Improvements Needed in VA's Education Loan Program

HRD-78-112: Published: May 11, 1978. Publicly Released: May 11, 1978.

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The Veterans Administration's (VA) education loan program was evaluated to determine if the program's primary objective of providing additional financial aid to needy veterans attending high tuition schools was being accomplished. The evaluation also attempted to determine the default rate being experienced in the program and why participation in the program was so low in the northeast section of the country.

Two major factors limited the program's effectiveness in providing aid to students attending high tuition institutions: (1) the implementing regulations and program guidelines did not restrict loan eligibility to veterans attending high tuition schools because the authorizing legislation was silent on the subject; and (2) the VA has neither provided its regional offices with adequate criteria for evaluating veterans' financial needs nor adequately defined allowable expenses. As a result, about 72 percent of the loans made from the inception of the program in 1975 through December 1977 were made to veterans attending schools charging low tuition. The VA has not issued clear and comprehensive collection guidelines specifically related to the loan program and, as a result, about half the loans that have come due are in default. Participation in the Northeast was low because of the availability of other financial aid and because of limited promotion of the program.

Matter for Congressional Consideration

  1. Status: Closed

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

    Matter: Congress should amend the authorizing legislation limiting program eligibility to veterans attending high tuition schools and require repayment over a period of less than 10 years.

Recommendation for Executive Action

  1. Status: Closed

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

    Recommendation: The Adminsitrator of Veterans Affairs should: define, in detail, what types of expenses can and cannot be used to justify a VA education loan; establish criteria to limit the amount of education-related expenses used to justify a loan; require that all resources available to the applicant be reported and considered in determining financial need; routinely collect the information necessary to calculate a valid default rate; require regions to notify veterans of their repayment obligation as soon as they cease to be at least half-time students; clarify instructions regarding followup action if the veteran fails to respond to the initial repayment notice; instruct regions when the first payment is due; amend the existing interest tables to preclude the veteran from being charged excess interest; instruct regions to collect on defaulted loans by offset against current benefits; and clarify instructions regarding when a loan should be classified as defaulted.

    Agency Affected:


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