Federal Student Loans:

Further Actions Needed to Implement Recommendations on Oversight of Loan Servicers

GAO-18-587R: Published: Jul 27, 2018. Publicly Released: Aug 27, 2018.

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Melissa H. Emrey Arras
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emreyarrasm@gao.gov

 

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What GAO Found

The Department of Education (Education) relies on contracted loan servicers to help manage its outstanding federal student loans, but GAO has previously identified weaknesses with Education's oversight of these servicers. Education has implemented two of the six recommendations GAO made in a 2015 testimony and a 2016 report targeted at deficiencies in Education's guidance to servicers, oversight of servicer call centers, complaint tracking, and performance metrics. Education reported that the remaining four recommendations will be addressed over time through Education's broader redesign of its student loan system, although an Education official said that the specifics of that system have not yet been determined. GAO will continue to monitor Education's progress in implementing these open recommendations, which would help Education provide better service to borrowers and improve program integrity.

Status of GAO Recommendations on Education’s Oversight of Student Loan Servicers

Closed/implemented recommendations Report
Improve methodology for monitoring calls between servicers and borrowers GAO-16-196T
Better document call monitoring results GAO-16-196T
Open recommendations Report
Ensure clear, sufficient, and consistent guidance to loan servicers  GAO-16-196T
Establish minimum call center hours for servicers GAO-16-523
Improve tracking of borrower complaints GAO-16-523
Evaluate and adjust performance metrics used for servicers GAO-16-523

Source: GAO analysis of information from the Department of Education. | GAO-18-587R

Note: Recommendations from GAO, Federal Student Loans: Key Weaknesses Limit Education’s Management of Contractors, GAO-16-196T (Washington, D.C.: Nov. 18, 2015); and Federal Student Loans: Education Could Improve Direct Loan Program Customer Service and Oversight, GAO-16-523 (Washington, D.C.: May 16, 2016). 

Why GAO Did This Study

Nearly 43 million borrowers held almost $1.4 trillion in federal student loans as of December 2017, which were primarily provided through Education's William D. Ford Federal Direct Loan (Direct Loan) program. Education currently contracts with nine loan servicers to help manage its Direct Loan portfolio. These servicers process payments, provide borrowers with information on repayment plans, and carry out other responsibilities. GAO has issued a report and a testimony over the last 3 years examining Education's oversight of these servicers and made six recommendations. GAO was asked to provide an update on Education's oversight of student loan servicers.

This report examines the status of Education's efforts to implement GAO's prior recommendations for improving oversight of federal student loan servicers. GAO reviewed Education documentation on the actions it has taken to implement prior recommendations, reviewed its recent solicitation of proposals for a new student loan servicer system, and interviewed agency officials.

For more information, contact Melissa Emrey-Arras at (617) 788-0534 or emreyarrasm@gao.gov.

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