Nation’s top student loan official resigns

Ombudsman protests White House, says Mulvaney serves companies, not borrowers

NEW YORK — The government’s top official overseeing the $1.5 trillion student loan market resigned in protest Monday, citing what he says is the White House’s open hostility toward protecting the nation’s millions of student loan borrowers.

Seth Frotman will be stepping down as student loan ombudsman at the end of the week, according to his resignation letter, which was obtained by The Associated Press. He held that position since 2016, but has been with the Consumer Financial Protection Bureau since its inception in 2011.

Mr. Frotman is the latest high-level departure from the CFPB since Mick Mulvaney, President Donald Trump’s budget director, took over in late November. But Mr. Frotman’s departure is especially noteworthy — his nonpartisan office is one of the few parts of the U.S. government tasked with handling student loan issues.

The office was 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, one of the nation’s largest student lenders. The Navientlawsuit has been mired in bureaucratic red tape as the Department of Education, headed by Betsy DeVos, has been unwilling to help the CFPB with its lawsuit. Since its creation, the student loan office has returned $750 million to harmed borrowers.

“You have used the bureau to serve the wishes of the most powerful financial companies in America,” Mr. Frotman wrote to Mr. Mulvaney. “The damage you have done to the bureau betrays these families and sacrifices the financial futures of millions of Americans... .”

Congress created the student loan ombudsman office when it established the CFPB, citing a need for a goto person to handle student loan complaints.

The ombudsman’s office is able to work with the bureau’s enforcement staff to target bad behavior in the student loan market as well as act as a voice inside the government on behalf of student loan borrowers. The office processed tens of thousands of complaints from student loan borrowers and was among the first major government office to raise alarms about the growing issue of students being unable to afford repaying their loans.

But Mr. Mulvaney downgraded the mission of Mr. Frotman’s student loan office earlier this summer and moved it under the umbrella of consumer education instead of enforcement. While Mr. Mulvaney’s office said it was a minor organizational shake-up, consumer advocates saw it as a move to downplay the CFPB’s mission on student loans.

Mr. Frotman also accused Mr. Mulvaney and his staff of hiding a report that raised alarms that banks were overcharging student loan borrowers.

“When new evidence came to light showing that the nation’s largest banks were ripping off students on campuses across the country by saddling them with legally dubious account fees, bureau leadership suppressed the publication of a report prepared by bureau staff,” Mr. Frotman wrote.