Collection Efforts Not Keeping Pace With Growing Number of Defaulted Student Loans

CD-77-1: Published: Aug 11, 1977. Publicly Released: Aug 11, 1977.

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Although some positive actions are being taken by the Office of Education to collect defaulted student loans, the problem has reached serious proportions.

The Office of Education guaranteed 4 million student loans amounting to $4.5 billion through September 1976. It had to pay about $287 million to lending institutions during the same time because about one of every six loans had been defaulted after the student completed or withdrew from school. After paying lenders, the Office has to collect the defaulted loans. Through September 1976, only $25 million had been collected, mostly through monthly payments. Collectors cannot handle their workloads, and the trend is toward ever larger, less manageable workloads.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Health, Education, and Welfare should direct the Commissioner of Education to effectively process defaulted student loans to the point of collection, referral for legal action, or termination. This should include: requiring the contractor to document unsuccessful collection efforts; instructing collectors to request debtor-prepared financial statements; revising guidelines on compromise; developing guidelines on collecting from current or former Federal employees; requiring every regional collection staff to develop the capability for referring defaulted loans directly to U.S. attorneys; and establishing a system for monitoring regional office collection activity.

    Agency Affected:

 

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