Status of Office of Education's National Direct Student Loan Funds at Selected Postsecondary Education Institutions

HRD-78-94: Published: May 2, 1978. Publicly Released: May 2, 1978.

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Enabling legislation for the National Direct Student Loan Program, begun in 1958, intended that schools attain a revolving fund status for this program. The net cumulative federal capital contribution to the program has totalled over $3.6 billion since the program began, with fiscal year 1977 appropriations totaling $323.2 million.

Each participating school differs in its ability to achieve a revolving fund status for the program because postsecondary schools manage the program differently and vary in the degree of diligence with which they attempt collection of loan accounts; loan delinquency problems differ depending on the type of institution; direct loan program legislation requires all schools to make loans to nearly all eligible students, regardless of their credit worthiness; and other legislation, particularly privacy regulations, affects the extent to which schools can pursue delinquent borrowers. A review of 19 postsecondary schools showed that 14 had cumulative delinquency rates of at least 18 percent and 8 had rates of 30 percent or higher. Two-year public and proprietary institutions appear to have the greatest problem with delinquency. It is not likely that the majority of schools participating in the program will be able to achieve a self-sustaining revolving fund status any time soon.

Recommendation for Executive Action

  1. Status: Closed

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

    Recommendation: Review of existing program legislation which requires schools to lend to nearly all eligible students and of privacy considerations that hamper their attempts to locate borrowers might be warranted.

    Agency Affected:

 

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