Meet the Man Now at the Center of the Debate Over Student Debt

Richard Cordray, a close ally of Senator Elizabeth Warren who served as the first director of the federal Consumer Financial Protection Bureau during the Obama years, has been selected as the new head of federal student aid in the Biden administration, a post that will put him at the center of the swirling debate over forgiving student debt.

The issue is a tricky one for President Biden. Though he has endorsed canceling up to $10,000 per borrower through legislation, Mr. Biden has been pressured by some Democrats to forgive much more, and to sign an executive order making it happen if Congress fails to act.

But with his new position within the federal Education Department, the primary lender for higher education, Mr. Cordray might be able to relieve the president of that burden by canceling student debt administratively. Democratic leaders are pushing for up to $50,000 in debt relief.

Mr. Cordray is a former Ohio attorney general who worked alongside Ms. Warren on financial issues before her election to the Senate. He headed the consumer protection bureau from 2012 to 2017, leaving in the first year of the Trump administration to make a failed bid for governor of Ohio.

Administration officials said that he and Ms. Warren maintain a close relationship, raising questions about how closely their views align on the question of canceling student debt. Ms. Warren has argued that it is a crushing burden for young people, and that relieving it would reduce economic inequality. Some critics say that forgiving student loans would disproportionately help the rich, who use them to pay for advanced degrees, rather than help the poor, who often are not college educated.

In a statement after his appointment was announced on Monday, Mr. Cordray focused on student debt as an overriding concern, saying that he looked forward to working with leaders in the department, the Biden administration and Congress to “create more pathways for students to graduate and get ahead, not be burdened by insurmountable debt.”

He did not indicate his position on whether some debt should be canceled, however. A spokeswoman for the Education Department, Rachel Thomas, said the agency is working with the Justice Department and the White House to review options on the issue.

Republican critics tried to block Mr. Cordray’s appointment to the consumer financial protection bureau under Mr. Obama, and have complained that the bureau had too much power and saddled businesses with unnecessary regulations. But his new appointment as chief operating officer of federal student aid, made by the education secretary, Miguel Cardona, is effective Tuesday and needs no other approvals.

In a statement announcing the appointment, Mr. Cardona said, it was “critical” that student loan borrowers could depend on the department “for help paying for college, support in repaying loans, and strong oversight of postsecondary institutions.”

Mr. Cordray, a five-time “Jeopardy!” champion, has also been a vocal critic of for-profit colleges. “I hate how these hollowed-out businesses and subpar colleges are cheating consumers, employees and whole communities,” he wrote in a guest essay in The Plain Dealer, Ohio’s largest newspaper.

Mr. Cordray succeeds Mark A. Brown, who was appointed as chief operating officer of federal student aid by President Donald J. Trump in March 2019 and resigned in March of this year. Mr. Brown became a target of consumer and labor groups, who cheered his resignation. Ms. Warren greeted Mr. Brown’s resignation with a tweet that said it was “good for student borrowers.”

Consumer advocates were delighted by Mr. Cordray’s appointment. “This is an outstanding pick,” said Seth Frotman, a former student loan ombudsman at the consumer protection bureau who worked closely with Mr. Cordray. Mr. Frotman is now the executive director of the Student Borrower Protection Center, an advocacy group.

“This is a very promising sign about a sea change in thinking at the Education Department,” Mr. Frotman said.

Mr. Cordray made student loan oversight one of the consumer protection bureau’s priorities, and in early 2017 — two days before Mr. Trump took office — the agency sued Navient, one of the Education Department’s largest student loan servicers, for errors and omissions that Mr. Cordray said improperly added billions of dollars to borrowers’ tabs.

The lawsuit is ongoing, and six state attorneys general have filed similar cases. The lawsuits describe routine mistakes and lapses in oversight that over time added up to systematic failures, eerily similar to the mortgage servicing industry’s bungling of borrower accounts and property foreclosures during the 2008 recession.

Mr. Cordray has described the country’s soaring student loan debt — which eclipses all consumer debt other than mortgages — and the often slipshod way it is managed as a problem ripe for government intervention. “The domino effects of student debt burdens and loan servicing problems are holding back the upcoming generation and hampering the economy,” Mr. Cordray wrote in his 2020 book, “Watchdog.”

The Education Department is the primary lender for Americans who borrow to pay for higher education. It directly owns loans made to nearly 43 million people, totaling $1.4 trillion.

In one of the government’s most sweeping pandemic relief measures, the department in March 2020 allowed borrowers to stop making payments on their federal student loans, and temporarily set the loans’ interest rate to zero percent. That pause is scheduled to continue through September.

Because of that freeze, fewer than 1 percent of borrowers with federal loans are currently making payments on then. Restarting loan collections will be one of the biggest challenges facing the Education Department this year.

Mr. Cordray will inherit a plethora of other problems at the Education Department, including extensive errors and obstacles in the department’s Public Service Loan Forgiveness program, which is intended to forgive the debts of teachers, military members, nonprofit workers and others in public-service careers.

The agency is also grappling with claims from hundreds of thousands of borrowers seeking relief through a program intended to eliminate the debts of people who were defrauded by schools that broke consumer protection laws.

Susan C. Beachy contributed research.

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