Stafford Student Loans: Prompt Payment of Origination Fees Could Reduce Costs
HRD-92-61
Published: Jul 24, 1992. Publicly Released: Jul 24, 1992.
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Highlights
Pursuant to a congressional request, GAO reviewed the Department of Education's collection of origination fees paid on Stafford student loans, focusing on: (1) the extent of and reasons for the delayed receipt of origination fees; and (2) actions needed to facilitate the prompt receipt of the fees.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| Congress should repeal the provision in section 438(c)(1) of the Higher Education Act, a amended, that requires the Department of Education to collect origination fees by offsetting interest subsidy payments to lenders. | Section 438(c) of the Higher Education Act of 1965 was amended effective October 1, 1992, to require lenders to pay origination fees directly to the Department of Education. Neither recently proposed legislation sponsored by the Department of Education nor recent technical amendments to the Higher Education Act of 1965, as amended, contained the provisions recommended. It does not appear likely that action will be taken on this recommendation any time soon, if ever. | |
| Congress should require lenders to pay the 5-percent loan origination fee, for every federally subsidized Stafford student loan disbursed, in a manner that will provide for the government's receipt of the fees within 15 days of loan disbursement. | Neither recently proposed legislation sponsored by the Department of Education nor technical amendments to the Higher Education Act of 1965, as amended, contained the provisions recommended. It does not appear likely that action will be taken on this recommendation any time soon, if ever. | |
| Congress should authorize the Secretary of Education to assess interest penalties on the late payment of origination fees. | No action on the recommendation has been taken by Congress, nor is there any indication that action is contemplated. The Department of Education is planning to propose regulations requiring lenders to report and remit loan origination fees to the Department quarterly. It is also looking at ways, including using the new student loan data system that it is implementing, to improve controls over the collection of loan origination fees. | |
| Congress should require the Secretary of Education, while the National Student Loan Data System is being developed, to work with the guaranty agencies to ensure the government's timely receipt of origination fees. | No action on the recommendation has been taken by Congress, nor is there any indication that action is contemplated. The Department of Education is planning to propose regulations requiring lenders to report and remit loan origination fees to the Department quarterly. It is also looking at ways, including using the new student loan data system that it is implementing, to improve controls over the collection of loan origination fees. |
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Topics
Accounting proceduresAdministrative costsDebt collectionFeesGovernment guaranteed loansInternal controlsLoan accounting systemsLoan interest ratesLoan repaymentsStudent loans