The recent resignation of the government’s chief watchdog of the student loan market has raised serious concern among advocates as to how the government will proceed with enforcement. Seth Frotman, the student loan ombudsman at the Consumer Financial Protection Bureau (CFPB), resigned this week, in a letter that indicated his resignation came as a direct result of the current administration’s lack of protection for student loan borrowers.
Frotman’s letter was delivered to Mick Mulvaney, the acting director of the CFPB. In the letter, Frotman stated that his departure was a direct result of changes at the bureau, including the lack of enforcement for violations and recent protection that bad lenders have received.
The purpose of the ombudsman position is to protect the interests of student loan borrowers, a number which has now been estimated to be approximately 42 million Americans. It is also estimated that the current figure of outstanding student loan debt is $1.4 trillion.
According to the deputy director of higher education policy at New America, Clare McCann, Frotman’s resignation seemed to come from his frustration in his inability to carry out his original mission when coming onboard at the CFPB. In his letter, Frotman stated, “You have used the bureau to serve the wishes of the most powerful financial companies in America.”
The ombudsman is an important position, serving as the voice for 42 million student loan borrowers. Since 2008, the student loan ombudsman office has reimbursed over $750 million to borrowers who were victims of illegal lending practices and servicing failures.
Frotman has been the student loan ombudsman since 2016. He was key component in the current lawsuit against one of the largest student loan providers, Navient. It was the claim of the CFPB that Navient illegally cheated its borrowers from the right to lower their student loan payments.
The Navient lawsuit is still pending, and many are wondering if the company will be held responsible for its practices. If the ruling is lenient on the company, this will only further demonstrate the concerns advocates have for the direction that is being taken when it comes to representing the rights of student loan borrowers.
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