Washington, D.C. — The Consumer Financial Protection Bureau (CFPB) announced that it will close the Office of Students and Young Consumers and relocate its staff to the Office of Financial Education. Since the bureau’s inception in 2012, it has recovered more than $750 million in funds for students who were wronged by lenders and servicers. Additionally, the bureau has collected hundreds of thousands of complaints and comments on issues related to student loans and has released more than 40 publications related to financial issues concerning young adults and education loan borrowers.
This announcement comes eight months after the U.S. Department of Education severed three memoranda of understanding with the CFPB, which cut off the bureau’s ability to monitor complaints and enforce consumer protection laws for federal education loans, which total $1.5 trillion for more than 40 million borrowers. In the face of federal inaction, several states have recognized the need to regulate an out-of-control student loan industry and have established their own borrowers’ bills of rights, servicer standards, and student loan ombudsmen. Colleen Campbell, associate director for Postsecondary Education at the Center for American Progress, issued the following statement in response:
Acting Director Mick Mulvaney’s decision to close the Office of Students and Young Consumers is a direct attack on every American who enrolls in higher education. Since 2012, this office has worked tirelessly to bring to light systemic issues with our student loan system, recovering billions of dollars on behalf of student loan borrowers and driving bipartisan reform efforts to further protect them. Closing this office effectively shuts out the only independent watchdog for our nation’s federal student loan borrowers and will only hurt students and their families.
The role of the Office of Students and Young Consumers is not limited to protecting student loan borrowers. It also ensures that campus-based checking accounts and prepaid cards are affordable for students; that students have access to information and options for various financial instruments; and that college credit card agreements are compliant with federal law. Now, there will be no consumer finance experts minding these programs, leaving students vulnerable to predatory actions.
This move is part and parcel of the Trump administration’s ongoing efforts to undermine consumer protections and weaken student financial aid programs. In closing this office, Acting Director Mulvaney is showing that he cares neither about the futures of young Americans nor any person who seeks to pursue the American dream through our higher education system.
Maggie Thompson, executive director of Generation Progress, released the following statement:
Closing the Office of Students and Young Consumers will wreak havoc on borrowers’ repayment processes. Borrowers already have very little consumer protections to defend themselves against the predatory behavior of student loan servicers. Hamstringing the CFPB’s ability to act in their defense will cause serious and lasting harm to borrowers’ financial health. Servicers have a track record of putting profits over their borrowers’ well-being by illegally charging excess interest on servicemembers’ loans, causing processing delays, denying applications without warning, and losing borrowers’ paperwork. The industry has been transparent about their priorities. In early 2017, Jack Remondi, the CEO of the largest student loan servicer, Navient, publicly stated that his company operates with “no expectation that the servicer will act in the interest of the consumer.”
Every year, one million student loan borrowers default on their federal loans. Many of these defaults could be avoided if student loan servicers did the job that the department pays them to do, such as correctly processing payments and informing borrowers of their repayment or loan forgiveness options. Closing the Office of Students will force more student loan borrowers into needless default while student loan companies continue to rake in profits at the expense of students and their families.
For more information or to speak with an expert, please contact Kyle Epstein at [email protected] or 202.481.8137.