Seth Frotman oversaw the $1.5 trillion student loan market for the Trump administration. In August, he quit in a very public way, protesting in a widely circulated resignation letter what he called the White House's open hostility toward the nation's millions of student loan borrowers. Now he's starting his own watchdog group to do what the government won't, and he's poaching former colleagues to do it.
Having spent seven years with Consumer Financial Protection Bureau, three of them as student loan ombudsman, Frotman said he drove policy reform that returned $750 million to wronged student borrowers.
Between July 2011 and August 2017, the CPFB's student protection unit handled 50,700 private and federal student loan complaints and almost 9,800 debt collection complaints related to private or federal student debt. It spurred enforcement actions across the U.S. government that led lenders including Wells Fargo, Sallie Mae and Navient—as well as the now-defunct for-profit chain Corinthian Colleges—to return hundreds of millions of dollars to consumers.
However, President Donald Trump's appointee to run the CFPB, Mick Mulvaney, shuttered the office in May as part of an effort to make the bureau "more efficient."
According to the Brookings Institution, almost 40 percent of U.S. student borrowers will default on their loans by 2023.
"The federal government hasn't just walked away from the fight," Frotman said in an interview. "They're arming the other side."
Frotman, 40, said that while he was reluctant to leave the government, "it wouldn't have been possible for me to stay and continue working to protect 44 million Americans with student loan debt." After his resignation, he began planning the new group. On Wednesday, he announced the Student Borrower Protection Bureau will partner with state and local policymakers, think tanks, law enforcement and universities to help alleviate what he calls an insurmountable student debt crisis.
As the cost of tuition and borrowing continues to rise, student loans have seen almost 157 percent in cumulative growth since the Great Recession. By comparison, auto loan debt has grown 52 percent while mortgage and credit card debt actually fell by about 1 percent, according to a Bloomberg analysis of federal and private loans. Student loan debt also currently faces the highest 90-plus-day delinquency rate of all consumer debt.
"Every 28 seconds of every single minute of every single hour of every single day, a student defaults on their loan."
"Every 28 seconds of every single minute of every single hour of every single day, a student defaults on their loan," Frotman said. "Still, in many ways, the student debt crisis is a quiet crisis. Student loan borrowers are forced to live with their struggles behind closed doors and with little oversight."
Frotman, an attorney, previously worked on the Senate Committee on Health, Education, Labor, and Pensions and was deputy chief of staff for former Rep. Patrick Murphy of Pennsylvania. Before his work on federal policy, he served as counsel for the New Jersey State Senate, where he worked on consumer protection legislation.
"Politics has infiltrated everything," Frotman said of the current U.S. administration. With Secretary of Education Betsy DeVos dismantling Obama-era policies that protected student loan borrowers, he said, the outlook for students is worsening. Spokespersons for the CFPB and the Department of Education didn't immediately respond to requests for comment.
On Tuesday, DeVos spoke at the Education Department's annual Federal Student Aid training conference in Atlanta. She called the federal student aid program a "looming crisis in higher education" and blamed rising debt on the Obama administration. "If we, as a country, do not make important policy changes in the way we distribute, administer and manage federal student loans, the program on which so many students rely will be in serious jeopardy," she said.
Frotman's Student Borrower Protection Bureau, which is based in Washington, won't have the enforcement power of the CFPB, of course. Instead, it will seek to publicize the cost of debt and delinquency on communities across the country, he said. The nonprofit has established partnerships with New York City's Department of Consumer Affairs and the San Francisco Office of Financial Empowerment and the Attorney General of the District of Columbia.
Frotman said his goal is to create policy and litigation strategies to tackle the crisis from the outside. Currently, he has three full-time employees and 10 people in his fellowship program, which will organize professionals working in related fields to produce research surrounding the debt crisis. The SBPB has received financial support from the Sandler Foundation, among others.
