Actions Underway To Reduce Delinquencies in the Health Professions and Nursing Student Loan Programs

AFMD-83-7: Published: Dec 1, 1982. Publicly Released: Dec 8, 1982.

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In response to a congressional request, GAO analyzed the problem of loan payment delinquency in the Health Professions and Nursing Student Loan Programs.

According to the latest data available, more than 28 percent of borrowers in the programs were delinquent in payments by 90 days or more. More than $34 million was delinquent on loans with principal amounts totalling $77 million. The 23 participating schools which GAO reviewed generally placed too little emphasis on billing and collection. Promissory notes were not properly controlled, interviews were not always conducted with borrowers before they left school, borrowers were not properly billed, and follow-up action on delinquent debts was not adequate. GAO found that many delinquent borrowers were able to pay but did not. In addition, participating institutions accumulated federal funds in excess of their immediate needs. Despite a law which requires that any interest earned from invested program funds be returned to the programs, only one school returned all interest earnings to the appropriate program and two schools returned part of the earnings. Inadequate monitoring and dependence on the schools to manage the programs for the Department of Health and Human Services (HHS) are primary reasons for debt collection problems at the schools. GAO also found that the interest rates on the loans provided little incentive for borrowers to repay their loans promptly. HHS accounting records do not accurately show the financial status of the loan programs, nor do they record interest earned on student loans. In addition, HHS has written off only $40,000 in loans as uncollectible since the inception of the programs even though some loans have been delinquent for many years.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: This recommendation is valid; however, since it was made almost 3 years ago and no action has been taken, it is very doubtful that Congress will act.

    Matter: Congress should amend authorizing legislation for the Health Professions and Nursing Student Loan Programs to authorize the assessment of additional late payment charges on delinquent loans.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should record as a liability to the government the amount owed to schools for loans that have been cancelled.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should establish an allowance for those loans that will be cancelled or considered uncollectable in the future.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should adjust the accounting records to accurately reflect the amount of program funds transferred to the scholarship funds and vice versa.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should determine and record the government's portion of interest earned on loans.

    Agency Affected: Department of Health and Human Services

  5. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should record the government's portion of cancelled loans in the HHS accounting system.

    Agency Affected: Department of Health and Human Services

  6. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should ascertain the amount of interest previously earned on government money and require participating schools to return these amounts to the programs.

    Agency Affected: Department of Health and Human Services

  7. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should direct that federal funds be invested in interest-bearing accounts and that earned interest be returned to the programs.

    Agency Affected: Department of Health and Human Services

  8. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should determine the amount of excess cash held by the schools and require such amounts to be returned to the federal government.

    Agency Affected: Department of Health and Human Services

  9. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should direct that awards be closed expeditiously.

    Agency Affected: Department of Health and Human Services

  10. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should ensure that program funds are awarded on the basis of need.

    Agency Affected: Department of Health and Human Services

  11. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should enforce required biennial audits of the Health Professions Student Loan Program and encourage the schools to provide for periodic audits of the Nursing Student Loan Program.

    Agency Affected: Department of Health and Human Services

  12. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should identify and review uncollectable loans and permit write-off only when a school has complied with due diligence requirements and, if these requirements have not been complied with, recover from the school the federal share of the uncollectible loan.

    Agency Affected: Department of Health and Human Services

  13. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should direct that schools' annual operating reports be reviewed.

    Agency Affected: Department of Health and Human Services

  14. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should establish and enforce delinquency rate standards, not allowing institutions that fail to meet these standards to receive additional program funds or to reloan collected funds.

    Agency Affected: Department of Health and Human Services

  15. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Health and Human Services should periodically assess participating schools' financial management of the Health Professions and Nursing Student Loan Programs, using reported delinquency rates as criteria for selecting schools. As a minimum, to establish adherence to due diligence requirements in billing and collecting outstanding loans, HHS must see that schools: (1) execute and safeguard promissory notes; (2) conduct and document exit interviews; (3) bill all borrowers and follow up on delinquent loans; (4) use collection agencies, credit bureaus, and litigation to the fullest extent; (5) improve accounting systems' recordkeeping practices; and (6) develop written procedures and provide sufficient personnel for the collection of outstanding loans.

    Agency Affected: Department of Health and Human Services

 

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