Direct Student Loans: The Department of Education's Implementation of Direct Lending

GAO discussed the Department of Education's implementation of the Federal Direct Student Loan Program. GAO noted that: (1) the guaranteed student loan program has been the subject of scrutiny during the last few years due to the rising costs related to defaulted student loans; (2) Education lacks the resources and enforcement tools to monitor and oversee the large group of program participants; (3) the loan program lacks adequate performance incentives for lenders, guaranty agencies, and schools participating in the program; (4) Education's procedures for determining which schools can participate in the program are weak; (5) Education's financial and management systems are not adequate to provide the information necessary to manage and oversee the program and protect the federal interest; (6) there are more lenders and guaranty agencies participating in the program than are needed to effectively operate the guaranteed student loan program; and (7) poor program management could increase the risk of failure in implementing direct lending.