Don’t Let the CFPB Harm Students and The Future of Student Loans

The often controversial Consumer Financial Protection Bureau (CFPB) has waded into the private student loan crisis with a decision that could potentially hurt millions of Americans who currently depend on student loans or will rely on them in the future.

For thousands of students nationwide, the ability to enroll in colleges and universities depends on private student loans and access to such capital. As the National Chairman of the College Republican National Committee, I represent thousands of students across the country, and I simply cannot imagine what would happen if decisions made by the CFPB put that access to capital in jeopardy.

At issue is private student loan collection practices by investors who hold student loans, and lenders who lack the ability to collect on loan debt. Many of these loans are in default partially due to bad economic times during the Obama years, and the question now concerns how those funds will be recouped.

The former head of the CFPB created a glaring conflict of interest in the student loan industry when he brought hedge funder Donald Uderitz into the fold to manage the National Collegiate Student Loan Trusts (NCSLT). Uderitz made a deal with Cordray’s CFPB to service loans overseen by the NCSLT through his hedge fund, Vantage Capital Group.

Instead of the typical process to recoup defaulted loans through litigation, Cordray and the CFPB handed down a first-of-its-kind judgment to allow the NCSLT and Uderitz to collect loans as he sees fit. This consent agreement means that trusts cannot collect on loans without jumping through hoops.

Now, Vantage Capital Group, which previously had no experience servicing student loan debt, stands to make a considerable amount of money in the servicing and administering of the debt they are tasked with from the NCSLT.

So the same individual who is in charge of the largest owner of private student loans in the nation, is now profiting from servicing that loan debt through his personal hedge fund?

A bureaucratic takeover like this damages the student loan recovery structure, helping the bottom line of some, while ultimately hurting bond investors in these trusts. All of this could endanger future access for private student loans funds.

Due to the CFPB’s independence from the White House and Congress, the CFPB was able to exceed its authority. Unfortunately, much of it was and still is political in nature, not to mention extrajudicial. The former director Cordray has since left the CFBP, and is running to be the next Governor of Ohio. His bureaucratic overreach is now coming to light.

This crony capitalism must end. We need to change the structure of the CFPB so they report directly to the White House or Congress on behalf of consumers—the American people—and not the financial interests of some at the top. We need to narrow the CFPB’s overly-broad mandate. And we need to drop their assault on student loan lending so students and graduates have access to the loans they need.

Student loan debt is a major issue in the United States today. Approximately 44 million Americans have student loan debt of some kind, and many have defaulted because of the stagnant economy over the past decade.

Student loan lenders not being paid has significant consequences for the future of student loan funding, not only regarding consumer options and lending rates but also for the securities market and the overall health of the American economy.

Now that the Trump Administration has asserted greater accountability and oversight over the CFPB, Acting Director Mick Mulvaney should remove Uderitz and his conflicts of interest, and dismiss the consent agreement that will drive up student loan interest rates and lead to fewer borrowing options for students.

An immediate and effective resolution on the issue would be a victory for the Trump Administration, and most importantly would help the millions of Americans with student loans—including many recent and soon-to-be college graduates.

Chandler Thornton is the chairman of the College Republican National Committee (CRNC).

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