High-Risk Series:

Student Financial Aid

HR-97-11: Published: Feb 1, 1997. Publicly Released: Feb 1, 1997.

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Carlotta C. Joyner
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GAO reviewed the Department of Education's management and oversight of postsecondary student financial aid programs, focusing on the: (1) Federal Family Education Loan (FFELP) Program; (2) Ford Direct Loan Program (FDLP); and (3) Federal Pell Grant Program.

GAO found that: (1) in fiscal year 1995, the federal government paid over $2.5 billion to make good its guarantee on defaulted student loans; (2) in addition, inadequate Department oversight has contributed to abuses on the part of some schools participating in federal student aid programs; (3) Congress addressed many of these problems through amendments in 1992 and 1993 to title IV of the Higher Education Act of 1965; (4) the Department has acted to address these problems and their causes; however, these actions have not completely resolved the underlying problems; (5) partly to help strengthen the Department's internal controls, the 1992 and 1993 amendments: (a) required that financial and compliance audits of guaranty agencies be conducted annually rather than every 2 years; and (b) required that lenders and guaranty agencies share more of the risk of defaults in FFELP by reducing the maximum insurance and reimbursement rates on a defaulted loan from 100 to 98 percent; (6) the Department has generally tried to address problems in its student aid programs, and some of these efforts appear to be achieving some results; (7) in July 1996, the Department had completed actions or had actions in progress or planned to address 186 of 205 recommendations, most made over a 4-year period by the Department's Office of Inspector General and GAO, to improve its management of federal student financial aid; (8) although the Department has shown a commitment to improving its oversight and management of the student aid programs, the financial risk to U.S. taxpayers remains substantial; (9) the procedural and structural program elements that are the root causes of the problems remain; (10) some of these problems arose from the statutory design of the programs and will persist unless changed through congressional action; (11) although the Department can mitigate some of these problems through more effective oversight and management, many of the Department's initiatives have not been fully implemented; (12) progress toward their full implementation has been mixed; (13) the student aid programs employ complex and cumbersome processes with many participants; (14) each major program has its own procedures and set of participants; (15) management shortcomings are a major problem, although in some areas, the Department has improved some its practices; and (16) the Department has begun planning a major reengineering effort that it expects will resolve these problems in the next several years.

Below are the reports in this series:

High-Risk Series: An Overview HR-97-1, Feb 1, 1997

High-Risk Series: Quick Reference Guide HR-97-2, Feb 1, 1997

High-Risk Series: Defense Financial Management HR-97-3, Feb 1, 1997

High-Risk Series: Defense Contract Management HR-97-4, Feb 1, 1997

High-Risk Series: Defense Inventory Management HR-97-5, Feb 1, 1997

High-Risk Series: Defense Weapon Systems Acquisition HR-97-6, Feb 1, 1997

High-Risk Series: Defense Infrastructure HR-97-7, Feb 1, 1997

High-Risk Series: IRS Management HR-97-8, Feb 1, 1997

High-Risk Series: Information Management and Technology HR-97-9, Feb 1, 1997

High-Risk Series: Medicare HR-97-10, Feb 1, 1997

High-Risk Series: Student Financial Aid HR-97-11, Feb 1, 1997

High-Risk Series: Department of Housing and Urban Development HR-97-12, Feb 1, 1997

High-Risk Series: Department of Energy Contract Management HR-97-13, Feb 1, 1997

High-Risk Series: Superfund Program Management HR-97-14, Feb 1, 1997

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