Student loan borrowers who said their lenders overcharged them were days away from getting help when the Trump administration fired the federal workers who were set to step in.
The workers, from the Consumer Financial Protection Bureau, were also in the midst of helping another approximately 900 students defrauded by for-profit colleges who had been overwhelmingly, and wrongly, rejected from having their loans discharged, according to two people with direct knowledge of the work. Plans to publish that information and aid those students were paused indefinitely after President Donald Trump took office.
Staff responsible for sifting through the tens of thousands of student loan-related complaints submitted to the bureau were part of massive federal job cuts last month. They often worked directly with students whose lenders refused to provide affordable payment plans, pause payments when borrowers were struggling with their bills, or discharge loans when a college was found to have misled them. The week of the firings, these CFPB staffers had been set to start a more efficient process for responding to complaints “that was going to be able to help hundreds of people,” said Julia Barnard, the former student ombudsman and senior adviser at the bureau. Barnard filed a court declaration as part of a larger lawsuit by the CFPB employee union against the Trump administration, arguing her dismissal was in violation of federal law.
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The Consumer Financial Protection Bureau was created in 2010 as a watchdog agency to guard against financial fraud after the 2008 financial crisis. It has long been a target for conservatives as well as the private banking and student loan industries, who say the bureau oversteps its authority and inappropriately meddles in financial markets. Since taking office earlier this year, President Donald Trump has called for shuttering the agency entirely. Its D.C. headquarters have been closed. Dozens of employees were laid off, and the rest were ordered to stop working. Current and former staff, student advocates and legal experts told The Hechinger Report that gutting the bureau could leave more students mired in debt, even as the colleges and lenders continue to profit.
The administration said in a court filing last week in response to the union’s lawsuit that it wants to run a “more streamlined and efficient bureau,” and it has told employees to do only the work required by law. Jonathan McKernan, Trump’s nominee to run the agency, said in a confirmation hearing that it had exceeded its statutory authority and “harmed consumers through higher prices and reduced choice.” CFPB did not respond to a request for comment.
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Borrowers who attended the now-closed International Academy of Design and Technology were among those on the brink of getting CFPB’s help. A settlement in federal court three years ago found that the for-profit college was one of many that had misled students about graduation rates and salaries its graduates earned. Federal loans were automatically canceled. Private borrowers also should have had some of their debt canceled, according to federal regulations.
Amanda Luciano was the first in her family to attend college, and as a teenager back in 2006, she was advised to take out private loans at the urging of one of the International Academy of Design and Technology’s financial aid officers. Her degree, however, proved worthless: She searched job boards for three years and got only one interview in her field. Now a mom of two young boys, she has kept up with her $700-a-month loan payments and works two jobs to help support her family. She has paid off $52,000 of the $61,000 she borrowed, she said, but because of interest building on her loan, she still owes over $85,000.
Last February, Luciano received an invitation from private lender Navient to apply to have her remaining debt discharged. She was denied.
The CFPB could have intervened on her behalf, but with the agency essentially hamstrung by the stop-work order and far-reaching layoffs, Luciano filed a proposed class-action lawsuit against Navient last month.
Navient did not respond to questions for this article and declined to comment on the lawsuit.
Related: Left in the lurch by for-profit college direct loans
“I hate to think about what it means going forward for other lenders, and also for Navient itself, if they feel like all of a sudden they aren’t accountable to their legal obligations,” said Eileen Connor, president and director of the Project on Predatory Student Lending.
Connor said the firings at the CFPB worry her.
Loans like Luciano’s “have been hanging over people’s heads and controlling their financial lives for so long,” said Connor. “Honestly, it’s mind-boggling the amount of money that they are seemingly just hell-bent on squeezing out of these people.”
Andrew Gillen, research fellow at the Cato Institute’s Center for Educational Freedom, supports the Trump administration’s efforts to reduce the scope of the bureau’s work. He’d like to see the CFPB focus more on increasing transparency around student borrowing. “There’s a lot to be said for making student financial aid less confusing,” he said. “That’s a role that would be perfectly tailored to the CFPB.”
Gillen, like many other conservatives, also contends that the bureau has gone beyond its regulatory authority, in part by adopting a broad interpretation of what constitutes a student loan.
In 2021, for instance, it issued a consent order against income share agreements providers, in which the amount students repay a school is based on their eventual salary. Some people ended up on the hook to repay hundreds of thousands of dollars through these arrangements. The bureau determined it was illegal for providers to tell people that ISAs were not loans.
Gillen said he likes when parts of the government are creative — just not regulators.
“I get real nervous when a policeman is getting creative with how they’re interpreting the law,” he said.
Related: ‘It’s a shell game’: How under-the-radar companies help for-profit colleges stay in business
The CFPB has also aggressively worked to regulate and oversee loans that for-profit colleges make directly to students. Since the Great Recession, these colleges have directly loaned students billions of dollars, despite knowing many will never earn enough to be able to fully pay them back. And the colleges, which are not bound by the same rules that govern federal student loans, could withhold a student’s transcript if they fail to make payments.
In 2022, however, the CFPB called that practice “abusive” and said it violated federal law. The agency began investigating colleges that withheld transcripts for nonpayment of loans taken directly from the school.
The agency also scrutinized payment plans offered by for-profit colleges to students who are unable to pay the cost of attendance up front. In 2023, it published a report analyzing the payment plans offered by 450 institutions, the majority of which charged additional fees. Some included terms and conditions that waived legal protections.
At the time, the bureau pledged to “continue to gather and analyze information on tuition payment plans and the practices of school-based lenders.”
Student advocates and former employees warn that even if the CFPB remains open, significant cuts to its staff will essentially turn back the clock when it comes to student borrower protections.
“Before the CFPB, when things were bad enough, there would be an enforcement action you’d suddenly see,” said Mike Pierce, co-founder and executive director at the Student Borrower Protection Center and previously a senior adviser to the student loan ombudsman at the CFPB. “But otherwise, more or less, companies could do whatever they wanted, and that was a real problem.”
Contact investigations editor Sarah Butrymowicz at butrymowicz@hechingerreport.org or on Signal: @sbutry.04.
Contact senior investigative reporter Meredith Kolodner at kolodner@hechingerreport.org or on Signal: @merkolodner.04.
This story about federal layoffs was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for the Hechinger newsletter.
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Student loan borrowers who said their lenders overcharged them were days away from getting help when the Trump administration fired the federal workers who were set to step in. The workers, from the Consumer Financial Protection Bureau, were also in the midst of helping another approximately 900 students defrauded by for-profit colleges who had been
The post Student loan borrowers misled by colleges were about to get relief. Trump fired people poised to help appeared first on The Hechinger Report. Higher Education, College to careers, Featured, for-profit education, Higher education affordability, Investigations, Law and policy, Politics, Trump administration The Hechinger Report
