The Department of Education (ED)'s office of Federal Student Aid (FSA), which oversees the government's massive student loan portfolio, launched a new Office of Enforcement last week to overhaul oversight of postsecondary schools that participate in federal student loan programs.
FSA Chief Operating Officer Richard Cordray, a former attorney general in Ohio who served as the director at the Consumer Financial Protection Bureau (CFPB) under President Obama and wrote "Watchdog: How Protecting Consumers Can Save Our Families, Our Economy, and Our Democracy," detailed why this initiative is a priority of the FSA under his leadership in an exclusive interview with Yahoo Finance conducted on October 8.
The transcript below has been slightly edited for clarity.
Yahoo Finance (YF): What is the Biden administration's priority when it comes to student loan oversight?
Richard Cordray (RC): What we're doing here... for me, this goes back to my roots, that you may recall, at the CFPB where we were building an agency from scratch.
Editor's note: The CFPB was created after the Global Financial Crisis at the behest of Senator Elizabeth Warren (D-MA), and Cordray served as the agency's first director.
My first job there was to figure out how to establish and set up and run the Office of Enforcement at CFPB, which I did for the first six months, and then was nominated by the President to be the Director of CFPB. But my roots are in enforcement and goes back to being an attorney general.
So coming to FSA, one of the things we understand that the Biden administration is keying in on is that we want to make sure that we are getting performance and accountability out of all of the partners and customers that we deal with at FSA, which includes servicers — as you've seen we're doing some work there to provide more performance and accountability.
And it includes schools, the thousands of schools that we deal with are the ones who have that direct personal relationship with the students, and are supposed to deliver them them the value that our financial help help pays for.
We need to make sure that they are doing what they should, that students are getting their money's worth, and, frankly, [that] the taxpayers are getting their money's worth as well.
So what we're doing here is we're creating and elevating really an Office of Enforcement within the FSA. It will report directly to me as the deputy COOs all do. ...
Our intention here is to be vigorous enforcers of the law and to... publicize what we're doing so that everybody gets the message sooner rather than later and we don't have to take enforcement actions against some of the others because they straightened up and cleaned up their act.
YF: The Obama administration started this crackdown on higher education institutions, identifying and addressing poor performers that participate in the federal student loan system. The Trump administration rolled a lot of those efforts back. What has it been like to rebuild that momentum?
RC: When you look at government, it's a very unusual thing to have an experience like I had and people had at the CFPB. We're actually starting something from scratch. And it has immense challenges, and it's difficult...
What you've come into is an organization that is doing things and doing them in a certain way and making change in how they're doing things and elevating your priorities, making sure people understand that and that they're hearing it out on the ground is always the challenge.
It's a challenge in every organization, and it's a challenge here.
And there has been some yo-yoing as you say, there was an effort made to to elevate enforcement work during the very later years of the Obama administration, then that got you know countermanded and arguably dismantled under the Trump administration for whatever reasons — it doesn't matter at this point — but we are very firm and our determination that this is something that is important. It is worth it needs to be done. Everybody needs... to see that it's being done.
And if it's done well, it has a deterrent effect and it cleans up a lot of problems that borrowers will never have to experience.
YF: More investigations could possibly mean that you'll find more instances of fraudulent behavior. And more fraud could mean more claims for debt relief under the borrower defense policy. Do you anticipate debt relief claims to stack up in the longer-run?
RC: This is both cleaning up how schools behave upfront, while students are there, while they're getting their education, where we intend that they get absolutely their money's worth. And by the way, our money's worth, because we're providing a lot of that money.
That's important to us.
Then down the road as students become borrowers, and then they become repayers, how they're treated and down the road — and this goes a little more to the servicers — is very important.
But you know there are, as you say, a variety of reasons why people end up with legitimate claims to have their debts forgiven and/or there may be programs that are in the law that are supposed to provide for forgiveness of debt.
We want to make sure that these programs work: that they aren't just on paper but that people actually get the relief they're supposed to get. And there's been a lot of promises that people thought were made to them that have not been carried out in the past. That's an important part of the work we're doing.
But let me go back to the office of enforcement, in particular. I think there's three ramifications here that are important.
The first is by elevating this within FSA, we're sending a message to everyone that in FSA and the department, how important we think this work is, so that... we rely on some collaboration and cooperation from others within the department. This is meant to signal that we intend for them to provide it. This is a priority. And it's a priority, not only for me but for the undersecretary, as in the comments today in the release, and for the secretary.
Number two is that we need the schools and people out there to see that we're serious. We need to show them through our work that we are going to be capable of ferreting out and addressing any kinds of problems.
So again that will keep people from thinking that they can cut corners or skirt the edges and do things that are problematic, as they'll somehow be able to get away with it because they got away with it in the past. We want to send that message loud and clear.
Thirdly, ... external partners matter a lot here, and there's always going to be limited resources that we have at the Department of Education and at FSA to do various things. When we see something as a priority the risk there is: Do we have the resources and the focus to deliver on that priority?
One of the ways we're going to do that here is by working with partners outside of FSA and outside of the department. That includes the [Federal Trade Commission (FTC)].
We've been in very close contact with them over the last couple of weeks. And, again, you'll remember some of the relationships here. Rohit Chopra, when I was head of CFPB, was our student loan ombudsman. He was our liaison to the Department of Education. Very knowledgeable in this area. Now, he is going to be starting next week [as] the head of the CFPB.
Before he left the FTC, he wanted us to get this partnership going. They made their announcement on Wednesday: They're going to be much more aggressive now about going after unfair, deceptive practice acts and practices in the higher education realm. We welcome that — that's more resources... more people looking to clean things up here. We will coordinate closely with them. They will take some actions, we will take some actions. We will do some things jointly, but we'll strategize together about that. Same with the CFPB with Rohit there.
Editor's note: On Wednesday, the FTC announced an initiative to crack down on for-profit schools by rolling out new fines for colleges that mislead students about jobs and earnings prospects.
And, by the way, the same now with... state attorneys general who are interested in this area, ... [and] in terms of loan servicing, there's some new overseers in a number of states. We want to work closely with them in reverse what had become a pretty toxic relationship between the department and state officials under the prior administration. We've done some things to change that already, by revising the preemption notice doing a 180-degree turn there. We're going to work with the states, not try to stymie the states.
YF: Is there anything I've missed in this conversation?
RC: At a very general level, rather than specific level... you've seen this over the years, and there is a bit of yo-yo effect about government. Is government working as it should? There's a lot of promises made to the public and to the citizens of this country about how government's going to do this and government's going to do that.
And it's easy to say those things it's always harder to do them.
What we're trying to do with FSA is we're trying to deliver on some of these promises made to people that borrowers are going to be treated fairly, that students are going to get their money's worth, that the taxpayers get to get their money's worth. I take that very seriously, but I understand that it's easy to talk — it's harder to walk the walk or deliver on what's been said.
But we intend to do that, and the Office of Enforcement here is a visible representation of one of the ways we're going to go about that.
Aarthi is a reporter for Yahoo Finance. She can be reached at firstname.lastname@example.org. Follow her on Twitter @aarthiswami.