Student Loan Defaults: Department of Education Limitations in Sanctioning Problem Schools
HEHS-95-99
Published: Jun 19, 1995. Publicly Released: Jun 19, 1995.
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Highlights
Pursuant to a congressional request, GAO reviewed the Department of Education's efforts to resolve disputes arising from its debarment of schools from federally guaranteed student loan programs, focusing on: (1) how many schools have contested Education decisions and their main points of contention; (2) whether Education has taken sufficient steps to implement the 1993 amendments to the Higher Education Act and address the schools' concerns; and (3) what needs to be done to resolve problems with Education's default reduction initiative.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| In those instances in which schools appeal a Department action to eliminate their Federal Family Education Loan Program eligibility because their default rates exceed a statutory threshold, Congress may wish to consider giving the Secretary of Education authority to require schools to reimburse the government for the cost of loans that are made and that may subsequently default, in the event that the schools' appeals are unsuccessful. | The bills approved in the House and Senate (in the 105th Congress) to reauthorize the Higher Education Act of 1965, as amended, did not incorporate the necessary implementing provision. | |
| As a measure of further protection of the government's interests, Congress also may wish to consider granting the Secretary of Education the authority to require schools to post a performance bond as a condition of filing an appeal as well as the discretion in determining under which circumstances a bond would be required of schools. | The bills approved in the House and Senate (in the 105th Congress) to reauthorize the Higher Education Act of 1965, as amended, did not incorporate the necessary implementing provision. |
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Topics
Appellate procedureDatabasesAppeals processData integrityEligibility determinationsGovernment guaranteed loansLoan accounting systemsLoan defaultsStudent financial aidStudent loansVocational schools