Stafford Student Loan Program:

Correspondence Schools' Loan Volume Declines Sharply

HRD-92-62FS: Published: Mar 13, 1992. Publicly Released: Mar 13, 1992.

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Pursuant to a congressional request, GAO provided information on correspondence schools' participation in the Stafford Student Loan Program, focusing on the rates at which students from those schools default on their student loans.

GAO found that: (1) between fiscal year (FY) 1987 and FY 1989, students at the 30 coorespondence schools eligible to participate in the Stafford Program received about $743 million in Stafford loans, Parent Loans for Undergraduate Students (PLUS), and Supplemental Loans for Students (SLS), representing 2 percent of the $34 billion in loans made to all borrowers during the same period; (2) 88 percent of the $743 million in loans were Stafford Loans, 10.9 percent were SLS loans, and 1.6 percent were PLUS loans; (3) the 14 schools that were still eligible as of September 1991 accounted for about $68 million of the $743 million in loans; (4) the 16 schools that no longer participated in the program accounted for about $675 million of the $743 million in loans; (5) the 16 schools no longer participating in the program either went out of business, lost their accreditation, or voluntarily withdrew from the program; (6) the average default rate for students attending correspondence schools was 42.2 percent, more than double the average rate of 18.3 percent for students from all participating schools between FY 1987 and FY 1989; (7) the 16 schools no longer participating had an average default rate of 43.8 percent; and (8) excluding the 16 nonparticipating schools, the average borrower default rate for correspondence schools is 27.8 percent.

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