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Head of federal student loan office resigns amid political pressure

After pressure from progressive groups, the head of student loans at the Education Department (ED) resigned from his position on Friday.

Mark Brown, who was the chief operating officer at ED's office of Federal Student Aid, oversaw a trillion-dollar student loan portfolio — making it equivalent to the nation's fifth-largest bank. He was appointed by former Education Secretary Betsy DeVos, after the resignation of his predecessor, A. Wayne Johnson.

Robin Minor, currently the deputy COO for Partner Participation and Oversight, will serve as interim COO.

Pressure for Brown to resign had been mounting, with progressives from Sen. Elizabeth Warren (D-MA) to advocacy groups such as the Americans for Financial Reform pushing for Brown to leave.

The resignation was announced by the newly-confirmed Secretary of Education, Miguel Cardona. Advocates are now pressing for an old student loan hand to fill the position.

“I accepted the resignation of Federal Student Aid Chief Operating Officer Gen. Mark Brown and thanked him for his service to the U.S. Department of Education," Cardona said in a statement. "As the nation continues grappling with economic disruptions caused by the COVID-19 pandemic, the need to deliver relief and fortify pathways to the middle class is more urgent than ever."

WASHINGTON, DC - DECEMBER 12:  U.S. Secretary of Education Betsy DeVos (L) listens as Chief Operating Officer of Federal Student Aid Mark Brown (R) speaks during a hearing before House Education and Labor Committee December 12, 2019 on Capitol Hill in Washington, DC. The committee held a hearing on
Former U.S. Secretary of Education Betsy DeVos (L) listens as Chief Operating Officer of Federal Student Aid Mark Brown (R) speaks during a hearing before House Education and Labor Committee December 12, 2019 on Capitol Hill in Washington, DC. (Photo by Alex Wong/Getty Images)

The office of FSA was "designed in an unusual way," Jason Delisle at the American Enterprise Institute, told Yahoo Finance.

"When this position was created, it was done so to try to attract people from the private sector... and that would insulate them from politics," Delisle explained. But "what you have [here] is essentially him resigning but you also have people exerting, ironically, political pressure to oust him."

Warren, one of Brown's critics, applauded the his resignation, calling it "good for American borrowers."

"Students deserve leadership at this office who will follow the law and make this program work for students and I look forward to working with Secretary Cardona to reform the FSA so that it works for student borrowers instead of big student loan servicing corporations," Warren said in a statement.

Two names that are being floated as replacements are Mark Kaufman, who was a former banking regulator in the state of Maryland, and Abigail Seldin, according to Huffpost. While Seldin has been criticized by some progressives for working with Educational Credit Management Corporation, a private student loan guaranty agency, when it bought her company College Abacus, many others have come to her defense as a champion of students' needs and rights.

(Graphic: David Foster)
(Graphic: David Foster)

The change in leadership also has major implications for borrowers. For instance, the incoming COO will be in charge of massive student loan reform project called Next Gen FSA.

"Is that something that the the secretary and the political appointees should be involved with? Or is that something you want some [political] insulation on?" said Delisle.

Slew of lawsuits

Under Brown's leadership amid the pandemic, FSA — and the loan servicers it oversees — has run into a number of legal issues due to its slow-moving student loan machinery.

In May 2020, consumer advocates sued student loan servicer Great Lakes and credit reporting agencies for inaccurate reporting of student loan payments that were suspended under the CARES Act. DeVos was also sued the same month for her department's failure to stop garnishing defaulted student loan borrowers' wages, despite the CARES Act suspending debt collection activity.

She and former Treasury Secretary Steven Mnuchin again were sued at the end of May for their failure to stop tax refunds from being seized by defaulted student loan borrowers.

Given the major hurdles the FSA faced during this period following the first time the payment pause was enacted by former President Donald Trump in March 2020, many advocates and government officials worry about how the process will unfold when the halt is lifted in October this year.

Meanwhile, the department also faces lawsuits over its management of the Public Service Loan Forgiveness program.

“The problems that millions of student loan borrowers are facing can be traced back to decisions made by the leadership in the office of Federal Student Aid. The systemic changes that need to happen were never going to be possible with Betsy DeVos’s handpicked leaders still in charge,” Mike Pierce, policy director at the Student Borrower Protection Center. “Now is the time to put in someone who understands the enormity of this crisis and is committed to taking real action.”

"FSA is deeply broken and is either unable or unwilling to prioritize students in its operations," Thomas Gokey, legal and policy organizer of the Debt Collective, an activist group. "The next head of FSA should have a proven tack record of fighting for students and cannot be anyone from the predatory for-profit sector."

Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.

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