DAVID GREENE, HOST:
The director of the Consumer Financial Protection Bureau - the CFPB - says the Trump administration's education department is getting in the way of efforts to police the student loan industry. This comes amid lawsuits that allege widespread wrongdoing by student loan companies. Here's NPR's Chris Arnold.
CHRIS ARNOLD, BYLINE: The head of the CFPB, Kathy Kraninger, is responding to Senator Elizabeth Warren and other Democrats who wanted to know whether the Consumer Protection Bureau is doing its job protecting student borrowers. And her answer is pretty striking.
The letter, obtained by NPR, is carefully worded. But in essence, Kraninger is saying that the CFPB is trying to do its job. But she says the companies that manage student loans are not handing over information that the bureau needs to do supervision because, they say, the Education Department told them not to. In other words, the Education Department is getting in the way.
SETH FROTMAN: It's actually quite remarkable.
ARNOLD: Seth Frotman heads up the nonprofit Student Borrower Protection Center. He used to be the CFPB student loan ombudsman but quit last summer over frustrations with the Trump administration.
FROTMAN: The head of the Consumer Financial Protection Bureau is telling the world that the secretary of Education has put in place a series of policies that are obstructing federal law enforcement officials from standing up for the millions of Americans with student debt.
ARNOLD: Americans like Jessica Saint-Paul. She was grappling with about $80,000 in student loans. Then when she heard about a program called Public Service Loan Forgiveness, she was ecstatic. The program's designed to encourage public service.
So police officers, government workers, teachers, people who work for nonprofits - if they make payments for 10 years, they can get the remainder of their student loan debt forgiven. Saint-Paul worked for a nonprofit that provides services to foster children.
JESSICA SAINT-PAUL: I was like, oh, this is perfect. So I called, you know, I'm interested in the Public Service Loan Forgiveness.
ARNOLD: That was nine years ago. She says over the years, she called the companies servicing her loans to check in.
SAINT-PAUL: Just want to make sure, you know, I'm on track. OK. No problem. The conversation was quick. I mean, I'm saying they were so kind.
ARNOLD: But Saint-Paul says she was getting bad information, she says she found out just last year at a conference. There was an information session on loan forgiveness, and she was told that she was in the wrong kind of loan and wrong payment plan so that she couldn't qualify. And she says a lot of other people were finding out the same thing right there at the conference.
SAINT-PAUL: It's like a support group almost - it turned into. Because people were like, no, that can't be true. And people were - I went on my phone. People were going on their phones, their laptops, checking their loan, what type of loan they were in. And we were all sitting there, like, just frantic. Like, what loan am I in? Wait. Wait. Wait. Let me pull this up. Let me see.
ARNOLD: But Saint-Paul says it was true. If, nine years ago, her loan servicer just told her to take a few simple steps to convert to the right loan and payment plan, everything would have been OK. Instead, she says she feels like somebody stole tens of thousands of dollars from her.
SAINT-PAUL: Oh, it's just frustrating. And I just cannot believe this happened to me.
ARNOLD: It's happening to a lot of people. So far, about 99% of people applying for this loan forgiveness program are getting rejected. And more than 1 million people are actively pursuing it and hoping to qualify. Saint-Paul is a plaintiff in one of the many lawsuits by advocacy groups and regulators related to this program and other problems.
This is why Democratic lawmakers say they want to be sure that perhaps the most powerful federal watchdog for consumers is on top of all this. In March, Senator Bob Menendez pressed the issue at a hearing with CFPB Director Kraninger.
(SOUNDBITE OF ARCHIVED RECORDING)
BOB MENENDEZ: Have you examined why 99% of applicants have been rejected?
KATHY KRANINGER: Senator, again, I understand why you're asking a question and it's an important one. I don't have a specific answer to your question on this topic.
MENENDEZ: So you...
ARNOLD: Now that lawmakers have Kraninger's answer, Elizabeth Warren and four other senators called the revelations disturbing in a round of letters they've just fired off to student loan servicing companies. The CFPB, in a statement, says it's confident that it can resolve the issues and achieve its mission of protecting borrowers.
But for its part, the Education Department appears to be defending its stance that loan servicers should not hand over information to the CFPB. The department says in a statement that it takes privacy seriously and says requests for information about student loan borrowers should be made to the Education Department.
Seth Frotman says that the CFPB should flex its muscles more and take loan servicers to court, if necessary, to get them to comply with its oversight efforts.
Chris Arnold, NPR News.
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