Back in 2010, federal law makers ended the ability for banks to create government backed student loans. Some reasoned that this enables the government to save money and give more support to indebted students. During his time as a federal employee at the U.S. Department of Education, David Bergeron conjectured that the government seeks full advantage of anything that renders more profit. Like many, he augurs that this concept will be implemented towards student loans.
A week ago, the U.S. Department of Education told the Consumer Financial Protection Bureau (CFPB) that it would not continue sharing information regarding federal student loans worth $1.3 trillion. This former partnership, which allowed CFPB to file law suits against loan companies and other debt market related entities. collapsed. Former high ranking officials portend that this can be a very risyk sign of leniency toward debt collecting loan companies. Some even say that this can be Trump’s administration undermining CFPB’s enforcement authority.
There is also partisan tensions involving with the authority CFPB has. Republican Congress made overt efforts over many years to fire Richard Cordray as Director of CFPB. The bureau, established by Congress and Obama in 2010, was created to oversee the nefarious actions of loan companies that before 2010 had very little oversight. Over the years, CFPB put extensive efforts to crack down on practices of loan companies that the bureau believes are immorally opportunistic towards borrowers.
In the meantime, the U.S. Department of Education hasn’t disciplined contracted loan services that commit opportunist like actions towards their users. According to Betsy DeVos, the CFPB complicates the lives of debtors. The partnership between CFPB and the Education Department is meant to “enhance the efficiencies of our servicers [loan companies, etc.].”
It is clear that loan companies might even benefit from this. Navient Corp., the Education Department’s largest loan contractor, might have a stock surge according to Wall Street’s Compass Point.