GAO reviewed lenders' billings under the Guaranteed Student Loan Program to determine whether the Department of Education was incurring excessive costs related to its payment of interest and special-allowance subsidies, focusing on the extent to which: (1) lenders erred in billing Education for interest and special-allowance payments; (2) lender billing errors resulted in federal overpayments; and (3) Education established adequate procedures to detect billing errors and prevent overpayments.
Matter for Congressional Consideration
|Congress should amend the Higher Education Act to authorize the Secretary of Education to assess lenders' interest due to lender billing errors from the date of overpayment of interest and special allowance.||The reauthorization of the Higher Education Act, completed in July 1992, did not include enacting the GAO recommendation, and it appears that Congress will not do so in the forseeable future.|
|Congress should amend the Higher Education Act to require lenders to: (1) specify to their independent auditors that the verification of loan accounts and interest and special-allowance billing should be included in periodic independent financial audits; and (2) provide that errors identified are promptly reported to Education and the guaranty agency.||The Higher Education Amendments of 1992 strengthened section 487(c) of the Higher Education Act which, in part, addressed part of this recommendation. But it appears that Congress will not act of the major features of the recommendations in the forseeable future.|
Recommendations for Executive Action
|Department of Education||The Secretary of Education should revise the Guaranteed Student Loan Program regulations to require the Office of the Inspector General to assist program officials in developing audit standards for the guaranty agencies to use in reviewing lender billing systems and practices.|
|Department of Education||The Secretary of Education should revise the Guaranteed Student Loan Program regulations to stipulate that Education and guaranty agency audits of lenders include tests of the accuracy of lender loan accounts and billing statements to provide a statistically valid basis for recovering overpayments.|