Senator Warren’s new watchdog initiative – announced on May 31 – to hold Secretary DeVos accountable is timely and crucial, especially given that the Consumer Financial Protection Bureau (CFPB) is now under fire from the Trump administration.
The new project, titled DeVos Watch, promises to “seek information about the department’s actions and inactions around federal student loans and grants and highlight the findings” by encouraging people to send in whistleblower tips about student loan issues.
Indeed, once CFPB director Richard Cordray finishes his term next year, there is no guarantee that his successor will be as aggressive in protecting consumers – which includes thousands of students struggling to repay astronomical amounts of debt. This means that someone needs to step up to champion the welfare of students over debt collection companies.
In the last 100 days, DeVos has come under fire for her controversial decisions on higher education and student debt – ranging from the dismantling of Obama-era student loan servicing measures, to the appalling delays in discharging borrowers from debt incurred by predatory for-profit colleges.
For example, in January, the department announced that it had notified over 23,000 student borrowers who took out loans for affected Corinthian College programs that their loan forgiveness applications had been approved.
Though the notification stated that “forgiveness should be completed within the next 60 to 120 days”, many of these loans have not actually been discharged, and students saddled with this debt have been suffering the credit-damaging consequences from defaulting on those loans.
Even once these loans are forgiven, they are only a drop in the bucket when it comes to national outstanding student loan debt, which has already surged past $1.5tr. The consequences of this crisis has already surfaced in the student loan ABS market, with bondholders having to vote on outstanding Federal Family Education Loan Program (FFELP) ABS to extend maturity dates to accommodate slower borrower repayments under schemes like Income-Based Repayment (IBR). IBR allows borrowers to repay debt based on their income and family size.
There is also the question of some of DeVos’s staff picks. This includes the hire of Robert Eitel as one of her aides. Eitel previously worked at for-profit college chain Bridgepoint Education Inc., which critics noted could raise the issue of potential ethics violations.
College debt was an issue long before DeVos was picked for the post, but many of the decisions she has made, including her refusal to greenlight Obama-era memorandums like streamlining student loan servicing into one platform, and her reversal of a ban on the charging of high fees by student loan servicers to defaulted borrowers will only exacerbate this crisis – and embolden student loan servicers to perpetuate predatory lending practices.
It is hoped that Senator Warren’s new project will not just be all-talk, and that her watchdog initiative will gain momentum beyond being just a platform for submitting whistleblower tips.
Already, student loan debt is affecting the distribution of wealth in this country, with many young Americans unable to own homes given the sheer amount of student debt they shoulder.
The last thing this country needs is the implosion of its student loan system, and a watchdog with Senator Warren at the helm may just be the thing to keep DeVos accountable to the public.