Students line up with student loan problems but can't get help (illustrated)
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Struggling student loan borrowers are running out of places to find help.

The Consumer Financial Protection Bureau, whose job is summed up by the name, has decided to shut down its Office of Students and Younger Consumers. That’s the division in charge of investigating student loan complaints, which was a big fight with Trump’s Education Department back when Richard Cordray ran the CFPB.

In an effort to trim the CFPB down — to match his $0 funding request to Congress — interim CFPB director Mick Mulvaney decided to fold that division into one that simply educates people about money. It’s true an ounce of prevention is worth a pound of cure, but that doesn’t apply to people who are getting ripped off.

All the doors are closing

In Trump’s America, it’s simply not true that when one door closes, another one opens. They just keep shutting the doors and locking them, and the only way to get inside is a VIP pass.

When Obama was president, both the Education Department and the CFPB were cracking down on student loan abuses — for-profit colleges roping in students and their borrowed money to fund degrees they couldn’t finish or wouldn’t be worth much, student loan servicers prioritizing payments in ways that ended up costing more in interest, bogus fees, bad documentation, all kinds of stuff.

When Betsy DeVos took over the Education Department, she pretty much halted all regulation and enforcement to give herself time to figure things out. Then she started scaling things down, rolling back regulations. I’ll have more sad news on that next week. But the upside is that the only regulatory authority DeVos seems to believe in is her ability to keep other people from doing anything. She fought the CFPB, and then she has fought states which are trying to pick up the slack with a “student loan bill of rights” and other ideas.

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The CFPB has shifted away from students — and being proactive

Mulvaney’s CFPB has indicated what it wants to focus on: debt collection. And of course I’m grateful for any effort to defend consumers who are being harassed or ripped off, but that’s looking at the wrong end of the problem.

If the Education Department is not going to protect consumers up front by implementing careful and consensus-driven regulations like it did during the Obama administration, someone needs to step up to be that first line of defense. The problem is, DeVos doesn’t want a first line of defense. And Mulvaney seems to agree with her that everything can be solved on the back end.

Both claim they’re doing this in the interests of saving the American people money. That makes no sense on two levels — one, you’re letting the abuse take place in ways that costs consumers money and time right now. And they have no clear place to go for help. Two, it costs more money to clean up a mess than it does to prevent one.

And maybe three: There are still people predicting a student loan crisis. I’m not really one of them, but I do buy the argument that student loan debt holds the economy back. People can’t buy what they otherwise would, and many people have found their degrees aren’t the return on investment they expected — wages haven’t risen that fast, but inflation has kept growing.

Many people are simply stuck treading water on student loans. And if that did somehow tip us into a recession, that would simply make things all the worse. The solution is definitely not to deregulate and step away to “educate” consumers.

 

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Article last modified on May 17, 2018. Published by Debt.com, LLC . Mobile users may also access the AMP Version: The CFPB Is Shutting Down Its Student Loan Office - AMP.

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Article last modified on May 17, 2018. Published by Debt.com, LLC .