Student loan watchdog quits, saying U.S. has "turned its back on young people"

The U.S. official in charge of protecting student loan borrowers resigned in protest on Monday, saying the Trump administration "has turned its back on young people and their financial futures."

Seth Frotman, student loan ombudsman at the Consumer Financial Protection Bureau, said Monday he is stepping down at the end of the week while also ripping into CFPB acting director Mick Mulvaney.

"At every turn, your political appointees have silenced warnings by those of us tasked with standing up for service members and students," he wrote in a letter.

Frotman also accuses the CFPB's leadership of suppressing publication of a report prepared by the agency's staff after new evidence surfaced late last year that the nation's largest banks were, in his words, "ripping off students on campuses across the country by saddling them with legally dubious account fees."  

In an emailed statement to CBS News, a CFPB spokesperson said the agency doesn't comment on personnel matters, but also said that "we hope that all of our departing employees find fulfillment in other pursuits and we thank them for their service."  

Frotman's student loan office has helped pursue lawsuits against for-profit educators including Corinthian Colleges and Navient, one of the country's biggest student lenders. The Department of Education, headed by Betsy DeVos, has so far declined to assist the CFPB with its legal action against Navient. 

Frotman wrote: "American families need an independent Consumer Bureau to look out for them when lenders push products they know cannot be repaid, when banks and debt collectors conspire to abuse the courts and force families out of their homes, and when student loan companies are allowed to drive millions of Americans to financial ruin with impunity."

Consumer groups said Frotman's exit is a loss for borrowers. 

"The administration has seized control of an independent consumer watchdog and is strangling one of the only agencies in Washington dedicated to looking out for the rights of ordinary Americans," Christopher Peterson, director of financial services at the Consumer Federation of America, said by email. 

Frotman's resignation also brought criticism from Sen. Elizabeth Warren, D-Mass., who was instrumental in the CFPB's creation following the 2008 financial crisis. Warren took to social media on Monday to slam Mulvaney for "siding with greedy student loan companies over students and military families."

As of December, nearly 43 million borrowers owed a total of $1.4 trillion in federal student loans, which have continued to rise even as the U.S. economy has strengthened and as Americans have pared other kinds of debt. A report from the Government Accountability Office released Monday found ongoing weakness with the Department of Education's oversight of student loan servicers. 

The CFPB ombudsman's office reviewed tens of thousands of complaints from student loan borrowers and was among the government entities that first warned of the escalating problem of students unable to repay their loans. Mulvaney scaled down the mission of Frotman's student loan office earlier this summer, transferring some of its duties to other CFPB personnel. 

A Senate committee last week narrowly approved Kathy Kraninger to replace Mulvaney at the CFPB. Kraninger, who previously worked at the Office of Management and Budget and Department of Homeland Security, is seen as a protege of Mulvaney and is opposed by Warren and other consumer advocates.

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• Mick Mulvaney
• Elizabeth Warren