As the school year begins this week across the United States, the top student loan watchdog has resigned in protest, accusing the Trump administration of siding with powerful predatory lenders over student loan borrowers. Seth Frotman worked as student loan ombudsman under the Consumer Financial Protection Bureau director, Mick Mulvaney. He wrote that under Mulvaney’s leadership, “the Bureau has abandoned the very consumers it is tasked by Congress with protecting.” This comes as Education Secretary Betsy DeVos has proposed new rules that would cut an estimated $13 billion in federal student loan relief for people defrauded by for-profit colleges. We speak with Sara Goldrick-Rab, professor of higher education policy and sociology at Temple University and author of “Paying the Price: College Costs, Financial Aid, and the Betrayal of the American Dream.”
JUAN GONZÁLEZ: Just as the school year gets underway across the United States, the top student loan watchdog has resigned in protest against the Trump administration siding with powerful predatory lenders over student loan borrowers. Seth Frotman works as student loan ombudsman under the Consumer Financial Protection Bureau director, Mick Mulvaney. In his resignation letter to Mulvaney, he wrote, quote, “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,” unquote.
Frotman’s resignation comes as outstanding student loan debt has topped $1.4 trillion. In the letter, he accused the bureau of failing to enforce laws that protect borrowers, defending predatory for-profit schools from scrutiny and suppressing reports that expose banks and other bad actors, quote, “ripping off students.” Frotman continued, quote, “[T]he Bureau’s current leadership folded to political pressure … and failed borrowers who depend on independent oversight to halt bad practices … The current leadership of the Bureau has made its priorities clear—it will protect the misguided goals of the Trump Administration to the detriment of student loan borrowers.”
AMY GOODMAN: This comes as Education Secretary Betsy DeVos has proposed new rules that would cut an estimated $13 billion in federal student loan relief for people defrauded by for-profit colleges. The changes would roll back the so-called borrower defense rule President Obama proposed after the collapse of ITT Tech and Corinthian College, which was then halted by the Trump administration. In response, Massachusetts Attorney General Maura Healey tweeted, “Betsy DeVos rewrote the #BorrowerDefense rule to let predatory schools cheat their students and enrich their executives. No surprise.”
Well, for more, we go to Philadelphia to speak with Dr. Sara Goldrick-Rab, professor of higher education policy and sociology at Temple University, author of the book Paying the Price: College Costs, Financial Aid, and the Betrayal of the American Dream.
Welcome to Democracy Now! It’s great to have you with us. Why don’t we begin with the resignation of the top student loan watchdog and what he has accused the Trump administration of, Dr. Goldrick-Rab?
SARA GOLDRICK-RAB: Well, thank you for having me. You know, this is a bold and, I presume, necessary move for someone like Seth Frotman to undertake. He’s trying to draw attention to some very serious changes, some of which are not being made public or transparent to taxpayers, that are going to affect not only our ability to afford college, to send our children to college and to repay our own loans, but also, frankly, for our ability to just have a manageable amount of debt in the United States. These changes are going to cost us all money, and he wants to make sure that we know it.
JUAN GONZÁLEZ: Well, could you talk in general about the crisis facing so many millions of college students in America today in terms of student loans and student loan debt? And what has been happening under the Trump administration to deal—or not deal—with the problem?
SARA GOLDRICK-RAB: Well, the crisis is created by what I call the new economics of college. This is a time where, frankly, like it or not, college is essentially mandatory for access to the middle class, for getting one’s family out of poverty and from keeping one’s family from falling into poverty. But, unfortunately, we have not created a financing system to actually make college attendance possible without having to take on loans. So millions of Americans are taking on loans, even when they don’t want to, just to be able to get access to college. Now, when they take those loans, they need to be sure that the risk to themselves is not too high. And frankly, collectively, as taxpayers, we need to be sure that those loans are not too risky to us, that they can be repaid.
Now, under the Obama administration, they worked very hard to try to put some protections in place, both for taxpayers and for the borrowers themselves. For example, they wanted to make sure that if students took their loans to a certain type of college called a for-profit college, that they wouldn’t be ripped off, that they would get a job afterwards, you know, that their credential would mean something, and they would have a chance to repay their debt. What’s happening now is that those protections are being removed. We’re told that they’re not necessary. But it was clear that they were, because we’re receiving tons and tons of fraud complaints about these colleges. And that’s the important work that CFPB has been doing, is to review those fraud claims. Well, the CFPB is now being told it really can’t do that work. And what Seth Frotman is telling us is that it hasn’t been able to do it for some time.
AMY GOODMAN: I want to go back to Seth Frotman’s resignation letter. He writes, “The Bureau’s new political leadership has repeatedly undercut and undermined career CFPB staff working to secure relief for consumers. These actions will affect millions of student loan borrowers, including those harmed by the company that dominates this market. … By undermining the Bureau’s own authority to oversee the student loan market, the Bureau has failed borrowers who depend on independent oversight to halt bad practices and bring accountability to the student loan industry,” unquote. The company Frotman is referencing is thought by many observers to be Navient, the nation’s largest servicer of student loans. According to lawsuits filed last year by a federal regulator and two state attorneys general—according to lawsuits filed last year by a federal regulator, Navient has for years misled borrowers and made serious mistakes at nearly every step of the collections process, illegally driving up loans’ repayment costs for millions of borrowers. Can you talk more about this company? And what is this relationship with Mick Mulvaney, who called his own bureau, the one that Frotman is resigning from, a joke?
SARA GOLDRICK-RAB: Well, I think that the biggest thing that Seth is pointing out is that we don’t fully understand what Mulvaney’s relationships are. I think that we have some speculation as to what’s going on here, but he keeps alluding to the fact that, you know, the real issues going on inside that agency are not being made transparent. And we, I think, have the same concerns, frankly, about the U.S. Department of Education and Secretary DeVos’s own relationships, both with these companies and with for-profit companies. That transparency is really key in order to be able to protect consumers.
You know, these places like Navient are servicing loans, which a lot of people are really struggling to pay off. And many folks who are not able to repay their debt, it’s not necessarily that they didn’t have the money, but they weren’t given the right information. The repayment process and the collections process was not transparent to them. It was not easy to follow. And so we have people who are falling into economic hardship—and defaulting on a loan is a very serious mark for somebody’s economic record—because these companies are not doing the right thing.
I think what Seth is raising questions about is the advice and the practices of career people in Washington—and for those who don’t know those folks, I mean, these are some very hard-working people, who stay regardless of who’s in charge at the White House, and really stick by the job of these agencies and departments—and the contrast between that and what the political appointees are doing, who don’t seem to really be aligned with the mission of the agency.
JUAN GONZÁLEZ: And what about the issue of what Congress is doing? We’re talking about more than $1.4 trillion in student debt, an exploding problem in the country, and yet Congress, years back, ruled that in personal bankruptcy cases you can’t discharge your student debt. So, it basically follows you through life no matter what.
SARA GOLDRICK-RAB: That’s right. And, you know, there are some reasons, some of which are irrational, some of which are rational, for those kinds of rules, I mean. But the big challenge is this. You know, Congress has not taken on, in a serious way, the need to create a financing system in this country that makes it possible for people to go to college without having to take on loans. That’s the hard work that needs to be done, and it really hasn’t happened. And for the folks who have taken on loans, they’ve made it incredibly hard for them to repay that debt, get out of that debt. For example, if they serve in terms of public service, if they become teachers in low-income schools, there’s talk of rolling back that loan forgiveness. So, you know, it seems that Congress is at odds with the will of the American people.
AMY GOODMAN: Professor Goldrick-Rab, your work has been credited, your book Paying the Price, based on a study in state colleges, not for-profit schools—but your work has been credited with really helping to lay the groundwork for Bernie Sanders’ proposal for free college education. Please explain.
SARA GOLDRICK-RAB: Well, the studies that my team and I have undertaken over the last 20 years have revealed that the current financial aid system just isn’t getting the job done. In many ways, it’s well-intentioned. It suggests that we can help people without money by giving them grants, that they have to fill out the FAFSA to receive—this horrible bureaucratic form, this application that takes ages to fill out, you know—and that we will somehow make up for their lack of money by giving them that financial aid. We find that doesn’t actually work in practice, for many reasons, including that families can’t get through the application. They may not have parents to fill out the application, for some students, who were estranged, for example, from their parents. And then there’s a whole middle class in this country that find themselves, you know, too rich to qualify for grants, but too poor to be able to afford these college prices.
That’s where a free college model comes in. And it isn’t about assuming that everything in life is free or that if you don’t have to pay something, you don’t work hard. But just as we value people in this country being able to go to high school, and we wouldn’t want to have a country where people turned away from high school because the tuition is too high, we believe it’s now time to start thinking at least about the 13th and 14th years of education as something that we need to collectively pay for, so that anybody, especially anybody hard-working and talented in this country, which is the majority of people, can get the college education that they need.
JUAN GONZÁLEZ: And what about the for-profit industry? Because clearly you have the private nonprofit colleges, the state universities and state colleges, but there’s been an explosion of the for-profit industry, and we’ve seen some major failures of some of these, but some continue to prosper, basically on the backs of this loan program.
SARA GOLDRICK-RAB: That’s right. I mean, in many ways, the model that we’re operating under is a voucher-driven model, and it allows private providers to compete for student aid dollars alongside public providers, but, unfortunately, with a lot less scrutiny and no public governance. And so, the result is that companies have realized they can step in. They can get students to walk in their doors by recruiting them with commercials. They spend a lot of money on advertising. They bring the students in, and in many cases—not all, but in most cases—the students do not experience the sort of education that will lead them to lead a better life, get a better job or earn more money. And it is an industry. And frankly, this is also a deeply racialized practice, because these schools disproportionately reach out to, recruit, prey on people of color. And those are people who really do not have the same access to forms of payment, other than student loans, that other folks have. So they go into deep debt, and they get useless credentials.
AMY GOODMAN: Finally, very quickly, Professor Goldrick-Rab, your report, “Hungry and Homeless in College,” you say, of the students you surveyed, one in three reported they had gone hungry while enrolled in college?
SARA GOLDRICK-RAB: That’s correct. Now, this has been a decade worth of research now, and we have found that, actually, it’s one in three students at 4-year colleges and universities, and between 40 to 50 percent of students at the nation’s community colleges. This is how severe the loan crisis really is. You can take loans and have trouble repaying them, and nonetheless still not have enough money to cover today’s college prices. And those prices are not just tuition. It’s housing and food. So students are legitimately falling short of what they need to learn and to get degrees.
AMY GOODMAN: We want to thank you so much for being with us, and we will of course continue to cover this issue. Sara Goldrick-Rab, professor of higher education policy and sociology at Temple University, author of Paying the Price: College Costs, Financial Aid, and the Betrayal of the American Dream.
SARA GOLDRICK-RAB: Thank you for having me.
AMY GOODMAN: When we come back, “Books, Not Magazines.” That was one of the T-shirts that a father of a student at Parkland who was killed last Valentine’s Day wore—”Books, Not Magazines,” with an automatic weapon through the word “magazines.” We’ll talk about the Education Secretary Betsy DeVos’s proposal to spend federal money on arming and training teachers to shoot. Stay with us.