“It is critical that students and student loan borrowers can depend on the Department of Education for help paying for college, support in repaying loans, and strong oversight of postsecondary institutions,” Cardona said in a statement Monday. “Cordray has a strong track record as a dedicated public servant who can tackle big challenges and get results.”
Cordray replaces Mark A. Brown, a retired major general in the U.S. Air Force appointed by Education Secretary Betsy DeVos in 2019. He resigned in March.
“For too many students, affordable quality education remains far out of reach,” Cordray said in a tweet, adding he was “excited to get to work creating more pathways for students to graduate and get ahead.”
Cordray will arrive at the department as the Biden administration grapples with its authority to cancel a portion of federal student loans, a policy championed by one of Cordray’s chief supporters, Sen. Elizabeth Warren. The Democrat from Massachusetts praised his appointment Monday, saying she is “very glad he will get to apply his fearlessness and expertise to protecting student loan borrowers and bringing much-needed accountability to the federal student loan program.”
During his six-year tenure at the CFPB, which he joined in 2011, Cordray frequently clashed with the financial industry and conservatives over his aggressive regulation. His efforts to weed out poor servicing of student loans and predatory career training schools at times put him at odds with the Education Department.
In 2017, DeVos ended two agreements to share information with the consumer bureau, accusing Cordray and his team of overreach and expanding its jurisdiction beyond what Congress intended. The move followed years of complaints from industry groups that under Cordray’s leadership the CFPB too often took a combative stance toward companies.
The CFPB under Cordray’s direction brought some of the most high-profile student lending cases in recent years. Among them: a lawsuit against the now-defunct for-profit giant Corinthian Colleges for steering students into private loans that had interest rates as high as 15 percent.
The bureau took similar action against ITT Educational Services for allegedly providing zero-interest loans to students but failing to tell them that they would be kicked out of school if they didn’t repay in a year. When students could not pay, the CFPB said, ITT forced them to take out high-interest loans to repay the first ones.
“Richard Cordray has an unparalleled record taking on the most powerful interests in the student finance and higher-education sectors — standing up for students at predatory for-profit schools and demanding justice for decades of abuses by student loan companies,” said Seth Frotman, a former student loan ombudsman at the CFPB who worked with Cordray.
Frotman, who is now the executive director of the Student Borrower Protection Center, said Cordray’s appointment shows the Biden administration is “serious about doing what’s necessary to protect borrowers and address the student debt crisis.”
Consumer advocates have long criticized the department for lax monitoring of the companies that manage its student loan portfolio and the colleges that benefit from those dollars. Industry groups say Cordray should consider them partners rather than adversaries.
“We share FSA’s goal of making the transition back to repayment as smooth as possible and assisting borrowers in the successful repayment of their student loans,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group representing companies who collect education debt payments.
He added: “Members are eager to partner with FSA to get guidance on many issues, including detailed plans for future payment resumption, staffing and resource needs, and system and operational issues.”
The student aid office provides more than $150 billion in federal grants, loans and work-study funds to college students and has become one of the nation’s largest lenders. Policy experts have questioned whether the office has the economic expertise to meet the challenge of rising loan defaults and an unwieldy lending system.
Conservatives, including DeVos, have called for the student aid office to be spun out into an independent entity run by an apolitical board of governors. Some say Cordray, a former Democratic candidate for Ohio governor, is ill suited to lead the office and more concerned with politics than fiscal responsibility.
“A $1.5 trillion student loan portfolio requires savvy financial management,” Rep. Virginia Foxx (N.C.), the top Republican on the House Education Committee, said in a statement Monday. “I am skeptical that a failed Democrat politician, who has a history of getting consumed by politics instead of caring for consumers, has the capability and serious character required.”
The student aid office is in the middle of overhauling the way it administers and manages student loans, a project dubbed Next Generation Financial Services Environment, or NextGen. The project has contended with pushback from student loan companies and members of Congress who have tried to curtail the changes.
As work continues on NextGen, the student aid office also must institute laws to make it easier to enroll in income-driven repayment plans and apply for financial aid. What’s more, the office will have to oversee the reinstatement of payments for tens of thousands of borrowers now subject to the pandemic moratorium.
“Cordray brings political and practical experience unlike any previous FSA chief operating officer. He will need those skills and more to address the significant challenges ahead,” said Justin Draeger, president of the National Association of Student Financial Aid Administrators.