Seth Frotman oversaw the $1.5 trillion student loan market for the Trump administration. In August, he quit in a very public way, protesting in a widely circulated resignation letter what he called the White House’s open hostility toward the nation’s millions of student loan borrowers. Now he’s starting his own watchdog group to do what the government won’t, and he’s poaching former colleagues to do it.
Having spent seven years with Consumer Financial Protection Bureau, three of them as student loan ombudsman, Frotman said he drove policy reform that returned $750 million to wronged student borrowers.
Between July 2011 and August 2017, the CPFB’s student protection unit handled 50,700 private and federal student loan complaints and almost 9,800 debt collection complaints related to private or federal student debt. It spurred enforcement actions across the U.S. government that led lenders including Wells Fargo, Sallie Mae and Navient—as well as now-defunct for-profit chain Corinthian Colleges—to return hundreds of millions of dollars to consumers.
However, President Donald Trump’s appointee to run the CFPB, Mick Mulvaney, shuttered the office in May as a part of an effort to make the bureau “more efficient.”
According to the Brookings Institution, almost 40 percent of U.S. student borrowers will default on their loans by 2023. More than 11 percent of student loan borrowers were 90+ days delinquent as of Sept. 30, Bloomberg data show.
“The federal government hasn’t just walked away from the fight,” Frotman said in an interview. “They’re arming the other side.”
Frotman, 40, said that while he was reluctant to leave the government, “it wouldn’t have been possible for me to stay and continue working to protect 44 million Americans with student loan debt.” Following his resignation, he began planning the new group. On Wednesday, he announced the Student Borrower Protection Center will partner with state and local policymakers, think-tanks, law enforcement and universities to help alleviate what he calls an insurmountable student debt crisis.
As the cost of tuition and borrowing continues to rise, student loans have seen almost 157 percent in cumulative growth since the Great Recession. By comparison, auto loan debt has grown 52 percent while mortgage and credit-card debt actually fell by about 1 percent, according to a Bloomberg analysis of federal and private loans. Student loan debt also currently faces the highest 90+ day delinquency rate of all consumer debt.
“Every 28 seconds of every single minute of every single hour of every single day, a student defaults on their loan.”
“Every 28 seconds of every single minute of every single hour of every single day, a student defaults on their loan,” Frotman said. “Still, in many ways, the student debt crisis is a quiet crisis. Student loan borrowers are forced to live with their struggles behind closed doors and with little oversight.”