Richard Cordray, Obama’s Consumer Rights Chief, to Head Student Debt Program

The Biden administration’s choice of Richard Cordray, former President Obama’s Consumer Financial Protection Bureau (CFBP) chief, to head the $1.6 trillion federal student-loan program, couldn’t be better.

“As CFBP chief, Cordray led the bureau’s crackdown on consumer abuses in debt collection, student loan servicing, and for-profit colleges, garnering the respect of advocates and drawing the ire of those industries,” The Washington Post reported.

Cordray and Senator Elizabeth Warren, a fierce supporter of eliminating student debt, have been close allies since Warren first conceived the CFPB after the 2008-09 financial meltdown. While the CFPB is called Warren’s “brainchild,” Obama chose Cordray as the agency’s leader.

“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,” Senator Warren said.

Cordray said he planned to work with other Biden officials and Congress” to ensure that Federal Student Aid does precisely what it was intended to do—create more pathways for students to graduate and get ahead, not be burdened by insurmountable debt.”

Cordray could cancel debt administratively

Under the Federal Schools Aid program, loan payments were halted in March 2020, relieving 43 million Americans of student debt payments. The Pandemic debt moratorium ends on October 31.

“During the loan moratorium, fewer than 1 percent of borrowers with federal loans are currently making payments,” The New York. Times reported.

Student debt is a politically fraught issue for President Biden. Although he has endorsed canceling up to $10,000 per borrower, Majority Leader Chuck Schumer has been pushing Biden to cancel $50,000 per borrower via executive order.

“But with his new job in the Education Department, the primary lender for higher education, Cordray might be able to relieve the president of that burden by canceling student debt administratively,” the Times reported.

Cordray — a five-time Jeopardy champion – was appointed as the chief operating officer of federal student aid by Education Secretary Miguel Cardona.

The job starts on Tuesday, May 4, and needs no Senate confirmation.

Navient defrauded student borrowers

The department is fielding claims from hundreds of thousands of borrowers who were defrauded by schools that broke consumer protection laws, MarketWatch reported.

“During Cordray’s tenure, the CFPB returned more than $750 million to student loan borrowers.

“In addition, the Obama-era CFPB filed high-profile lawsuits in the student-loan arena, including one against student-loan servicer Navient, accusing the company of making it unnecessarily difficult for borrowers to repay their loans, MarketWatch reported.

“I hate how these hollowed-out businesses and subpar colleges are cheating consumers, employees, and whole communities,” Cordray wrote in an opinion essay in The Plain Dealer, Ohio’s largest newspaper.

Cordray says under the Biden administration, he expects the CFPB and the Department of Education to cooperate more closely on student loan issues than in the Trump era.

“I think the bureau will tend to go back in the direction of where we were when I was the [CFPB] director and the Obama administration was in place,” he said in a MarketWatch interview.

“That was all nixed when [Education Secretary] Betsy DeVos came into office.”

Arizona default rates among lowest in nation

As of September 30, 5.5 million borrowers in the U.S. were in default—meaning they had gone a year without making any payment—on $122 billion in student debt, Education Department data show.

While the report finds Arizona’s financial aid has climbed 28 percent from $2.4 billion to $3.1 billion since 2016, default rates for students are below the national average.

“Our universities provide millions in institutional aid each year to students, yet many students struggle financially, especially as the pandemic continues,” said Arizona Board of Regents Chair Larry E. Penley.

Key findings of the report include:

• Only 11 states in the union have lower rates of student loan debt than Arizona. University graduates are also more likely to be employed and have stronger earning power five years after graduation – even after accounting for student loan repayments.
• 44 percent of Arizona State University, 44 percent of Northern Arizona University, and 52 percent of University of Arizona undergraduate students graduate with no debt.

Perhaps, Cordray should use the Arizona state lending program as a model for the nation.