A former federal regulator and Elizabeth Warren acolyte who has repeatedly questioned the Obama administration’s treatment of student loan borrowers just took a job with the Department of Education.
Rohit Chopra brawled with schools and banks while serving as the nation’s student loan watchdog at the Consumer Financial Protection Bureau, an agency launched by Warren, now a U.S. senator from Massachusetts. He began work Monday as a senior official at the Education Department, officials said Wednesday.
Chopra, 33, will work for an Education Department that student advocates and some regulators say has shirked one of its basic duties: Policing the nation’s colleges and universities, which annually receive more than $100 billion in federal loans and grants, and its loan contractors, which guide borrowers on their options and collect their monthly payments on the department’s behalf.
Chopra often contradicted the Obama administration, especially its senior officials at the Education Department, on student loan issues while at the CFPB. He has admonished the administration’s loan contractors, questioned the reliability and quality of government data on student debt, and challenged the value of going to college:
Senior Obama administration officials — in particular former Education Secretary Arne Duncan — continue to say that “college is an excellent investment.” Chopra has compared it to an insurance policy, one with “premiums that keep going up and up.”
Total student debt has doubled under Obama to $1.3 trillion, according to the Federal Reserve. Nearly 1 in 5 of the roughly 42 million Americans with student loans are in default, according to the CFPB. Several million more are delinquent while millions of others watch their balances grow as they delay payments under approved repayment plans, Education Department data show. Chopra has repeatedly urged a forceful government response to the nation’s student debt crisis, such as by allowing borrowers to refinance loans with high interest rates or discharge debt in bankruptcy that they’re unable to repay. In 2013, he said financial regulators and economic policymakers would be “irresponsible” if they ignored the potential problems stemming from overly indebted Americans struggling to repay their student loans.
Education Department officials have sought to minimize fears that U.S. economic growth could be hampered by Americans’ excessive levels of student debt. Chopra has spent the past few years warning fellow policymakers and the public about student debt’s impact on homeownership, Americans’ retirement savings and small business formation. It’s the “student debt domino effect,” he says. “There is growing consensus among industry leaders and policymakers that student debt may be holding back the economic recovery,” he said last year.
In July, Duncan said that late payments on student loans had fallen as a result of the Education Department’s efforts. “Some in the student loan industry still believe that things are just fine and dandy,” Chopra said the next month. “But the reality is that millions of borrowers are needlessly in distress … When borrowers reach out for help, student loan servicers need to own up to borrowers and tell them the truth about their options, rather than steering them into a plan that gets them off the phone quickly.”
Last summer, Duncan took credit for a small drop in the share of borrowers who defaulted early on their federal loans. Chopra argued that most of those defaults could’ve been avoided entirely had “servicers enrolled borrowers in affordable repayment plans.” Chopra reckons that loan servicers — the companies the Education Department annually pays more than $800 million to counsel borrowers on their federal repayment options — haven’t properly done their jobs.
Chopra also has sought to publicly shame Education Department loan contractors when the department preferred to not draw attention to them. In 2013, for example, he noted on the CFPB’s blog that Navient Corp., then known as Sallie Mae, was the worst-ranking loan specialist in three separate department-commissioned surveys of borrowers, colleges and Education Department employees. Borrowers wishing to move their accounts to another contractor with better customer service were generally out of luck, he said at the time. The Education Department posted the survey results on an obscure department website, and never proactively told borrowers that the results existed. The department said in response that borrowers could find the survey results by searching for them on Google, which it argued helped improve customer service.
In their interactions with distressed borrowers, the Education Department’s loan contractors “may be hiding the ball to protect their bottom line,” Chopra has said. The Education Department’s student loan contractors receive more money if borrowers stay current on their debt, according to their contracts with the government, but they’re also guaranteed new accounts every year regardless of their performance.
Chopra also has slammed the colleges themselves. His attitude toward misbehaving schools is one of the reasons why consumer groups have cheered nearly his every move.
For example, Chopra’s team at the CFPB publicly shamed schools and banks they thought should be voluntarily disclosing to students the lucrative deals they struck that allowed banks to peddle accounts and debit cards to a potentially captive audience on campus. By contrast, the Education Department has fought efforts to publicly disclose the identities of colleges that either pose a risk to taxpayers or may not be in compliance with federal rules.
Shortly after leaving the consumer bureau last year, Chopra sent a blistering letter to investors in ITT Educational Services Inc., an Indiana-based for-profit college operator. Chopra said that he had “serious concerns” that the company wasn’t properly managed and questioned whether it could survive. He said the company’s schools, which the CFPB sued in 2014, had harmed its own students — a charge the company vigorously disputes.
In a 2013 speech, Chopra unfavorably compared colleges — particularly for-profit schools — to pre-financial crisis mortgage lenders that got paid based on the number of loans they made regardless of whether borrowers could repay.
Colleges’ revenue from taxpayers, Chopra noted, isn’t influenced by students’ graduation or drop-out rates. He said that gives schools an incentive to focus on enrolling students rather than helping them succeed.
Last year, when the Education Department was facing a growing revolt by allegedly defrauded Americans over its 2014 bailout of for-profit schools owned by Corinthian Colleges Inc., Chopra organized a meeting between the group and federal officials. The group has since expanded to hundreds of former college students who are publicly refusing to repay federal loans they took on to attend for-profit schools.
Chopra is “as capable as they come, and as resolutely pro-consumer as possible,” tweeted Barmak Nassirian, who works on federal policy issues for the American Association of State Colleges and Universities. But at the Education Department, Nassirian noted, the “question is whether they’ll let him do the job.”
Borrower advocates hope Chopra’s appointment signals a more borrower-friendly Education Department as its senior leaders prepare for their final year in office under Obama, whose eight-year term has included the end of the bank-based student loan program but also a doubling of total student debt, record levels of loan defaults, and a negligible increase in college graduation rates.
“Rohit’s experience in protecting borrowers and his expertise in financial services policy will advance and deepen” the Education Department’s “ongoing work to strengthen our student aid programs,” Education Undersecretary Ted Mitchell said in an email.