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Over half of the $80.4 billion in financial aid provided to college students in the 2000-01 school year came from the federal government in the form of grants and loans provided under Title IV of the Higher Education Act (HEA). To help finance their education, students and families may have received other funds from states, private groups or lenders, and/or the schools themselves. We initiated this study to, among other things, determine how often federal financial aid recipients received aid that was greater than their federally defined need and what cost or other implications might result from changing HEA to limit such aid.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Education 1. To ensure that the use of substitutable loans will not lead to unmanageable student loan indebtedness, the Secretary of Education should, over time, monitor the impact of substitutable loans on student debt burden and, if debt burden associated with substitutable loans rises substantially, develop and propose alternatives for the administration or Congress to consider to help students manage student loan debt burden. Such alternatives could range from shifting students into repayment plans that would lower their debt burden to limiting the use or amount of substitutable loans.
Closed - Not Implemented
Education responded that it believes its current practices already address the recommendation. It currently monitors student loan debt burden as a performance measure within its strategic plan and there are several repayment options available to federal student loan borrowers to help in managing their debts. Education also expressed the belief that if federal substitutable loans were not available, students and families would borrow from private lenders at higher interest rates. No evidence to support this belief was provided. Education has studied changes in student debt burden issuing a study in 2006, which found median debt burden did not change among bachelor's degree recipients between 1992-93 and 1999-2000. The Department has not informed us of any additional actions it has taken to review the impact of substitutable loans on student debt burden. This is an issue that we believe should continue to be monitored as it concerns how best to use federal resources.

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