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The demise of a key consumer protection agency could push relief for student-loan borrowers further out of reach.
Attorneys for Russell Vought, acting director of the Consumer Financial Protection Bureau, wrote in a legal filing on November 10 that the administration “anticipates exhausting” the CFPB’s available funds in early 2026, meaning that after that point, the agency created in 2011 to protect Americans from another financial crisis will be defunct.
Vought wrote in a memo that the CFPB’s funding structure, which relies on money from the Federal Reserve, is not constitutional, marking the Trump administration’s most significant step to date in attempting to shut down the agency. Vought argued that the agency can only draw from the Fed when the central bank is turning a profit, which it has not done in recent years.
Getting rid of the CFPB would remove a level of oversight on financial institutions — and also raises increased risks for student-loan borrowers, John Rao, a senior attorney with the National Consumer Law Center, told Business Insider.
“Earlier administrations have worked closely with the CFPB to ensure that servicers comply with the contracts they have to service student loans, and also to make sure that the laws are carried out as they should,” Rao said. “And I don’t think any of us have any confidence at this point that that’s going to occur.”
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Since the CFPB was created, it has fined student-loan servicers for misleading borrowers about payments and debt relief, sued major student-loan lenders, and returned millions of dollars to borrowers who the CFPB determined were affected by predatory behavior. It also took on private student debt — the CFPB sued servicer PHEAA in 2024 over accusations that it illegally collected borrowers’ private loans that were already discharged through bankruptcy.
The agency’s work, however, was halted soon after President Donald Trump took office. Treasury Secretary Scott Bessent ordered CFPB employees to cease most of their work in February, and in an April memo, the agency’s chief legal officer said that the CFPB will “deprioritize” student-loan oversight.
Should the CFPB run out of funding next year, Rao said that oversight of the student-loan industry would likely fall into the hands of the states, and the level of oversight would vary depending on each attorney general’s priorities.
“A lot of those offices are strapped for resources,” Rao said. “So it would be hard to say that they would be an equal replacement for the CFPB, but that is a possibility, and that’s not going to happen in every state.”
Where student-loan oversight stands
The Supreme Court ruled earlier this year that the CFPB’s funding is constitutional, siding with the agency over payday lenders who brought the lawsuit. Sen. Elizabeth Warren, who helped create the CFPB, said in a statement that Vought’s latest move to shut down the CFPB is “plainly illegal, and federal judges have already rejected his fringe theory. If the courts continue to uphold the law, Vought will fail again.”
With or without the CFPB, student-loan oversight has dwindled this year. The Department of Education has slashed its staff as part of Trump’s larger goal to shut down the agency altogether, meaning there are limited resources to ensure student-loan servicers are complying with their contracts and meeting their obligations to borrowers.
Still, the department announced in September that it would develop a new “common manual” intended to serve as a centralized place for servicing and debt collection practices, with the idea that consistent guidelines for borrowers and servicers would make it easier for the department to pursue enforcement actions.
Oversight over the industry will become more critical next year; the Trump administration is set to implement its sweeping changes to student-loan repayment plans, which include new borrowing caps on graduate and professional student loans and fewer repayment plan options.
Rao said that, absent the CFPB, servicers will face less pressure from regulators to ensure they’re following the law.
“Things could get worse rather than better because there’s not effectively a regulator, another regulator saying you need to do this,” Rao said.
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