The Guaranteed Student Loan Information System Needs a Thorough Redesign To Account for the Expenditure of Billions

HRD-81-139: Published: Sep 24, 1981. Publicly Released: Sep 24, 1981.

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The Department of Education's Guaranteed Student Loan Program guarantees loans to undergraduate and graduate college students by ensuring federal government loans directly and by reinsuring loans issued by states. To keep track of and to control this multibillion dollar program, Education maintains a computerized information system to process most program transactions. GAO reported on Education's efforts and plans to correct known deficiencies in the system, whether the major system costs under the previous contractor were reasonable and proper, and how well the new contractor is performing.

The system continues to be deficient in four functional areas: (1) some loans to students who had exceeded loan limits were being reinsured; (2) Education pays the lenders' interest and special allowance payments without validating them; (3) if the lender does not pay the first insurance premium bill, the system does not provide for rebilling the lender; and (4) the system has yet to accumulate and report the program's financial status in accordance with the needs of Education's financial managers. GAO believes that Education needs to determine the extent and degree of the controls and accountability it wants to provide for this multibillion-dollar program. GAO did not identify any improper charges to the earlier contract to operate the system. However, GAO believes that the contract costs incurred from fiscal years 1976 through 1979 were high. The new contract does not address the correction of system deficiencies. Although parts of the conversion from the old to the new contractor were delayed up to 5 months, the adverse effects on program recipients were kept to a minimum. However, problems encountered with the conversion will add further to contract costs, and certain critical items to be provided by the contractor had not been accepted by Education as of August 1981. This problem needs to be resolved.

Recommendations for Executive Action

  1. Status: Closed

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

    Recommendation: The Secretary of Education should direct the Office of Student Financial Assistance to develop comprehensive plans and timetables for completing and implementing a total Guaranteed Student Loan system redesign.

    Agency Affected: Department of Education

  2. Status: Closed

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

    Recommendation: The Secretary of Education should direct the Office of Student Financial Assistance to implement Education policies for developing ADP systems by competitively procuring a Guaranteed Student Loan information system at a fixed price and according to a prescribed plan once the recommended system redesign is completed.

    Agency Affected: Department of Education

  3. Status: Closed

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

    Recommendation: The Secretary of Education should direct the Assistant Secretary for Management to provide automated data processing (ADP) oversight of Guaranteed Student Loan system development efforts by the Office of Student Financial Assistance which ensures Office adherence to Education policies for ADP system life-cycle management and for the development of ADP systems under contract.

    Agency Affected: Department of Education

  4. Status: Closed

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

    Recommendation: The Secretary of Education should direct the Office of Student Financial Assistance to establish a process for system design, planning, and other key Guaranteed Student Loan information system life-cycle management functions.

    Agency Affected: Department of Education

  5. Status: Closed

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

    Recommendation: The Secretary of Education should direct the Office of Student Financial Assistance to subject the Guaranteed Student Loan information system to a total redesign effort. This redesign should include the documentation and validation of the appropriate system controls needed to ensure accountability for the expenditure of program funds.

    Agency Affected: Department of Education

  6. Status: Closed

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

    Recommendation: The Secretary of Education should direct the Office of Student Financial Assistance to pursue a timely completion and acceptance of the contractor's conversion effort, including full system documentation, security and backup/recovery subsystems, a terminal user training program, and controls for maintaining and documenting changes to programming.

    Agency Affected: Department of Education

 

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