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Student Loan Marketing Association's Loan Consolidation Program

Published: May 25, 1983. Publicly Released: May 25, 1983.
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Highlights

GAO presented information concerning the Student Loan Marketing Association (Sallie Mae) loan consolidation programs. Specifically, GAO discussed the program's costs and impact on defaults as well as potential legislative modifications affecting program expansion, interest rates, minimum loan amounts, and interest subsidies. GAO noted that Sallie Mae estimates that the consolidation program will cost the Federal Government an additional $2 million for every $100 million of consolidated loans. GAO stated that it is too early to assess the program's impact on defaults but noted that student loan program officials of the Departments of Education and State anticipate that the program will reduce them. Potential legislative modifications to the program were presented in detail on four major issue areas: (1) extending loan consolidation authority to States; (2) determining individual loan interest rates by averaging the rates of the loans being consolidated; (3) revising or eliminating the aggregate qualifying loan balance requirements; and (4) limiting special allowance payments to the consolidated loans that were eligible for the allowance prior to consolidation. Furthermore, GAO developed information on the administrative and financial capability of State programs to administer loan consolidations and of Sallie Mae and State programs to administer consolidations with potential legislative modifications and, finally, the impact of potential legislative modifications on Federal costs. GAO concluded that there is potential for the programs to obtain the administrative and technical capability to operate a loan consolidation program.

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