Benefits for student loan borrowers during the Biden administration
Seth Frotman, executive director of the Student Borrower Protection Center, former head of the Consumer Financial Protection Bureau, joins Yahoo Finance to discuss the civil service loan cancellation program, resignation of student loan service companies and of the Biden administration’s efforts to fix student loan programs.
ALEXIS CHRISTOFOROUS: The Department of Education currently offers a student loan discount to public service employees who have made 10-year payments while employed by the government or in a non-profit organization, such as teachers and members of the military service. But the program has actually received a failing grade from some advocacy groups.
With me now is Seth Frotman, executive director of the Student Borrower Protection Center. We’re also joined by Yahoo Finance education reporter Aarthi Swaminathan. Glad to have you here, Seth. Thank you so much. I know you were on CBS ’60 minutes recently talking about this military borrower issue. But ask us if this program has worked for all Americans with student loan debt over the past few years.
SETH FROTMAN: Thank you very much for inviting me. So over 10 years ago, Congress created this program which was supposed to help people who went into the fields of public service, teachers, nurses, social workers, the military. But as you mentioned, over 9 out of 10 borrowers have been turned down. Every time we get data, it shows rejection rates of 98%, 99%.
In fact, Congress tried to fix this program, and the fix has a 97% denial rate. And what you are seeing are borrowers who have done everything right, both in terms of impact in their community and even trying to fight to get into and stay in this program, only to run into this buzz. paperwork. And it’s just tragic when you hear these stories.
AARTHI SWAMINATHAN: Seth, we have a bunch of loan departments that people like you are telling these people are responsible for the bottlenecks that are happening. These loan services are disappearing with 16 million student loan accounts essentially having to be transferred from one to the other. What concerns you as you go through this process? And do you think this will slow down the forgiveness rate even further?
SETH FROTMAN: So it’s important to recognize that these same student loan companies are the reason we’re in this mess. We’ve seen federal lawsuits, state lawsuits, individual borrowers rise up and document how it’s the companies that have actually tried to fund their own profits instead of helping active duty members, veterans, cops, firefighters, teachers actually enroll in the benefits that they were entitled to.
So of course there is going to be some confusion and some extra work now that these companies are leaving. But it is a good thing for borrowers. These are the companies that have left millions of American families in needless trouble.
AARTHI SWAMINATHAN: Seth, just zooming out on the larger student loan debt cancellation, there was a memo that you were told to wait in April and that we are still waiting for, on capacity of the White House to cancel these loans. But meanwhile, Senators Chuck Schumer and Elizabeth Warren continued to call the $ 50,000 number. Where are we on this? Do you have an idea?
SETH FROTMAN: So I think we’re still waiting. But one of the positive things for student loan borrowers to hear is that Education Secretary Biden administration is not just waiting to hear the results of this legal review. What most people don’t realize is that there are already programs in the books that were designed, that is, the law of the land that aims to write off the debts of millions of people, people who have been ripped off by their school, people who go into debt to find themselves tragically severely disabled and, in this circumstance, borrowers who have given back a decade of public service.
And what you see the Biden administration is fixing all of these programs because they were broken. So time and time again I think what you are starting to see is that the new leadership of the Department of Education is trying to fix these programs and give borrowers the relief they deserve while waiting for this. broader decision on debt cancellation.
AARTHI SWAMINATHAN: And you sort of skip to my next question very clearly, but we’re expecting news tomorrow on the civil service loan cancellation. Do we have any idea what the department expects from all the sessions it has had in discussion with advocacy groups?
SETH FROTMAN: So a lot of us have read the tea leaves in all the leaks and the initial reports, but I think what you’re going to see is that it will be good news for the officials. Once again we see how, despite this promise that officials were going to get debt relief if they returned a decade, a series of illegal student loan industry practices and, sadly, a lot of government incompetence. previous ones have left these borrowers stuck holding the sack for loans that should have been canceled, because these people have given back for a decade or more.
And what all the details emerge from the looming White House and Department of Education announcement is that the department is committed to addressing the issues that caused us in the first place and to s’ ensure that those who have done so much, at the end of the day, see their loans canceled.
ALEXIS CHRISTOFOROUS: OK. We will stop there. Seth Frotman, Executive Director of the Student Borrower Protection Center and, of course, Aarthi Swaminathan, thank you very much for being here.