Biden admin taps Rich Cordray, former CFPB chief, to oversee federal student loans

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Michael Stratford
·8 min read
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The Biden administration has tapped Richard Cordray, the former director of the Consumer Financial Protection Bureau, to serve as the top official overseeing the federal government’s $1.6 trillion portfolio of student loans and array of financial aid programs.

The selection of Cordray, who previously was attorney general of Ohio and ran unsuccessfully to be governor, is a major victory for progressives who have been calling on the Biden administration to take more aggressive action on student loans and for-profit colleges.

Cordray’s appointment to lead the Education Department’s Office of Federal Student Aid was announced on Monday by Secretary Miguel Cardona, who praised his “strong track record as a dedicated public servant who can tackle big challenges and get results.”

In an interview with POLITICO, Cordray said he was eager to take on a job focused on boosting access to higher education that is so “integral to people's success and chances in life.”

Cordray said he will bring to the role his experience working on federal student loan issues at the CFPB and recalled his collaboration with the Education Department during his tenure — an interagency relationship that was often strained during the Trump administration.

Cordray noted that Rohit Chopra, President Biden’s nominee to lead the consumer bureau, served as the CFPB’s top student loan official during much of the Obama administration.

“We have a close working relationship already,” Cordray said. “So in many ways, I think this is a perfect opportunity for us to make very good progress forward on thinking about how we finance and make available higher education in the United States to people for whom it's more and more a critical step forward in their lives.”

Cordray is an ally of Sen. Elizabeth Warren (D-Mass.), who has been leading the progressive charge to overhaul how the Education Department manages its day-to-day student lending operations, oversees student loan servicing companies and regulates colleges that receive federal student aid.

Warren, who pushed for Cordray’s appointment, said in a statement that Cordray would “apply his fearlessness and expertise to protecting student loan borrowers” and would bring “much needed accountability to the federal student loan program.”

The position — formally called the chief operating officer of Federal Student Aid — does not require Senate confirmation and is appointed by the secretary of education.

Rachel Thomas, an Education Department spokesperson, confirmed that Cardona had appointed Cordray for a three-year term. She said Corday’s first day on the job will be Tuesday.

The top Republican on the House education committee, Rep. Virginia Foxx (R-N.C.), criticized the administration’s pick of Cordray, which she derided as a political selection.

“A $1.5 trillion student loan portfolio requires savvy financial management,” Foxx said. “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 to carry out the duties of COO of FSA."

Richard Hunt, the chief executive officer of the Consumer Bankers Association, who represents private student lenders and sparred with Cordray when he was CFPB director, sounded a more conciliatory note.

“For too long, politicians have ignored the root causes of the federal student debt crisis and students and families have suffered,” Hunt said. “I hope Mr. Cordray can reverse this trend.”

But Cordray won praise in other Republican corners. A. Wayne Johnson, who was appointed by DeVos as the Trump administration’s first student aid chief, endorsed Cordray for the role.

“I think there could not possibly be a better choice,” Johnson told POLITICO. “He understands government, he’s well respected by the consumer advocates, he’s got the right skill set, and he understands regulatory oversight, which is a big part of the job.”

The appointment of Corday also significantly elevates the role of an Education Department post that has historically been relatively obscure. But it has become in recent years a major focus for progressives, who see it as critical to carrying out the student debt relief they’re demanding as well as tightening regulation of the for-profit education and student loan industries.

Cordray said he viewed his new role, like many jobs in government, as a combination of both operations and policy.

“Policy is just an airy theoretical thing without the operations to deliver the goods, and I saw that at CFPB. And I think the same will be true here,” he said. “Certainly, we're facing big decisions right now about the federal student loan program, about financing education, and about what to do about accumulated debt. Those are policy issues, but they depend greatly on sound operations to make things run effectively, all over the country.”

The appointment of Cordray comes as the Biden administration is debating how to respond to demands from some Democrats, including Senate Majority Leader Chuck Schumer, that the Education Department cancel up to $50,000 of federal student loan debt per borrower using executive action. The White House has said it has tasked the Education and Justice Departments to study the issue, a review that Cardona said on Monday was still ongoing.

Cordray said it was premature for anyone to draw conclusions about what his appointment means for where the Biden administration will come down on the student debt cancellation issue. “There’ll be a number of important inputs into those” decisions, he said. “My voice will be part of that, but let’s not get ahead of ourselves on that for now.”

“There are a lot of conversations that need to be had. A lot of legal analysis needs to be digested. A lot of policy thinking that has to be done,” Cordray added. “And I'm not ready to prejudge that just as I’m coming into the position.”

But beyond the fight over widespread debt cancellation, Cordray will be in a position to deliver more immediately on other key progressive priorities. That includes fixing some of the existing, targeted loan forgiveness programs, including those that are aimed at public service workers, borrowers with severe disabilities, or students who are defrauded by their college.

Seth Frotman, who served as the top student loan official at the CFPB under Cordray after Chopra and now runs the Student Borrower Protection Center, an advocacy group, praised the appointment as “a great step, showing that this Administration is serious about doing what’s necessary to protect borrowers and address the student debt crisis.”

Cordray’s appointment to the Education Department is also sure to bring greater scrutiny to the student loan industry. The CFPB, during his tenure as director, brought a slew of legal actions against for-profit education companies over their lending practices. And it also filed a major lawsuit against Navient, one of the largest student loan servicers that is hired by the Education Department.

Perhaps the most pressing challenge facing Cordray will be how the Education Department restarts monthly student loan payments for the 40 million Americans who have had their payments and interest paused since March 2020.

The Biden administration in January extended until Sept. 30 the pause on monthly loan payments and interest in response to the pandemic.

Cardona on Monday said that the Biden administration was open to a possible further extension of that relief but suggested it was unlikely. “It’s not out of the question,” Cardona said in remarks at the Education Writers Association’s annual conference. “But, at this point, it’s September 30” for the expiration of relief.

Cardona said that the Education Department would be focused on helping borrowers “ramp up” to the resumption of monthly payments as that date nears. Consumer groups and industry officials have both warned that the unprecedented restart of payments could be chaotic for borrowers and lead to increases in delinquencies and defaults.

As he takes the helm of the student aid office, Cordray will be in charge of hammering out new major contracts with the companies that collect federal student loan payments. The existing contracts, which are worth tens of millions of dollars, are expiring in the coming months.

Cordray will also be responsible with carrying out major changes that Congress made last year to the Free Application for Federal Student Aid. The student aid office, which houses major federal databases on tens of millions of student aid applicants and recipients, has also increasingly had to address growing cybersecurity threats and concerns in recent years.

The Biden administration had been considering a range of candidates for the job since Mark A. Brown, a Trump administration holdover, resigned earlier this year under pressure from progressives and labor leaders. Brown, who was appointed by then-Education Secretary Betsy DeVos, left with a full year remaining on his three-year term.

Abigail Seldin, who runs a charitable foundation focused on higher education equity, had been among the candidates who was among the candidates considered for the job, though she drew the ire of some progressives over her work at a student loan collection company that purchased her college comparison tool.

“Students borrowers deserve first-rate, modern tools,” Seldin said in a statement on Monday. “Richard Cordray will lead the public servants at FSA with the necessary experience, gravitas, and commitment key to delivering what students have long needed.”