The Senate confirmed Rohit Chopra to lead the Consumer Financial Protection Bureau
The student-loan industry could face a crackdown as yet another Elizabeth Warren ally takes a top oversight job for Biden
Ayelet Sheffey
Thu, September 30, 2021, 2:54 PM·3 min read
The Senate confirmed Rohit Chopra to lead the Consumer Financial Protection Bureau.
Chopra helped create the bureau with Elizabeth Warren and cracked down on the student-loan industry.
He joins other Warren allies in Biden's ranks fighting for student-loan borrowers.
Yet another ally of Massachusetts Sen. Elizabeth Warren - one of the biggest advocates for student-loan borrowers in Congress - joined President Joe Biden's ranks on Thursday.
Before leaving for recess, the Senate confirmed Rohit Chopra to lead the Consumer Financial Protection Bureau (CFPB), the government's consumer protection and oversight agency. Chopra previously served in the CFPB as its first student-loan ombudsman, and he was with Warren when she created the agency in 2011 to ensure people across the country are being financially protected. Now, he joins CFPB as student-loan companies face more stringent regulations leading up to February's payment restart after more than a year's pause. In recent weeks, three servicers have said they'll be shutting down, leaving 16 million borrowers to transition to new companies.
After Chopra's nomination was announced in January, Warren wrote on Twitter that she worked closely with him "to set up the CFPB and fight for America's children."
"It's terrific that President-elect Biden picked Rohit to run the @CFPB," Warren wrote. "He's been a fearless champion for consumers at the FTC (Federal Trade Commission) and will be a fearless champion leading the consumer agency."
Chopra left the CFPB in 2015 and was sworn in as a Federal Trade Commissioner in 2018, during which he worked to protect consumers from unfair business practices. But his work at the agency suggests the student-loan industry will be facing much stricter oversight from here on out.
As the agency's first student-loan watchdog, he primarily focused on unearthing problems with student-loan companies and ensuring the millions of borrowers across the country were not being mistreated. Chopra helped President Barack Obama establish the Student Aid Bill of Rights, which improves how the companies interact with borrowers, and in 2013, he led the bureau in discovering that more than 7 million borrowers were in default on their debt.
Since then, the CFPB has revealed a number of findings of student-loan abuses, and in some cases, has taken legal action against the companies. For example, the agency sued Navient, one of the biggest student-loan servicing companies in the US, in 2017 for "illegally failing borrowers at every stage of repayment," including causing borrowers to take on more debt than they could pay off.
Now that Chopra is confirmed to lead the agency, he will likely continue enforcing fair student lending. During his March confirmation hearing, Chopra said he will focus on protecting Americans with debt and he acknowledged the challenges that will come in February when the student-loan payment pause lifts.
"We are at a critical moment when so many borrowers are going to have to restart their payments," Chopra said during the hearing. He added that he will ensure the restart is "happening lawfully so we can avoid an avalanche of defaults when any moratorium might end."
Three student-loan companies have already announced their plans to shut down their services at the end of this year, bringing additional administrative hurdles to the already substantial burden the Education Department has with resuming payment collections for 43 million borrowers.
And Richard Cordray, the head of the Federal Student Aid office and another Warren ally, suggested in a conference earlier this month that those shutdowns are occurring because those companies do not want to be held to higher accountability standards under Biden.
Insider reported in July on the student-loan advocates that have joined Biden's ranks, and with Chopra now leading the government's consumer watchdog agency, more reforms to the student-loan industry are likely to come.
Thu, September 30, 2021, 2:54 PM·3 min read
The Senate confirmed Rohit Chopra to lead the Consumer Financial Protection Bureau.
Chopra helped create the bureau with Elizabeth Warren and cracked down on the student-loan industry.
He joins other Warren allies in Biden's ranks fighting for student-loan borrowers.
Yet another ally of Massachusetts Sen. Elizabeth Warren - one of the biggest advocates for student-loan borrowers in Congress - joined President Joe Biden's ranks on Thursday.
Before leaving for recess, the Senate confirmed Rohit Chopra to lead the Consumer Financial Protection Bureau (CFPB), the government's consumer protection and oversight agency. Chopra previously served in the CFPB as its first student-loan ombudsman, and he was with Warren when she created the agency in 2011 to ensure people across the country are being financially protected. Now, he joins CFPB as student-loan companies face more stringent regulations leading up to February's payment restart after more than a year's pause. In recent weeks, three servicers have said they'll be shutting down, leaving 16 million borrowers to transition to new companies.
After Chopra's nomination was announced in January, Warren wrote on Twitter that she worked closely with him "to set up the CFPB and fight for America's children."
"It's terrific that President-elect Biden picked Rohit to run the @CFPB," Warren wrote. "He's been a fearless champion for consumers at the FTC (Federal Trade Commission) and will be a fearless champion leading the consumer agency."
Chopra left the CFPB in 2015 and was sworn in as a Federal Trade Commissioner in 2018, during which he worked to protect consumers from unfair business practices. But his work at the agency suggests the student-loan industry will be facing much stricter oversight from here on out.
As the agency's first student-loan watchdog, he primarily focused on unearthing problems with student-loan companies and ensuring the millions of borrowers across the country were not being mistreated. Chopra helped President Barack Obama establish the Student Aid Bill of Rights, which improves how the companies interact with borrowers, and in 2013, he led the bureau in discovering that more than 7 million borrowers were in default on their debt.
Since then, the CFPB has revealed a number of findings of student-loan abuses, and in some cases, has taken legal action against the companies. For example, the agency sued Navient, one of the biggest student-loan servicing companies in the US, in 2017 for "illegally failing borrowers at every stage of repayment," including causing borrowers to take on more debt than they could pay off.
Now that Chopra is confirmed to lead the agency, he will likely continue enforcing fair student lending. During his March confirmation hearing, Chopra said he will focus on protecting Americans with debt and he acknowledged the challenges that will come in February when the student-loan payment pause lifts.
"We are at a critical moment when so many borrowers are going to have to restart their payments," Chopra said during the hearing. He added that he will ensure the restart is "happening lawfully so we can avoid an avalanche of defaults when any moratorium might end."
Three student-loan companies have already announced their plans to shut down their services at the end of this year, bringing additional administrative hurdles to the already substantial burden the Education Department has with resuming payment collections for 43 million borrowers.
And Richard Cordray, the head of the Federal Student Aid office and another Warren ally, suggested in a conference earlier this month that those shutdowns are occurring because those companies do not want to be held to higher accountability standards under Biden.
Insider reported in July on the student-loan advocates that have joined Biden's ranks, and with Chopra now leading the government's consumer watchdog agency, more reforms to the student-loan industry are likely to come.
Aarthi Swaminathan
·Reporter
Thu, September 30, 2021,
Major student loan servicer Navient (NAVI) is quitting the federal servicing business, the company announced Tuesday, handing off its 5.5 million borrowers holding about $280 billion in federal student loans to Maximus, another servicer.
Advocates and progressive lawmakers led by Senator Elizabeth Warren (D-MA) heralded the move, in light of Navient's troubled relationship with the federal government's consumer protection bodies.
But the departure adds another challenge when the Education Department (ED) looks to end the student loan payment pause in January — especially after four other servicers quit in the past year.
"Even under the best of circumstances, this is a monumental task," Persis Yu, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, told Yahoo Finance. "It's a process that needs to be managed very slowly and deliberately, [and] I have a lot of concerns about whether or not that can actually be done in the timelines that we have."
Signage is seen on the offices of Navient in Wilmington,
Delaware, U.S., June 9, 2021.
REUTERS/Andrew Kelly
'Need to have hand-holding to this entire process'
With Navient's announcement, roughly 16.3 million student loan borrowers will be getting a new loan servicer in 2022.
The Pennsylvania Higher Education Assistance Agency — which services around 8.5 million student loan borrowers — and Granite State — which services around 1.3 million borrowers — both called it quits in July. Utah Higher Education Assistance Authority, which pulled out in October 2020, serviced around 1 million student loan borrowers.
The departures come as the majority of the 43 million student loan borrowers across the U.S must start paying their loans again. The payments have been paused, without interest, since March 13, 2020, with the Biden administration recently extending the pause through January 31, 2022.
Advocates expressed deep concern about the transfer process, given the short timeline between October and February 2022. The U.S. government, which owns trillions of dollars in student loan debt, has already expressed that ending the payment pause needs to be carefully managed.
Navient’s departure aside, these transitions are going to be tricky, especially given uncertainty around whether the servicers "have the staff capacity to handle the influx of borrowers who are going to be confused and are going to need to have hand-holding to this entire process,” Yu said.
Richard Cordray, chief operating officer of Federal Student Aid, which handles the trillion-dollar student loan portfolio, said in a statement that his agency is still reviewing documents and information from both Navient and Maximus "to ensure that the proposal meets all legal requirements and properly protects borrowers and taxpayers."
Richard Nicholls, 22, a graduate in engineering from The City College of New York is on his phone after his commencement ceremony in Manhattan on May 31, 2019. REUTERS/Gabriela Bhaskar
'Behind the scenes company'
Maximus for its part has expressed its intention to provide high-quality service for student loan borrowers with the payment pause ending. Maximus spokesperson Eileen Cassidy Rivera said in a statement to Yahoo Finance that the company was "committed to ensuring a seamless transition for student loan borrowers" and to help borrowers manage the re-starting of repayment come 2022.
But Yu and other advocates also expressed concern that Maximus, despite being a government contractor over the years, had largely been out of the public eye and doesn’t provide the same services that Navient does.
Maximus has until now run debt collection and management for ED, according to a blog post by the Student Borrower Protection Center (SBPC). And not many borrowers are aware of the company's existence, said Yu.
"Maximus is a company that has not been subject to much public scrutiny. It is a servicer, but it doesn't do the functions that Navient, [the Pennsylvania Higher Education Assistance Agency], and the other ones do," Yu explained. "So we don't have a track record of how it helps borrowers navigate income-based repayment."
And being a very "behind the scenes company," she added, "it's concerning that Navient can just choose its replacement and choose someone who is not in the public eye, and who has no track record."
WASHINGTON, DC, UNITED STATES - 2019/07/23: U.S. Senator Elizabeth Warren (D-MA) speaks at a press conference during the introduction of a bill to cancel students loan debt held at the Capitol in Washington, DC.
'Need to have hand-holding to this entire process'
With Navient's announcement, roughly 16.3 million student loan borrowers will be getting a new loan servicer in 2022.
The Pennsylvania Higher Education Assistance Agency — which services around 8.5 million student loan borrowers — and Granite State — which services around 1.3 million borrowers — both called it quits in July. Utah Higher Education Assistance Authority, which pulled out in October 2020, serviced around 1 million student loan borrowers.
The departures come as the majority of the 43 million student loan borrowers across the U.S must start paying their loans again. The payments have been paused, without interest, since March 13, 2020, with the Biden administration recently extending the pause through January 31, 2022.
Advocates expressed deep concern about the transfer process, given the short timeline between October and February 2022. The U.S. government, which owns trillions of dollars in student loan debt, has already expressed that ending the payment pause needs to be carefully managed.
Navient’s departure aside, these transitions are going to be tricky, especially given uncertainty around whether the servicers "have the staff capacity to handle the influx of borrowers who are going to be confused and are going to need to have hand-holding to this entire process,” Yu said.
Richard Cordray, chief operating officer of Federal Student Aid, which handles the trillion-dollar student loan portfolio, said in a statement that his agency is still reviewing documents and information from both Navient and Maximus "to ensure that the proposal meets all legal requirements and properly protects borrowers and taxpayers."
Richard Nicholls, 22, a graduate in engineering from The City College of New York is on his phone after his commencement ceremony in Manhattan on May 31, 2019. REUTERS/Gabriela Bhaskar
'Behind the scenes company'
Maximus for its part has expressed its intention to provide high-quality service for student loan borrowers with the payment pause ending. Maximus spokesperson Eileen Cassidy Rivera said in a statement to Yahoo Finance that the company was "committed to ensuring a seamless transition for student loan borrowers" and to help borrowers manage the re-starting of repayment come 2022.
But Yu and other advocates also expressed concern that Maximus, despite being a government contractor over the years, had largely been out of the public eye and doesn’t provide the same services that Navient does.
Maximus has until now run debt collection and management for ED, according to a blog post by the Student Borrower Protection Center (SBPC). And not many borrowers are aware of the company's existence, said Yu.
"Maximus is a company that has not been subject to much public scrutiny. It is a servicer, but it doesn't do the functions that Navient, [the Pennsylvania Higher Education Assistance Agency], and the other ones do," Yu explained. "So we don't have a track record of how it helps borrowers navigate income-based repayment."
And being a very "behind the scenes company," she added, "it's concerning that Navient can just choose its replacement and choose someone who is not in the public eye, and who has no track record."
WASHINGTON, DC, UNITED STATES - 2019/07/23: U.S. Senator Elizabeth Warren (D-MA) speaks at a press conference during the introduction of a bill to cancel students loan debt held at the Capitol in Washington, DC.
(Photo by Michael Brochstein/SOPA Images/LightRocket via Getty Images)More
Navient's problems
Navient has long been in the crosshairs of advocates and progressive lawmakers who believed the company was responsible for shoddy servicing, such as steering student loan borrowers into high-cost repayment plans or for deceptive practices from New Jersey to Washington.
Its departure was welcomed.
“Navient has spent decades misleading, cheating, and abusing student borrowers. The Federal student loan program will be far better off without them," Senator Elizabeth Warren (D-MA) said in a statement.
"Ultimately, the student loan system is broken,” she continued. “The only way to guarantee that borrowers do not face the same predatory behavior from Navient’s replacement is to cancel student debt, so that no borrower’s future is held hostage by corporations profiting off their financial distress.”
—
Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.
Navient has long been in the crosshairs of advocates and progressive lawmakers who believed the company was responsible for shoddy servicing, such as steering student loan borrowers into high-cost repayment plans or for deceptive practices from New Jersey to Washington.
Its departure was welcomed.
“Navient has spent decades misleading, cheating, and abusing student borrowers. The Federal student loan program will be far better off without them," Senator Elizabeth Warren (D-MA) said in a statement.
"Ultimately, the student loan system is broken,” she continued. “The only way to guarantee that borrowers do not face the same predatory behavior from Navient’s replacement is to cancel student debt, so that no borrower’s future is held hostage by corporations profiting off their financial distress.”
—
Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.
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