Published on August 30, 2021 | 5:10 am
Updated 5 minutes ago
NEW YORK (AP) – Before starting an advocacy group at the Student Borrower Advocacy Center, Seth Frothman served as Student Loan Ombudsman at the Consumer Financial Protection Bureau. Basically, it is the federal government’s student loan officer.
Frotman held this position until 2018, when he stepped down to protest the Trump administration’s handling of student loans and private service companies.
Frotman told The Associated Press about the Biden administration’s decision to extend the student loan moratorium and other $ 1.5 trillion in industry problems.
This interview has been edited for clarity:
Q: President Biden has extended the moratorium on student loan payments until January 31, 2022. Why is it good?
A: It would be a disaster if we returned payments so quickly during the recovery period. It is important to remember how many student loan borrowers were suppressed by the system prior to the virus. One in four has delayed payment. Millions have struggled to pay their student loan bill as well as put food on the table. Simply put, student borrowers have too much debt, and this administration must figure out the root of the problem before asking borrowers to repay the money.
Q: What do you mean?
A: One example is the Public Service Loan Forgiveness Program. Millions of borrowers have really important safeguards that could completely write off their debts if they performed government services. Washington promised that if you manage to get our country back or serve in the army, your debts will be written off. Millions have kept their end of the deal, but nine out of 10 applicants are turned down.
The Pennsylvania Higher Education Support Agency (also known as FedLoan) had a terrible track record in implementing this program. They recently announced that they are terminating the student loan service contract, which I think is good. This gives the administration the opportunity to finally establish oversight of the industry.
Q: How important is it for the Department of Education to write off student loan debts for 300,000 disabled borrowers, and why? It was a long time ago?
Answer: This is just the beginning – millions of others have been denied the promised assistance, including those who work in the public service, those who are deceived by predatory schools, and those who serve in the army. They deserve the same massive debt relief that hundreds of thousands of borrowers have received today. Cardona’s secretary has developed a roadmap to fix the broken student loan system, and now he just needs to follow it.
Q: What worries you lately in the student loan market?
A: In the past few years, we have seen a new crop of predatory finance companies emerge in education. Many of them are fintech companies trying to fill the space that banks would have. I am deeply concerned about a new form of funding called revenue sharing agreements, which require you to donate a portion of your future income towards tuition fees. Such agreements are not subject to traditional financial protections, so there are many opportunities for abuse.