Student Loan Borrowers Just Got a Friend in the White House

Who is Richard Cordray, and how will he shape the future of student loans?

Anyone who has dealt with student loans, especially in the past 20 years, knows that the Department of Education, and the federal loan servicers (Nelnet, Great Lakes, etc.) haven’t exactly been winning the hearts and minds of borrowers.

From the PSLF debacle to reversed loan forgiveness judgements, most news about student loans was bad news.

And while there is still a quasi-disaster looming due to the $1.55 trillion in outstanding student loan debt, borrowers can take heart that Richard Cordray was just hired by the Biden administration to be the new “student loan czar”, i.e. the Chief Operating Officer of the Office of Federal Student Aid (FSA).

Who is Richard Cordray?

In short, Cordray is a true believer in his fight against those ever-present Biblical villains, the moneylenders.

• When he was the Ohio Attorney General, he investigated fraudulent mortgage foreclosure process and sued Bank of America for misleading it investors when purchasing Merrill Lynch during the financial crisis of 2007–2008.
• When he was first director of the newly created Consumer Financial Protection Board, he led the charge against unfair practices by student loan servicers and vehemently pursued for-profit colleges for falsely advertising student success rates.

As a side note, Elizabeth Warren, who helped create the CFPB, was initially slated to be the first director in 2011. However, President Obama removed her from consideration after he became convinced that Republicans would be united in opposition.

Even as a replacement for Warren, Cordray needed a recess appoinment to become the CFPB director, and was only officially confirmed in 2013.

Why is This a Big Deal?

This is a big deal because student loan borrowers, both current and present, will finally have someone in leadership who will actually represent their interests, not just those of the servicers.

As an illustration, look at what Seth Frotman had to say about this appointment.

When we talk about the student debt crisis we often only focus on the ever increasing balances or the sheer amount that people owe, but an underappreciated element of the crisis before us is the predatory student loan companies that prey on the most vulnerable borrowers driving billions and billions of dollars of debt.

If you don’t remember, Seth Frotman worked as the CFPB student loan ombudsman under Mick Mulvaney, and wrote a scathing resignation letter accusing Mulvaney (and by proxy, the Trump administration) of “abandon[ing] the very consumers it is tasked by Congress with protecting.”

Strong words from a strong supporter of borrowers rights.

His ties to Senator Elizabeth Warren show that the Biden administration is taking her suggestions seriously to overhaul the entire student loan system, from managing the student loan servicers to regulating colleges that receive student aid.

What to Expect Next?

While many progressives might read the tea leaves and see this as the first step towards student loan forgiveness, I would caution against such prognostication.

Not only is Biden still waiting on the legal research regarding student loan forgiveness, it would be tough to sell student loan forgiveness to the masses, even at just the $50,000 level.

What will probably happen is this:

• The FSA will require more stringent adherence to customer service from the student loan servicers.
• Management of the PSLF program within the DOE will be overhauled and oversight of FedLoan Servicing will increase dramatically.
• Tighter relations with the CFPB will result in cracking down hard on student loan scammers.

Cordray does not have the power to forgive student loans, but he will make sure the agency he runs allows students the most opportunity to pay back their loans with the least possible financial pain.

Related Stories

• The Truth About PSLF
• PSLF Update: July 2020, August 2020, September 2020, October 2020, April 2021
• Is PSLF Right For Me?
• How I Still Have $135,000 in Student Loan Debt (Even After 21 Years)
• There is No Student Loan Crisis
• Will Student Loan Forgiveness Actually Work?
• Conquer Your Student Loans
• 6 Quick Wins to Tame Your Student Loans

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This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.