High Risk Series:

Guaranteed Student Loans

HR-93-2: Published: Dec 1, 1992. Publicly Released: Dec 1, 1992.

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GAO reviewed the Department of Education's management of the Guaranteed Student Loan Program, focusing on the: (1) program's structural flaws; and (2) lack of adequate incentives to prevent loan defaults.

GAO found that: (1) the federal government's risk of loan losses has increased greatly as the program has evolved; (2) the government has increased its financial exposure, since it provided interest subsidies to lenders as well as full reimbursement to lenders and guaranty agencies for any loan defaults; (3) incentives do not adequately encourage participants to do more to prevent defaults; (4) Education has a history of mismanagement and poor oversight of the program's activities; and (5) Education has inadequate financial and management information systems that contain inaccurate and incomplete data, conducted little oversight of the lenders and guaranty agencies, experienced high turnover in key management positions and has not hired staff with adequate skills, and a management structure that inhibited effective program improvement.

Below are the reports in this series:

High Risk Series: Farmers Home Administration's Farm Loan Programs HR-93-1, Dec 1, 1992

High Risk Series: Guaranteed Student Loans HR-93-2, Dec 1, 1992

High Risk Series: Bank Insurance Fund HR-93-3, Dec 1, 1992

High Risk Series: Resolution Trust Corporation HR-93-4, Dec 1, 1992

High Risk Series: Pension Benefit Guaranty Corporation HR-93-5, Dec 1, 1992

High Risk Series: Medicare Claims HR-93-6, Dec 1, 1992

High Risk Series: Defense Weapons Systems Acquisition HR-93-7, Dec 1, 1992

High Risk Series: Defense Contract Pricing HR-93-8, Dec 1, 1992

High Risk Series: Department of Energy Contract Management HR-93-9, Dec 1, 1992

High Risk Series: Superfund Program Management HR-93-10, Dec 1, 1992

High Risk Series: NASA Contract Management HR-93-11, Dec 1, 1992

High Risk Series: Defense Inventory Management HR-93-12, Dec 1, 1992

High Risk Series: Internal Revenue Service Receivables HR-93-13, Dec 1, 1992

High Risk Series: Managing the Customs Service HR-93-14, Dec 1, 1992

High Risk Series: Management of Overseas Real Property HR-93-15, Dec 1, 1992

High Risk Series: Federal Transit Administration Grant Management HR-93-16, Dec 1, 1992

High Risk Series: Asset Forfeiture Programs HR-93-17, Dec 1, 1992

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Corrective action is being obtained through other ongoing Education Department means.

    Recommendation: The Secretary of Education should consider actions to enhance the existing loan programs, such as further strengthening the Department's gatekeeping procedures to more effectively determine the fiscal and administrative capabilities of schools seeking initial and continuing approval for participation in federal student aid programs. Part of this effort should include the use of outcome measures, such as completion and job placement rates, in recording the performance of such schools (especially those providing proprietary/vocational training).

    Agency Affected: Department of Education

  2. Status: Closed - Not Implemented

    Comments: Corrective action is being obtained through other ongoing Education Department means.

    Recommendation: The Secretary of Education should consider actions to enhance the existing loan program, such as ensuring that the Department expeditiously implements the recommendations contained in the joint OMB/Department study of the program.

    Agency Affected: Department of Education

  3. Status: Closed - Not Implemented

    Comments: Corrective action is being obtained through other Education Department means.

    Recommendation: The Secretary of Education should consider actions to enhance the existing loan program, such as proceeding cautiously with implementation of the direct lending demonstration program to ensure its proper implementation and subsequent evaluation.

    Agency Affected: Department of Education

 

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