A major student-loan watchdog is stepping down and criticizing the Trump administration’s handling of the nation’s student-loan problem.
Seth Frotman, the student-loan ombudsman at the Consumer Financial Protection Bureau, sent his letter of resignation to acting CFPB director Mick Mulvaney on Monday. Frotman, who has worked at the CFPB for the past seven years, served as the head of the agency’s student loan office since 2015.
Both the announcement of his resignation and the tenor of Frotman’s letter, in which he accused the CFPB’s current leadership of “hurting families,” have consumer advocates worried about the future for student loan borrowers. The departure also comes amid growing concern from borrower advocates over the way the Trump administration is approaching the country’s $1.5 trillion student-loan problem.
Since its inception, the CFPB’s student-loan office was known for its aggressive approach to monitoring the student-loan market. But Frotman’s letter suggests that under Mulvaney’s leadership, those efforts have stalled.
Frotman’s resignation comes just a few months after the CFPB reorganized its student loan office, shifting its focus from enforcement to financial literacy.
“Unfortunately, under your leadership, the bureau has abandoned the very consumers it is tasked by Congress with protecting,” Frotman wrote in his letter to Mulvaney. “Instead, you have used the bureau to serve the wishes of the most powerful financial companies in America.”
Frotman cites examples of what he alleges are efforts by political staff to undermine the bureau’s student-loan work, including suppressing a report prepared by career CFPB staff on “dubious” fees that banks charge college students and making it more difficult for CFPB staffers to help student-loan borrowers get money back when they’ve been victims of troubling practices, among other accusations.
“It seems like folks are feeling like they can’t do their job,” said Persis Yu, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center. “That’s incredibly concerning, because their jobs are incredibly important to the people that I represent.”
The CFPB press office declined to comment on personnel matters, but wrote in an email, “We hope that all of our departing employees find fulfillment in other pursuits and we thank them for their service.”
Frotman has played a direct role in holding student-loan companies accountable, perhaps most notably by overseeing a CFPB lawsuit against student loan giant Navient, Yu said. But she also noted other, more subtle ways the agency helped student loan borrowers during Frotman’s tenure. They include producing research on how certain industry practices affect the most vulnerable student-loan borrowers and working on behalf of borrowers who lodge complaints against servicers. The agency has also secured more than $750 million in relief for student loan borrowers.
“People can relate to the experience of making a payment and not having it go to the right place,” Yu said. “Those are the kinds of abuses and practices that the CFPB is looking out for and they’re ensuring get fixed.”
Frotman’s resignation and the state of the agency’s student-loan office as portrayed in his letter has advocates worried that student-loan borrowers are becoming increasingly vulnerable to bad actors at an already precarious time.
“Borrowers are on their own to figure out not just how to navigate the system, but what to do when the system is not working properly,” said Julie Margetta Morgan, a fellow at the Roosevelt Institute, a think tank focused on economic and social equality.
Historically, the CFPB has been unafraid to point out and try to address flaws in the student-loan system even if it “put other agencies in a tough spot,” Margetta Morgan said. Given recent actions by other agencies in the student-loan space, that watchdog role is particularly important, advocates say.
Earlier this month, Betsy DeVos’s Department of Education announced plans to revamp to Obama-era rules cracking down on for-profit colleges. In addition, DeVos issued a memo earlier this year aimed at shielding student loan companies from state laws.
In this environment, a robust student-loan office at the CFPB with a strong leader, like Frotman, is particularly important, Yu said. “We need someone who will really stand up to servicers, who will demand information and who will push for accountability.”
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