into such plans, such as following up with those who submit incomplete applications, rather than just throwing those applications away.
The student debt crisis isn’t just a problem for borrowers; it’s a problem for our entire economy.
Another outcome of the 2015 report was a recommendation that the Bureau add a student loan servicing rule to its agenda — an initiative that Mulvaney also decided to snuff out on May 9, abandoning plans to regulate student loan companies.
The student debt crisis isn’t just a problem for borrowers; it’s a problem for our entire economy. The New York Fed has warned that rising student debt has caused a decline in home ownership, which in turn suppresses local economies. And when servicers fail to ensure borrowers can find repayment plans they can afford, and they fall into default, it’s also taxpayers who take the hit, as we are all ultimately on the hook for federal student loans.
Mulvaney dismantling the office is a move that deliberately makes life harder for America's 44 million student loan borrowers. At a time when student borrowers need allies in government more than ever, Mick Mulvaney and the Trump Administration have left them out in the cold.
Alexis Goldstein is a Senior Policy Analyst at Americans for Financial Reform, a coalition of 200 organizations fighting for a safer and fairer economy. She also co-hosts the podcast Humorless Queers.
