Meet the man now at the center of the debate over student debt

Richard Cordray, a close ally of Sen. Elizabeth Warren, D-Mass., who served as the first director of the federal Consumer Financial Protection Bureau during the Obama years, has been selected as the new head of federal student aid in the Biden administration, a post that will put him at the center of the swirling debate over forgiving student debt.

The issue is a tricky one for President Joe Biden. Though he has endorsed canceling up to $10,000 per borrower through legislation, Biden has been pressured by some Democrats to forgive much more, and to sign an executive order making it happen if Congress fails to act.

But with his new position within the Education Department, the primary lender for higher education, Cordray might be able to relieve the president of that burden by canceling student debt administratively. Democratic leaders are pushing for up to $50,000 per borrower in debt relief.

Cordray, whose appointment was announced Monday, is a former Ohio attorney general who made a name for his aggressive investigation of mortgage foreclosure practices. He led the Consumer Financial Protection Bureau, which Warren was a driving force in creating, from 2012 to 2017, leaving in the first year of the Trump administration to make a failed bid for governor of Ohio.

Administration officials said that he and Warren maintain a close relationship, raising questions about how closely their views align on the question of canceling student debt. Warren has argued that it is a crushing burden for young people, and that relieving it would reduce economic inequality. Some critics say that a large percentage of that debt is held by people who spent the money to get an elite education and advanced degrees that pay off very well.

Forgiving $50,000 in student debt for millions of people “is just a giveaway to the people who are not the people who suffered the most from the pandemic, who are not the people who need it the most in society and the economy, and we should be looking for better-targeted solutions,” said Sandy Baum, a senior fellow at the Urban Institute.

Baum nonetheless welcomed Cordray’s appointment, saying she expected him to approach the problem by changing the way the system treats people and preventing them from being exploited.

In a statement, Cordray focused on student debt as an overriding concern, saying that he looked forward to working with leaders in the department, the Biden administration and Congress to “create more pathways for students to graduate and get ahead, not be burdened by insurmountable debt.”

He did not indicate his position on whether some debt should be canceled, however. A spokesperson for the Education Department, Rachel Thomas, said the agency was working with the Justice Department and the White House to review options on the issue.

Republican critics tried to block Cordray’s appointment to the Consumer Financial Protection Bureau under President Barack Obama, and have complained that the bureau had too much power and saddled businesses with unnecessary regulations. But his new appointment as chief operating officer of federal student aid, made by Education Secretary Miguel Cardona, is effective Tuesday and needs no other approvals.

Cardona said in a statement announcing the appointment that it was “critical” that student loan borrowers could depend on the department “for help paying for college, support in repaying loans, and strong oversight of postsecondary institutions.”

Cordray, a five-time “Jeopardy!” champion, has also been a vocal critic of for-profit colleges. “I hate how these hollowed-out businesses and subpar colleges are cheating consumers, employees and whole communities,” he wrote in an opinion essay in The Plain Dealer, Ohio’s largest newspaper.

Cordray succeeds Mark A. Brown, who was appointed by President Donald Trump in March 2019 and resigned in March of this year. Brown became a target of consumer and labor groups, who cheered his resignation. Warren greeted Brown’s resignation with a tweet that said it was “good for student borrowers.”

Consumer advocates were delighted by Cordray’s appointment. “This is an outstanding pick,” said Seth Frotman, a former student loan ombudsman at the Consumer Financial Protection Bureau who worked closely with Cordray.

“This is a very promising sign about a sea change in thinking at the Education Department,” said Frotman, who is now the executive director of the Student Borrower Protection Center, an advocacy group.

Cordray made student loan oversight one of the bureau’s priorities, and in early 2017 — two days before Trump took office — the agency sued Navient, one of the Education Department’s largest student loan servicers, for errors and omissions that Cordray said improperly added billions of dollars to borrowers’ tabs.

The lawsuit is ongoing, and six state attorneys general have filed similar cases. A spokesperson for Navient, Paul Hartwick, described the allegations as “unfounded” and said the company assisted students by helping them navigate the complex student loan program.

Cordray has described the country’s soaring student loan debt — which eclipses all consumer debt other than mortgages — and the often slipshod way it is managed as a problem ripe for government intervention. “The domino effects of student debt burdens and loan servicing problems are holding back the upcoming generation and hampering the economy,” Cordray wrote in his 2020 book, “Watchdog.”

The Education Department is the primary lender for Americans who borrow to pay for higher education. It directly owns loans made to nearly 43 million people, totaling $1.4 trillion.

In one of the government’s most sweeping relief measures of the coronavirus pandemic, the department decided in March 2020 to allow borrowers to stop making payments on their federal student loans, temporarily setting the interest rate to 0%. That pause is scheduled to continue through September.

Because of that freeze, fewer than 1% of borrowers with federal loans are currently making payments on them. Restarting loan collections will be one of the biggest challenges facing the Education Department this year.

But Cordray will inherit a plethora of other problems, including extensive errors and obstacles in the department’s Public Service Loan Forgiveness program, which is intended to forgive the debts of teachers, military members, nonprofit workers and others in public-service careers.

The department is also grappling with claims from hundreds of thousands of borrowers seeking relief through a program intended to eliminate the debts of people who were defrauded by schools that broke consumer protection laws.