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Enhanced Default Assumptions for Budgetary Cost Estimates' which was 
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Report to the Chairman, Committee on the Budget, House of 
Representatives: 

United States Government Accountability Office: 

GAO: 

August 2004: 

Student Consolidation Loans: 

Further Analysis Could Lead to Enhanced Default Assumptions for 
Budgetary Cost Estimates: 

GAO-04-843: 

GAO Highlights: 

Highlights of GAO-04-843, a report to House Committee on the Budget.

Why GAO Did This Study: 

The number of borrowers consolidating their federal student loans has 
increased substantially in recent years, with the total amount of loans 
being consolidated rising from $13 billion in fiscal year 1999 to over 
$41 billion in fiscal year 2003. This increase in consolidation loan 
volume and recent interest rate trends have increased the overall 
estimated long-term cost to the federal government of providing 
consolidation loans under the Department of Educationís (Education) two 
major student loan programsóthe Federal Family Education Loan Program 
(FFELP) and the William D. Ford Federal Direct Loan Program (FDLP). 

GAO is providing information on (1) the differences that exist between 
FFELP and FDLP consolidation loans and borrowers, (2) the extent to 
which borrowers with student loans under one program obtain 
consolidation loans under the other, and (3) how FFELP and FDLP 
borrower and loan characteristics and the movement of loans between the 
two programs are incorporated into Educationís budgetary cost estimates 
for consolidation loans.

What GAO Found: 

On average, during the 1995-to-2003 period, FFELP consolidation loan 
borrowers had higher levels of consolidation loan debt than FDLP 
consolidation loan borrowers. FFELP borrowers were also more likely 
than FDLP consolidation borrowers to have attended a 4-year school 
versus a 2-year or proprietary school. As a group, FFELP borrowers were 
less likely to default on a student loan prior to consolidation than 
FDLP borrowers. However, both FFELP and FDLP borrowers who had 
defaulted prior to consolidation were more likely to default on their 
consolidation loan than those who did not default prior to 
consolidation.

Over the 1998-to-2002 period, an increasing share of both FFELP and 
FDLP underlying loan volume was consolidated into FFELP, while a 
decreasing share of underlying loan volume was consolidated into FDLP. 
Defaulted loans, however, whether from FFELP or FDLP, were much more 
likely to be consolidated into FDLP.

In general, Education incorporates borrower and loan characteristics 
and movement of loans between programs into its budgetary cost 
estimates by (1) grouping loans with similar characteristics in risk 
categories, (2) forecasting loan volume for each risk category, and (3) 
applying various assumptions to each risk category based on historical 
and other economic data. Education incorporates the default history of 
borrowers into its cost estimates by grouping consolidation loans with 
underlying defaulted loans in a risk category and applying higher 
default rate assumptions to loans in this category. However, Education 
has not analyzed whether borrowers with an underlying defaulted loan 
will default on their consolidation loans at different rates based on 
the type of school attended. Education does incorporate assumptions 
based on variations in default rates by school type, but only for 
nonconsolidation loans. As shown below, our analysis demonstrates that 
the extent to which borrowers with an underlying defaulted loan default 
on their consolidation loan varies according to the type of school they 
attended.

Default Rate of Consolidation Loan Borrowers Who Defaulted on a Loan 
Underlying Their Consolidation Loan, by Program and School Type, Fiscal 
Years 1995 to 2001: 

[See PDF for image]

[End of figure] 

What GAO Recommends: 

GAO recommends that Education consider the type of schools 
consolidation borrowers attended in developing the risk categories for 
the departmentís budgetary cost estimates. Education generally agreed 
with our recommendation.

www.gao.gov/cgi-bin/getrpt?GAO-04-843.

To view the full product, including the scope and methodology, click 
on the link above. For more information, contact Cornelia Ashby, (202) 
512-8403, ashbyc@gao.gov.

[End of section]

Contents: 

Letter: 

Summary of Key Findings: 

Further Analysis Could Lead to Enhanced Default Assumptions for 
Consolidation Loan Cost Estimates: 

Recommendation for Executive Action: 

Agency Comments: 

Scope and Methodology: 

Briefing Slides: 

Appendix I: Comments from the Department of Education: 

Figures: 

Figure 1: Default Rate of Consolidation Borrowers Who Defaulted on a 
Loan Underlying Their Consolidation Loan, by Program and School Type, 
Fiscal Years 1995 to 2001: 

Figure 2: Percentage of FFELP Consolidation Loan Borrowers with an 
Underlying Default by School Type: 

Figure 3: Percentage of FDLP Consolidation Loan Borrowers with an 
Underlying Default, by School Type: 

Abbreviations: 

FDLP: William D. Ford Direct Loan Program: 

FFELP: Federal Family Education Loan Program: 

NSLDS: National Student Loan Data System: 

United States Government Accountability Office: 

Washington, DC 20548: 

August 20, 2004: 

The Honorable Jim Nussle: 
Chairman, Committee on the Budget: 
House of Representatives: 

Dear Mr. Chairman: 

Consolidation loans--available under both of the Department of 
Education's (Education) two major student loan programs, the Federal 
Family Education Loan Program (FFELP) and the William D. Ford Direct 
Loan Program (FDLP)[Footnote 1]--allow borrowers who have multiple 
student loans, possibly from different lenders and from different loan 
programs, to combine their loans into a single new loan and extend 
their repayment period. Consolidation loans can reduce borrowers' 
monthly repayments, which may lower default risk and thereby reduce 
federal costs of loan defaults. Current provisions of the program also 
allow borrowers to lock in a fixed interest rate on their consolidation 
loans, unlike other FFELP and FDLP student loans, which carry an 
interest rate that varies from year to year. As we reported in October 
2003 and in March 2004,[Footnote 2] the number of borrowers 
consolidating their federal student loans has increased substantially, 
with the total amount--or volume--of loans being consolidated rising 
from $13 billion in fiscal year 1999 to over $41 billion in fiscal year 
2003. This increase in consolidation loan volume and the lower interest 
rates available to borrowers in recent years have increased the overall 
estimated long-term cost to the federal government of providing 
consolidation loans.[Footnote 3]

This report addresses your request that we expand upon the information 
provided in our earlier reports on consolidation loans by determining 
(1) what differences exist between FFELP and FDLP consolidation loans 
and borrowers, (2) the extent to which borrowers with student loans 
under one program obtain consolidation loans under the other, and (3) 
how FFELP and FDLP borrower and loan characteristics and the movement 
of loans between the two programs are incorporated into Education's 
budgetary cost estimates. Our work is based on an analysis of a 
representative sample of borrowers from Education's National Student 
Loan Data System (NSLDS), a national database of student loan 
recipients. Our analysis primarily focused on FFELP and FDLP borrowers 
in the sample who originated consolidation loans from 1995, the first 
full year in which loans were available under FDLP, through June 2003. 
On May 20, 2004, we briefed your staff on the results of our work. This 
report transmits the slides we used to brief your staff and conveys 
additional school type information requested by your staff at the 
briefing. Our key findings provided at the briefing are summarized 
below, followed by the additional information we are reporting in 
response to your staff's request. At the end of this letter, we provide 
additional details on the scope and methodology of our work.

Summary of Key Findings: 

In determining differences that exist between FFELP and FDLP 
consolidation loans and borrowers, we found that on average, FFELP 
consolidation loan borrowers, during the 1995-to-2003 time period, had 
higher levels of consolidation loan debt than did FDLP consolidation 
loan borrowers. The average consolidation loan amount among FFELP 
borrowers was about $26,400 versus about $20,000 for FDLP borrowers. 
FFELP consolidation borrowers were less likely than FDLP consolidation 
borrowers to have attended a proprietary (for profit) school prior to 
consolidation and were more likely to have borrowed while attending 
graduate school. Overall, FDLP borrowers had higher default rates in 4 
out of the 7 years between fiscal years 1995 through 2001. 
Additionally, for borrowers who had defaulted prior to consolidation, 
borrowers from both FFELP and FDLP were more likely to have defaulted 
on their consolidation loan than those who did not default prior to 
consolidation.

From fiscal year 1998 to fiscal year 2002, the share of underlying 
FFELP and FDLP loan volume consolidated into FFELP increased, while the 
share of underlying loan volume consolidated into FDLP decreased.
[Footnote 4] In fiscal year 2002 alone, 84 percent of FFELP loan volume 
that was consolidated was done so under FFELP, while 16 percent was 
consolidated under FDLP. With regard to FDLP loan volume consolidated, 
58 percent was consolidated under FFELP, while 42 percent was 
consolidated under FDLP. Defaulted loans, however, whether from FFELP 
or FDLP, were much more likely to be consolidated into FDLP. For 
example, in fiscal year 2002, 87 percent of defaulted underlying FFELP 
loan volume and 92 percent of defaulted underlying FDLP loan volume 
were consolidated under FDLP. According to Education officials, it is 
not surprising that a larger share of defaulted underlying FFELP and 
FDLP loan volume is consolidated into FDLP because requirements for 
consolidating defaulted loans under this program are often less 
stringent than those imposed by FFELP lenders. For example, FFELP 
lenders may chose not to offer repayment plans based on income levels, 
while FDLP is required to offer such a plan to eligible borrowers. In 
addition, an FFELP lender may require that the borrower be employed, 
while FDLP does not have such a requirement.

Education incorporates FFELP and FDLP borrower and loan 
characteristics, and the movement of loans between the two programs, 
into its budgetary cost estimates by (1) grouping loans that share 
similar characteristics in risk categories, (2) forecasting loan volume 
for these categories, taking into account the movement of loans between 
the two programs, and (3) applying various assumptions to the 
categories, such as rates of interest, estimates of loan prepayment, 
and rates of default. Among the risk categories Education uses to 
estimate costs, for example, is one that includes consolidation loans 
with underlying defaulted loans. Education forecasts the expected loan 
volume for this risk category and then applies various assumptions to 
derive an estimated budget cost for the loans. For example, Education 
assumes that a certain proportion of loans placed in this risk category 
will eventually go into default, thus increasing the federal 
government's cost of the loans. Education sometimes makes different 
assumptions for different groups. For example, Education assumes that 
consolidation borrowers who have defaulted on an underlying loan will 
default on their consolidation loans at a higher rate than will 
consolidation loan borrowers who have not previously defaulted. In 
estimating the costs of nonconsolidation loans--those that borrowers 
may ultimately consolidate--Education groups loans based on the type of 
schools borrowers attended (2-year, 4-year, proprietary, and so forth) 
because experience has shown that these borrowers default on their 
loans at different rates. However, Education does not group 
consolidation loan borrowers in this way because consolidation loans 
could reflect multiple underlying loans with different risk categories, 
and it believes that other differences, such as default rates of 
underlying loans, are more likely to significantly affect the estimated 
costs of consolidation loans. For consolidation loans, however, 
Education has not analyzed whether borrowers who consolidate a 
defaulted loan default again, or redefault, at different rates based on 
the type of school they attended. Because of data limitations, 
Education was, until recently, unable to link consolidation loans to 
borrowers' underlying loans. Education can now do this, making it 
possible to determine whether redefault rates vary by type of school. 
As a result of the additional analysis we conducted after the briefing, 
we are making a recommendation to the Secretary of Education that he 
direct Education's Director, Budget Service, to consider the type of 
schools consolidation borrowers attended in developing the risk 
categories for the department's budgetary cost estimates.

Further Analysis Could Lead to Enhanced Default Assumptions for 
Consolidation Loan Cost Estimates: 

Education's recently acquired ability to link consolidation loans to 
borrowers' underlying loans allows it to conduct additional analyses, 
which could be used to refine its budgetary cost estimates. In 
particular, Education could expand its risk categories that currently 
segregate consolidation loans by whether they have an underlying 
default to also segregate by the type of schools borrowers attended. 
Our analysis demonstrates that the extent to which borrowers redefault 
on consolidation loans varies according to the type of school they 
attended. By analyzing the extent to which borrowers will default on 
their consolidation loans based on the type of school attended, 
Education could determine the resulting impact on budgetary cost 
estimates. This could be important since the proportion of 
consolidation loan borrowers by type of schools attended has varied 
over time. As these proportions vary, the total rate of default on 
consolidation loans will likely vary as well, given that the type of 
school borrowers attended affects default rates. In its report on 
internal control, Education's auditor recently recommended that the 
department better monitor consolidation loan activity and conduct 
studies of the assumptions used in estimating the budgetary costs of 
consolidation loans.

Extent to Which Consolidation Loan Borrowers Redefault Varies by Type 
of School Attended: 

According to our analysis, the extent to which borrowers consolidated 
loans that included at least one loan on which they had defaulted, and 
then subsequently defaulted on their consolidation loan, varies by the 
type of school borrowers attended. For both FFELP and FDLP 
consolidation loans originated from fiscal years 1995 to 2001, the 
overall default rate for consolidation loan borrowers with an 
underlying default was higher for borrowers who had attended a 2-year 
or proprietary school than for those who had attended a 4-year school. 
As figure 1 shows, for FFELP, the rate of default was 45.5 percent for 
borrowers who had attended proprietary schools, compared with 29.6 
percent for borrowers who had attended a 4-year school. We observed 
similar relative default rates with respect to FDLP consolidation 
loans. The lower rate of redefault among consolidation loan borrowers 
who attended a 4-year school is consistent with the lower risk of 
nonconsolidation loan borrowers who attended a 4-year school, compared 
with borrowers who attended other types of schools.

Figure 1: Default Rate of Consolidation Borrowers Who Defaulted on a 
Loan Underlying Their Consolidation Loan, by Program and School Type, 
Fiscal Years 1995 to 2001: 

[See PDF for image]

Notes: 

(1) Analysis based on borrowers in the NSLDS sample who originated a 
consolidation loan from fiscal years 1995 through 2001, plus any 
underlying loans these borrowers originated from January 1, 1980, 
through September 2001.

(2) Four-year, 2-year, and proprietary represent borrowers whose 
underlying loans were obtained exclusively while attending these types 
of schools. Two-and 4-year category represents borrowers whose 
underlying loans were obtained while attending both 2-and 4-year 
schools. All other represents borrowers whose underlying loans were 
obtained while attending some combination of 4-year, 2-year, 
proprietary, and foreign schools other than the categories listed 
above.

[End of figure]

While figure 1 presents borrower rates of redefault, by school type, we 
also analyzed borrowers' default rates by year of consolidation, by 
school type. On this basis, we also observed differences by school 
type. Moreover, we observed different borrower default rates by school 
type for consolidation loans without an underlying loan default, and we 
observed different dollar volume default rates by school type for both 
consolidation loans with and without an underlying loan default. 
Because Education assumes a similar rate of default among consolidation 
loan borrowers without regard to the type of school borrowers attended, 
Education's cost estimates may be excluding important risk factors 
associated with specific school types. However, the impact of this 
exclusion will not be known until Education performs an analysis of the 
sensitivity of the cost estimates to different school types.

Share of Consolidation Loan Borrowers by Type of Schools Attended 
Varied over Time: 

Overall, the number of borrowers consolidating their student loans has 
increased significantly in recent years, while the proportion of 
borrowers by type of school attended has varied over time. As these 
proportions vary, the overall rate of default on consolidation loans 
will likely vary as well, given that the type of school borrowers 
attended affects default rates. As shown in figure 2 for FFELP and 
figure 3 for FDLP, generally there was an increasing share of 
consolidation loan borrowers with an underlying defaulted loan who had 
attended a 4-year school. At the same time there was a decreasing share 
of consolidation loan borrowers with an underlying defaulted loan who 
had attended a proprietary school. For example, for FFELP, the 
percentage of consolidation loan borrowers with an underlying default 
who had attended a 4-year school increased from over 30 percent in 
fiscal year 1995 to almost 50 percent in fiscal year 2001. In contrast, 
the percentage of consolidation loan borrowers with an underlying 
default who had attended a proprietary school dropped from almost 50 
percent in fiscal year 1995 to about 26 percent in fiscal year 2001. 
Similar patterns are also observed with regard to FDLP consolidation 
loans beginning in fiscal year 1996.

Figure 2: Percentage of FFELP Consolidation Loan Borrowers with an 
Underlying Default by School Type: 

[See PDF for image]

Note: Analysis based on borrowers in the NSLDS sample who originated a 
FFELP consolidation loan from fiscal years 1995 through 2001, plus any 
underlying loans these borrowers originated from January 1, 1980, 
through September 2001.

[End of figure]

Figure 3: Percentage of FDLP Consolidation Loan Borrowers with an 
Underlying Default, by School Type: 

[See PDF for image]

Note: Analysis based on borrowers in the NSLDS sample who originated a 
FDLP consolidation loan from fiscal years 1995 through 2001, plus any 
underlying loans these borrowers originated from January 1, 1980, 
through September 2001.

[End of figure]

While figures 2 and 3 present the variations in the percentage of 
consolidation loan borrowers with an underlying default by school type, 
we also analyzed volume changes by school type. On this basis, we also 
observed similar variations in proportions by school type. Because 
default rate assumptions are based in part on loans consolidated years 
ago that had a different distribution of underlying loans by school 
type than current consolidation loans, they may be less reliable than 
they could be. This could result in less precise cost estimates for 
consolidation loans.

Education's Fiscal Year 2003 Financial Statements Auditor Reported That 
Improvements Were Needed in Education's Cost Estimation Process: 

While Education received an unqualified audit opinion on its fiscal 
year 2003 financial statements, the auditor's report on internal 
control[Footnote 5] identified certain matters that it considers to be 
reportable conditions,[Footnote 6] including matters related to 
Education's cost estimates. Among other things, the report noted that 
Education had made progress in refining various assumptions used in 
estimating costs related to consolidation loans based on its recently 
acquired ability to link consolidation loans to the paid-off underlying 
loans. In light of the significant increase in consolidation loans in 
recent years, however, the auditor recommended, among other things, 
that Education continue to identify and gather data to better monitor 
and report on consolidations, and accelerate studies to validate the 
basis of assumptions used to determine the effect of loan 
consolidations, to ensure timely updates of its cost estimates for the 
best available information. To assist in addressing the auditor's 
recommendations, as well as address recommendations contained in our 
January 2001 report,[Footnote 7] Education officials have established a 
"credit reform working group" to formalize and document assumptions 
used in developing its budgetary cost estimates and to make its 
estimates more transparent.[Footnote 8]

Recommendation for Executive Action: 

To better reflect the impact of consolidation loans on Education's 
budgetary cost estimates, we recommend that the Secretary of Education 
direct Education's Director, Budget Service, to consider the type of 
schools consolidation borrowers attended in developing the risk 
categories for the department's budgetary cost estimates. Education 
could use the credit reform working group as a vehicle to help the 
Director, Budget Service, monitor this effort and assess the impact of 
including the type of schools borrowers attended in the assumptions 
Education uses to develop its budgetary cost estimates.

Agency Comments: 

We provided a draft of this report to Education for review and comment. 
In commenting on the draft, Education, in general, agreed with our 
findings and recommendation. Education noted that it will conduct an 
analysis to determine whether expanding risk categories is the best 
approach and that if it does not expand risk categories it will track 
and report on consolidating borrowers by school type. Education's 
written comments appear in appendix I.

Scope and Methodology: 

To answer the three research questions, we analyzed a randomly drawn, 
representative sample of borrowers from NSLDS, which is a comprehensive 
national database of Title IV loan and grant recipients. Our analysis 
of the characteristics of borrowers and loans focused on FFELP and FDLP 
borrowers in the sample who originated consolidation loans from 1995, 
the first full year that FDLP loans were made, through June 2003. 
Including only those years when both programs were in operation allowed 
for more meaningful comparisons between programs. For the borrowers in 
our analysis, we included underlying loans originated from January 1, 
1980, through June 2003. To determine the extent to which borrowers 
with student loans under one program obtain consolidation loans under 
the other, we linked sample borrowers' consolidation loans to their 
underlying loans and analyzed these data to determine the extent of 
loan movement between programs. This linking analysis included 
borrowers who originated consolidation loans from fiscal years 1995 
through 2002, the most recent linking methodology data file available 
at the time of our review. In order to develop the additional 
information requested by your staff on consolidation loan default rates 
by year and of borrowers by type of school attended, we focused on 
FFELP and FDLP borrowers in the NSLDS sample who originated 
consolidation loans from fiscal years 1995 through 2001. For these 
borrowers we reviewed default information through June 2003 in order to 
determine if these borrowers had subsequently defaulted on their 
consolidation loans. This approach allowed sufficient time for more 
recent loans that subsequently defaulted to appear as defaulted loans 
in NSLDS. We interviewed officials at Education to determine how 
Education incorporates FDLP and FFELP consolidation loan and borrower 
characteristics and the movement of loans from one program to the other 
in its cost estimates. We assessed the reliability of the NSLDS data by 
reviewing financial statement audit reports and Education's annual 
reports on NSLDS data reliability. We also interviewed external 
auditors and Education officials on the reliability of NSLDS data. In 
addition, we performed electronic testing of key variables in our 
sample for obvious problems in accuracy and completeness. We determined 
that NSLDS data were sufficiently reliable for this review. We 
conducted our work from December 2003 through July 2004 in accordance 
with generally accepted government auditing standards.

We are sending copies of this report to the Secretary of Education, the 
Director of Education's Budget Service, and other interested parties.

This report is also available at no charge on GAO's Web site at 
http://www.gao.gov. If you have any questions about this report, 
please contact me at (202) 512-8403 or Jeff Appel, Assistant Director, 
at (202) 512-9915. You may also reach us by e-mail at ashbyc@gao.gov 
or appelc@gao.gov. Key contributors to this assignment were Susan Chin, 
Julianne Hartman Cutts, Cindy Decker, and John Mingus.

Sincerely yours,

Signed by:

Cornelia M. Ashby: 
Director, Education, Workforce,: 
and Income Security Issues: 

[End of section]

Briefing Slides: 

[See PDF for images]

[End of slide presentation]

[End of section]

Appendix I: Comments from the Department of Education: 

UNITED STATES DEPARTMENT OF EDUCATION:

OFFICE OF POSTSECONDARY EDUCATION:

Aug 4 2004:

THE ASSISTANT SECRETARY:

Ms. Cornelia M. Ashby: 
Director, Education, Workforce, 
and Income Security Issues: 
United States Government Accountability Office: 
Washington, DC 20548:

Dear Ms. Ashby:

Thank you for the opportunity to respond to the U.S. Government 
Accountability Office's (GAO's) report entitled "STUDENT CONSOLIDATION 
LOANS: Further Analysis Could Lead to Enhanced Default Assumptions for 
Budgetary Cost Estimates" (GAO-04-843), which highlights the recent 
growth in the volume of Federal Family Education Loan and Federal 
Direct Student Loan consolidation loans. While we generally agree with 
your findings, we believe there may be a better way to obtain the data 
you discuss in your recommendation.

Your findings indicate a need to track the type of school associated 
with underlying loans consolidated. To accomplish this, you recommend 
that the Department expand risk categories used in cost estimation 
models. There may be more efficient ways to monitor this information. 
The Department will conduct an analysis to determine whether expanding 
risk categories is the best approach.

The Department's current assumptions reflect default and re-default 
experience of borrowers from various school types at an aggregate 
level.	If the Department does not expand risk categories, it will track 
and report on consolidating borrowers by school type.

I appreciate your examination of this important issue. The Department 
is committed to the continued development of our cost estimation model 
for the Federal student loan programs.

Sincerely,

Signed by:

Sally L. Stroup:

[End of section]

FOOTNOTES

[1] Under FFELP, private lenders make consolidation loans to borrowers, 
with Education guaranteeing lenders loan repayment and a minimum rate 
of return. Under FDLP, Education uses federal funds to make direct 
student loans.

[2] GAO, Student Loan Programs: As Federal Costs of Loan Consolidation 
Rise, Other Options Should Be Examined, GAO-04-101 (Washington, D.C.: 
October 31, 2003) and Student Loan Programs: Lower Interest Rates and 
Higher Loan Volume Have Increased Federal Consolidation Loan Costs, 
GAO-04-568T (Washington, D.C.: March 29, 2004).

[3] Lower interest rates available to borrowers have increased the cost 
to the federal government because FFELP consolidation loans carry a 
government-guaranteed rate of return to lenders that is projected to be 
higher than the fixed interest rate consolidation borrowers pay. Higher 
loan volumes in the FFELP program also add to the estimated costs of 
consolidation loans. FDLP consolidation loans are made by the 
government and thus carry no interest rate guarantee to lenders, but 
changing interest rates and loan volumes affect the costs in this 
program as well.

[4] The combination of declining interest rates and increased 
consolidation loan marketing efforts by lenders has likely contributed 
to the increase in the share of underlying loans consolidated into 
FFELP.

[5] For the report of independent auditors, see Fiscal Year 2003 
Performance and Accountability Report, U.S. Department of Education, 
November 14, 2003.

[6] Reportable conditions are matters that come to the auditor's 
attention that in the auditor's judgment should be communicated because 
they represent significant deficiencies in the design or operation of 
internal control, which could adversely affect the organization's 
ability to record, process, summarize, and report financial data 
consistent with the assertions of management in the financial 
statements.

[7] GAO, Department of Education: Key Aspects of the Federal Direct 
Loan Program's Cost Estimates, GAO-01-197 (Washington, D.C.: January 
12, 2001).

[8] As we reported in March 2004, the credit reform working group will 
also consider more formalized procedures related to performing and 
documenting sensitivity analysis of its budgetary cost estimates, 
according to Education officials. For additional information, see GAO, 
Department of Education's Federal Direct Loan Program: Status of 
Recommendations to Improve Cost Estimates and Presentation of Updated 
Cash Flow Information, GAO-04-567R, (Washington, D.C.: March 29, 2004).

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