The top federal official overseeing the massive $1.5 trillion student loan market bubble resigned Monday, citing in a letter what he says is the Trump administration’s blatant disregard toward protecting the nations 44 million Americans struggling with student loan debt (which, however, they had no problem taking out).
In a fiery resignation letter, Seth Frotman, who until Monday morning was the Student Loan Ombudsman at the Consumer Financial Protection Bureau (CFPB), warned that current leadership “has turned its back on young people and their financial futures.” i.e., loans are not being forgiven. The letter was addressed to the Honorable Mick Mulvaney, the Acting Director of the CFPB.
In the letter, obtained by NPR, Frotman unloads on Mulvaney and the Trump administration of undermining his ability to defend the millions of millennial loan borrowers struggling to stay afloat. There was no mention of explaining to said millions of millennials why taking out debt in the first place is a bad idea if there are no prospects of ever repaying it.
“I had hoped to continue this critical work in partnership with you and your staff by using our authority under law to stand up for student loan borrowers trapped in a broken system. Unfortunately, under your leadership, the Bureau has abandoned the very consumers it is tasked by Congress with protecting. Instead, you have used the Bureau to serve the wishes of the most powerful financial companies in America."
Congress created the Student Loan Ombudsman office when it formed the CFB, citing the critical need for a specific office to handle student loan complaints.
Frotman’s office was quite powerful; they worked with the bureau’s enforcement staff to pinpoint bad behavior in the student loan market as well as an advocate for student loan borrowers. Since inception, the Student Loan Ombudsman office returned $750 million to harmed borrowers.
“Frotman’s office was central to processing tens of thousands of complaints from student loan borrowers against their servicers. It also was the office at the center of the lawsuits against for-profit colleges like Corinthian Colleges and is currently heading up a lawsuit between the CFPB and Navient. The Navient lawsuit has been mired in bureaucratic red tape as the Department of Education, headed by Betsy DeVos, has been unwilling to help the CFPB with their lawsuit,” said Bloomberg.
Under Mulvaney, Frotman’s student loan office was severely downgraded, which scaled back its enforcement work. Mulvaney’s office is currently in the process of revising or rescinding all of the rules and regulations it put into place under the Obama administration.
Frotman concludes the resignation letter with a warning that the “system is rigged to favor the most powerful financial interests.” He also mentioned millions of borrowers are "trapped in a broken student loan system", by which he meant one in which borrowers are expect to repay their lenders:
In my time at the Bureau I have traveled across the country, meeting with consumers in over three dozen states, and with military families from over 100 military units. I have met with dozens of state law enforcement officials and, more importantly, I have heard directly from tens of thousands of individual student loan borrowers.
A common thread ties these experiences together — the American Dream under siege, told through the heart-wrenching stories of individuals caught in a system rigged to favor the most powerful financial interests. For seven years, the Consumer Financial Protection Bureau fought to ensure these families received a fair shake as they as they strived for the American Dream.
Sadly, the damage you have done to the Bureau betrays these families and sacrifices the financial futures of millions of Americans in communities across the country.
For these reasons, I resign effective September 1, 2018. Although I will no longer be Student Loan Ombudsman, I remain committed to fighting on behalf of borrowers who are trapped in a broken student loan system.
As for millions of the millennials who are financially wrecked with student loans and shitty jobs in the gig economy, and whose only hope was to get their debt forgiven, perhaps complain to the Fed and demand that during the next bailout their debt be monetized too.