Richard Cordray at the head of the student loans agency

The Biden administration has appointed Richard Cordray, the former head of the Bureau of Consumer Financial Protection, to oversee the $ 1.6 trillion federal student loan program.

Cordray will join the administration as director of operations for Federal Student Aid, the Department of Education agency that manages the loan program, the ministry said on Monday.

The post, which does not require confirmation by the Senate, has traditionally been more of an operational role than a political one. The federal student aid office oversees contracts with private and nonprofit groups that provide customer service and collect payments from the roughly 43 million Americans with federal student debt. While at CFPB, Mr. Cordray regulated these companies, known as loan managers.

In 2012, Mr. Cordray became the first chief of CFPB, a watchdog body created by Congress after the 2008 financial crisis to regulate lenders and other businesses related to consumer credit. Appointed by Obama, he left the agency in 2017, after the Trump administration took office.

“Rich was a fearless and effective leader at the Consumer Financial Protection Bureau where he held the big banks to account and forced financial institutions to return $ 12 billion directly to the people they deceived,” said Senator Elizabeth Warren (D., Mass.), Who designed the founding of the CFPB, said in a written statement. “I am very pleased that he can apply his fearlessness and expertise to the protection of student loan borrowers and the much-needed accountability of the federal student loans program.”

Rep. Virginia Foxx (R., NC), the top Republican on the House Education and Labor Committee, criticized the nomination. “I am skeptical that a failed Democrat politician, who is used to letting himself be invaded by politics instead of caring about consumers, has the ability and the seriousness required to serve as director of government. ‘FSA exploitation,’ she said in a written statement.

Mr Cordray said in a written statement that he planned to work with other officials at Biden and Congress “to ensure that federal student aid does exactly what it was supposed to do: create more ways for students to graduate and move on, without being burdened with insurmountable debt.

During his tenure, the CFPB tightened financial regulations, including requiring lenders to impose stricter underwriting on mortgages. The agency was also a political lightning rod, with Republicans battling Mr. Cordray’s regulatory efforts.

More than 43 million Americans collectively owe $ 1.6 trillion in federal student loans. Josh Mitchell of the WSJ explains how President Biden plans to help borrowers tackle this debt. Photo illustration: Carlos Waters (Video of 1/12/21)

The student loan program faces its own set of issues, including a high level of defaults and a dispute within government over accounting practices.

As of September 30, 5.5 million borrowers were in default – meaning they had gone a year without making payments – on $ 122 billion in student debt, according to data from the Department of Education . Millions more are months behind on payments or have sought refuge in federal options that reduce monthly payments and ultimately write off debt. According to the Federal Reserve Bank of New York, nearly a fifth of all student debt outstanding in the repayment cycle – most from the federal program – is at least 90 days past due.

In response to the coronavirus pandemic, the federal government allowed most borrowers with federal loans to suspend their payments, under legislation passed by Congress and a series of executive actions by the Trump and Biden administrations.

Write to Josh Mitchell at [email protected]

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Bernadine J. Perkins