If anything, Richard Cordray understands that restarting a behemoth like federal student loan payments is not as simple as flipping a switch and the gravity of the importance in making sure that the restart is done properly is not lost on him, based on a speech that he gave last week before the Education Finance Council.
The Department of Education is getting ready to end a nearly two-year forbearance plan on federally guaranteed student loans that was in place for the duration of the COVID-19 pandemic, which resulted in tens of millions of individuals not having to make payments on their student loans. But that forbearance program is set to expire on December 31, and at a time when many are still struggling to make ends meet, getting the restart right is paramount, said Cordray, the Chief Operating Officer of Federal Student Aid and the former Director of the Consumer Financial Protection Bureau.
“This is a defining moment, and it is important that we get it right,” Cordray said, according to a copy of his remarks. “At a time when so many have been struggling — with their health, their employment, their finances — we cannot burden them with poor execution on the return to repayment.”
Communication will be important, as will persuading individuals with student loans to start making payments again after two years of not doing so.
“…we can expect that many, many borrowers will not be eager to return to repayment when they have been led to believe, or even to hope, that was never going to happen,” Cordray said. “Getting over that psychological hurdle with millions of Americans may be a much harder job than we know.”
Cordray also spoke about the importance of holding student loan servicers and collectors accountable for their actions. To help accomplish this, Federal Student Aid is “beefing up our own capabilities as well as building strong relationships to reflect a vision of ‘one united government’ to fulfill shared goals,” Cordray said. “To be most effective, we need to collaborate consciously with others who can help achieve our joint objectives. That includes our fellow federal officials, like the CFPB, the FTC, and the Departments of Justice and Treasury. It also includes state officials, where we will engage in a strategy of ‘cooperative federalism’ to protect the people we serve. And it includes community and consumer groups who advocate for borrowers and can help us by being our ‘eyes and ears’ about problems and errors that need to be addressed. By strengthening these relationships, we will be more successful in securing compliance with the law and the obligations it imposes – and we will help more borrowers be successful.”
