The Trump administration signaled Wednesday that it intends to pull back on investigating potential abuses by companies in the $1.5-trillion student loan market.
The Consumer Financial Protection Bureau will shut its student lending office, according to a bureau-wide memo written by its acting director, Mick Mulvaney. The student loan office at the CFPB had been responsible for returning $750 million in relief.
Its responsibilities are being moved under the broad umbrella of “financial education.”
The office had been primarily responsible for an investigation into the troubled student lender Navient, which the CFPB sued last year alleging unfair and abusive practices. The office also investigated and sued for-profit education company Corinthian Colleges.
A CFPB spokesman did not respond to multiple requests for comment on whether the bureau plans to maintain the number of its investigators looking at student loans or whether it plans to move forward with the lawsuit against Navient.
This isn’t the first time Mulvaney has reshuffled the bureau to change the CFPB’s priorities. He took similar action with the bureau’s Office of Fair Lending this year, moving the entire department under the bureau’s education department. That office had been focused on discrimination issues, particularly in the auto lending industry.
Mulvaney has said repeatedly that he planned to curtail the bureau’s operations to only what is required by law. He was a longtime critic of the bureau while he was a congressman from South Carolina, and as the CFPB’s acting director, he has pleaded with Congress to trim the bureau’s mandate and make it more subject to congressional oversight.
Although the housing and stock markets have recovered from the 2008 financial crisis, the problems in the student loan market have only intensified. Roughly 4.6 million Americans were in default on their student loans as of Dec. 31, 2017, according to the Education Department, more than double what it was four years earlier. That’s more than 10% of the total 42.8 million Americans who have a student loan outstanding backed by the Education Department.
Consumer advocates immediately denounced the change, saying the CFPB should be conducting tough oversight of the student loan industry, given the industry’s size and number of borrowers affected, particularly young people.
“Education alone cannot stop predatory behaviors on the part of for-profit schools and servicers, nor can it help hundreds of thousands of Americans in serious debt because of these practices,” said Whitney Barkley-Denney, senior policy counsel for the Center for Responsible Lending.