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Higher Education: Better Management of Federal Grant and Loan Forgiveness Programs for Teachers Needed to Improve Participant Outcomes

GAO-15-314 Published: Feb 24, 2015. Publicly Released: Mar 26, 2015.
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What GAO Found

More than 410,000 students and teachers have participated in financial aid programs for teachers over the past decade, though GAO estimates 0.8 and 19 percent of the potentially eligible population participates in the Stafford Teacher Loan Forgiveness and Teacher Education Assistance for College and Higher Education (TEACH) Grant programs, respectively. GAO did not develop an estimate for Perkins Loan Teacher Cancellation because U.S. Department of Education (Education) budget documents indicate that federal funds for cancellations were last appropriated in fiscal year 2009. About 36,000 of the TEACH Grant's more than 112,000 recipients have not fulfilled grant requirements, according to GAO's analysis of servicer data, and have had their grants converted to loans, known as grant-to-loan conversions, as required by regulation. Education has a stated goal to take a data-driven approach to better understand its customers, but does not collect information on why recipients do not meet requirements. Absent this data, Education is hindered in taking steps to reduce grant-to-loan conversions and improve participant outcomes.

Key benefits of the TEACH Grant and the two loan forgiveness programs are helping to recruit needed teachers and helping teachers pay for their education, while key challenges include participants' lack of knowledge about the programs' requirements, according to GAO's focus groups with college officials and interviews with other stakeholders. Regarding challenges, college officials said TEACH recipients may have difficulty finding and keeping an eligible teaching position and that annual certification requirements are confusing. GAO's review of data from Education's Federal Student Aid Ombudsman corroborates these challenges: 64 percent of the 212 requests for TEACH assistance from October 2011 through March 2014 cited problems submitting certification paperwork. Further, some college administrators said a key reason their schools do not participate in the program is the grant-to-loan conversion issue.

Education tracks participation in all three programs, but lacks clear, consistent guidance to help recipients understand the TEACH grant-to-loan conversion dispute process. As of September 2014, GAO's analysis of TEACH servicer data shows that 2,252 grants were erroneously converted to loans. Education officials said they now monitor the servicer more closely and plan to review all of the nearly 36,000 of the program's grant-to-loan conversions, but the agency has not systemically reviewed the cause of the errors. Federal internal control standards emphasize ongoing monitoring and absent a review, Education lacks reasonable assurance that it has taken steps to minimize future erroneous conversions. Education established a dispute process to address concerns about TEACH grants converted to loans in error; however, GAO found that Education and the servicer provide incomplete and inconsistent information to recipients about the availability of and criteria for disputing conversions. This is inconsistent with federal internal control standards that highlight effective external communication. Absent clear and complete information, recipients are unlikely to understand the dispute process. Education also has not established performance measures for the three programs nor used available data to systematically evaluate them. Managing for results includes setting meaningful performance goals and measuring progress toward them. Absent those, Education is unlikely to be able to use data to improve program administration and participant outcomes.

Why GAO Did This Study

Education estimates 430,000 new teachers will be needed by 2020. It administers three programs that may help attract and retain qualified teachers by helping them finance their education. However, little is known about the efficacy of these programs. GAO was asked to examine the TEACH Grant and two loan forgiveness programs.

This report examines (1) the number of current and potential participants in the three teacher aid programs and the extent to which TEACH Grant recipients satisfy grant requirements; (2) what selected schools, teachers, and students identified as benefits and challenges of program participation; and (3) the extent to which Education has taken steps to effectively manage and evaluate these programs. GAO reviewed applicable federal laws, regulations, and documents; analyzed participation data for the past decade; and interviewed stakeholders including agency officials, loan servicers, and students. GAO also held eight non-generalizable focus groups with officials from 58 colleges representing a range of sizes. GAO also reviewed Ombudsman data covering the former and current TEACH Grant servicers from October 2011 to March 2014.


GAO recommends, among other things, that Education assess TEACH Grant participants' failure to meet grant requirements, examine why erroneous TEACH grant-to-loan conversions occurred, disseminate information on the TEACH grant-to-loan dispute process, and establish program performance measures. Education agreed with GAO's recommendations.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Education To enhance participation in and strengthen management of federal student aid programs for teachers, the Secretary of Education should direct Federal Student Aid's Chief Operating Officer to explore and implement ways to raise awareness about the TEACH Grant and the loan forgiveness programs.
Closed – Implemented
In its initial response, Education noted that Federal Student Aid disseminates information about these programs through various channels, such as its website, social media, and materials posted to the Financial Aid Took Kit. Annual in-person training is also provided, as well as online guidance on these programs to Financial Aid Officers at Title IV institutions. In 2018, Education provided information on the steps it has taken to increase awareness of the teacher loan forgiveness and TEACH Grant programs, including through initial correspondence with borrowers, servicers' websites, and exit counseling.
Department of Education To enhance participation in and strengthen management of federal student aid programs for teachers, the Secretary of Education should direct Federal Student Aid's Chief Operating Officer to take steps to determine why participants are not able to meet TEACH Grant service requirements and examine ways to address those challenges.
Closed – Implemented
The Department of Education (Education) took steps to determine why participants are not able to meet TEACH Grant service requirements and established a new rule to address those challenges. In 2016, Education surveyed TEACH Grant recipients whose grant had converted to a loan, and the agency determined that grantees faced challenges with recertification, including that the existing certification form was too confusing. Beginning in January 2019, Education adopted a standardized annual certification date (October 31) and updated forms for TEACH Grant recipients who wish to certify qualifying teaching or request a suspension of their obligation period. In 2018, the American Institutes for Research also completed a study for Education examining why recipients did not meet grant requirements. As part of its 2018-19 Negotiated Rulemaking, the agency included a TEACH Grant subcommittee to revise the program's rules, citing challenges identified in our report and the 2018 American Institutes for Research study. In July 2020, Education published the final rule - effective August 14, 2020 - which addresses multiple challenges recipients face meeting grant requirements identified in the studies. First, it addresses challenges grant recipients faced meeting employment requirements. The rule clarifies that recipients may satisfy the teaching requirements by teaching for an educational service agency that serves low-income students, revises the definition of a ''highly qualified'' teacher, and updates and expands the conditions a recipient may satisfy the service obligation using Education's annual Teacher Shortage Area Nationwide Listing. Second, the new rule addresses challenges with the certification process, clarifying when the eight-year period for completing the TEACH Grant service obligation begins and adds new conditions under which a borrower could suspend the service obligation. It also removes the regulatory requirement for TEACH Grant recipients to certify within 120 days of completing the program for which they received TEACH Grants that they are teaching or intend to teach. Third, it requires Eduction to provide more information to grant recipients. The agency must provide grant recipients with annual notification about their progress towards meeting the service obligation. It must notify the recipient when he or she will see the grant converted to a loan and specify the final date the recipient must provide documentation that they are meeting the service requirement. The new rule also expands counseling provided to the grant recipients while they are in school. Fourth, the rule addresses grant-to-loan conversion. It specifies that a loan conversion will only occur if the recipient asks the Secretary to convert his or her grant to a loan, or if the recipient fails to begin or maintain qualifying teaching service within the eight-year time frame. This removes the grant-to-loan conversion for paperwork omissions or errors. The new rule also adds a counseling requirement for recipients who had their grant converted to a loan in error or who wish to reverse their voluntary grant-to-loan conversions. If a grant recipient requests reconsideration of a conversion, the rule describes actions the Secretary takes if the reconsideration is approved or denied. If Education converts a recipient's grant to a loan erroneously, he or she will receive a "statement of error" from the Department.
Department of Education To enhance participation in and strengthen management of federal student aid programs for teachers, the Secretary of Education should direct Federal Student Aid's Chief Operating Officer to review the underlying cause of the known erroneous conversions to ensure steps Education has taken are sufficient to address the problem, and establish time frames for transferring the approximately 2,600 loan conversions currently with other loan servicers.
Closed – Implemented
To address this recommendation the Department of Education (Education) conducted a comprehensive assessment to define what constitutes a servicing error, identify the underlying causes of the erroneous conversions, and identify the grants affected. Education then implemented a work plan to address erroneous conversions it had identified, including rebuilding borrower files, if needed; worked with the current grant servicer to make sure it understood program requirements; and updated TEACH Grant contractual servicing requirements. It notified recipients it deemed eligible for reconversion and gave recipients an opportunity to provide documentation that they had fulfilled the grant's teaching service requirements. As a result, 20 percent of the grant recipients it had identified successfully applied to have their loans reinstated as grants. To help borrowers who may experience erroneous conversions in the future, Education updated the program's regulations in August 2020 to automatically reconvert a loan back to a grant if it was converted in error. The regulations improve the reporting and documentation process for grant recipients to help prevent and resolve unintended grant to loan conversions and require that Education send a "statement of error" when a grant is erroneously converted to a loan. Education noted that this error statement would ensure that affected grant recipients have documentation that the conversion was incorrect. Regarding time frames for transferring the converted loans, in September 2017, Education provided documentation that the loan conversions were transferred to one servicer in December 2014.
Department of Education To enhance participation in and strengthen management of federal student aid programs for teachers, the Secretary of Education should direct Federal Student Aid's Chief Operating Officer to review the TEACH grant-to-loan conversion dispute process and disseminate to appropriate audiences clear, consistent information on it, including that recipients have an option to dispute, how to initiate a dispute, and the specific criteria considered in the adjudicating process.
Closed – Implemented
The Department of Education (Education) addressed this recommendation, starting by clarifying the TEACH grant conversion dispute process, and detailing the specific set of criteria under which FedLoan Servicing is authorized to convert loans back to grants. In September 2018, Education provided updated language now included in correspondence with recipients when their TEACH grants are converted to loans. This new language explicitly states that a grant may be reconverted if the grant was converted in error and the grant recipient met program requirements. The agency's 2018-19 Negotiated Rulemaking clarified that the circumstances under which the loan will be reconverted to a grant. Specifically, "the Secretary will reconvert the loan to a TEACH Grant based on documentation provided by the recipient or in the Secretary's records demonstrating that the recipient was satisfying the service obligation as described in ? 686.12 or that the grant was converted to a loan in error." Before the rules were finalized, in December 2018, Education announced a process for grant recipients to request reconsideration if their grant was converted in error. In February 2019, Education emailed recipients eligible to request reconsideration. It also explained on, that if a grant recipient did not receive an email from Education, borrowers could still request reconsideration if they fulfilled their teaching requirements or are on track to do so. In August 2020, National Public Radio reported that more than 6,500 TEACH grant recipients had successfully petitioned to have their loans re-converted to grants. The rule further detailed steps the department would take to if the loan was converted in error: "after the Secretary reconverts an incorrectly converted loan to a TEACH Grant, the Secretary (1) applies any full academic years of qualifying teaching that the recipient completed during the period when the grant was incorrectly in loan status toward the grant recipient's four-year service obligation requirement, and (2) provides the recipient with an additional period of time to complete the remaining portion of the service obligation equal to eight years, minus the number of full academic years of qualifying teaching that the recipient completed prior to the correction of the erroneous conversion." The new rule also requires Education to send recipients a "statement of error."
Department of Education To enhance participation in and strengthen management of federal student aid programs for teachers, the Secretary of Education should direct Federal Student Aid's Chief Operating Officer to establish program performance measures for the TEACH Grant and the loan forgiveness programs to assess against established goals and to inform program administration.
Closed – Implemented
Education developed performance measures for both the TEACH grant and loan forgiveness programs. Additionally, those performance measures were published in Education's FY 2018 budget justification documentation.

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