Let’s end financial bureau’s interference in student loans

It is past time for the Consumer Financial Protection Bureau (CFPB) to stop overreaching. Specifically, it should stay out of the federal student loan program. That’s the business of the U.S. Department of Education. With the CFPB, the Obama administration seemed determined to push the envelope to create policy through enforcement actions in ways not granted by law. Federal student loans are a clear example.

The federal government, not banks, hands out billions of dollars in student loans, which accounts for 90 percent of the market each year. The Department of Education sets the interest rates according to a formula established in law. The department also sets the terms and eligibility for all these loans — which, by the way, are funded with taxpayer dollars. There is no legitimate role for the CFPB in this area.  

{mosads}The Department of Education has a robust process and extensive expertise for managing the loans and loan servicers. In my prior role as chairman of the House Committee on Education and the Workforce, I oversaw the Higher Education Act, which establishes the policies and responsibilities for all federal student loans that apply to all borrowers regardless of where they live. I did not always agree with the policies of the Obama administration, especially those adding to the proliferation of repayment options, thus further complicating an already confusing maze of programs.

Despite my concerns about these policies, I have much greater concerns with the back seat driving of the CFPB. It was never the intent of Congress to have the bureau regulate another federal agency.

To achieve its expansion of power, the CFPB spun a narrative that simply ignored the facts. The story was that there are millions of borrowers who are falling behind on tens of thousands of dollars of debt. That’s not true. Roughly 30 percent of bachelor’s degree recipients graduate without borrowing at all. The overwhelming number of Americans are paying back their student loans successfully, particularly those who complete their degrees.

It seems that the bureau was trying to force borrowers into income-based repayment in such repayment plan programs. These are good options for many borrowers, which is why participation has increased by 295 percent over the past four years. But they may not be best for everyone — and it certainly is not the job of the CFPB to promote them.

In its determination to meddle in the Department of Education’s business, in 2015 the bureau staged high-profile events and had an online campaign to encourage consumers to “tell us about your student debt stress.” It actively solicited complaints about student loan servicers, who must follow the government’s rules and ultimately cannot help struggling borrowers who refuse to respond to servicer outreach. As a percentage of budget size, the CFPB had the dubious distinction of being the largest advertiser in the federal government.

Even worse, it wasted taxpayer money on lawsuits, such as the one against student loan servicer Navient. Recent court filings have made clear the government’s case has no merit. Last month, it was reported that Navient had provided some 450,000 pages of documents, made hundreds of phone calls and submitted 30 reports. There are two particularly concerning aspects of the litigation. First, it produced no evidence that Navient was guilty of “systematically and illegally failing borrowers,” and, second, it was filed two days before President Obama left office.

The new acting director of the CFPB, Mick Mulvaney, should move quickly to drop the lawsuit. He has shown that he is serious about reorganizing and refocusing the bureau; this should be an important part of that effort. The CFPB should not interfere with other federal departments and agencies as it clearly has done here.

John Kline was chairman of the U.S. House Education and the Workforce Committee from 2011-2017. A Republican from Minnesota, he served in Congress from 2003-2017. He is a member of the board of directors for Education Corporation of America.