Higher Education
More Information Could Help Education Determine the Extent to Which Eligible Servicemembers Serving on Active Duty Benefited from Relief Provided by Lenders and Schools Gao ID: GAO-07-11 November 1, 2006million members of the armed forces have been deployed in service to the United States. Congress enacted the Higher Education Relief Opportunities for Students (HEROES) Act to recognize the needs of those servicemembers who are deployed in the midst of pursuing postsecondary education or repaying student loans. GAO was asked to determine (1) how the Department of Education has implemented HEROES, (2) the policies and practices federal student loan lenders have in place to assist borrowers serving on active duty, and (3) the policies and practices postsecondary schools have to assist students who are serving on active duty. To address these objectives, GAO interviewed representatives from the nine largest Federal Family Education Loan program lenders, surveyed a random sample of postsecondary schools, and visited four colleges and universities.
Education has issued waivers and modifications to certain federal student financial aid provisions to minimize the financial impact and administrative burden for servicemembers on active duty, for example, by making it easier to postpone or suspend loan payment. Students who leave school for active duty service are treated as still enrolled to ensure that they do not have to begin repaying their student loans. Borrowers already repaying their student loans no longer have to provide written documentation of active duty service to suspend repayment for up to 1 year. However, Education did not complete a study to assess the extent to which servicemembers are benefiting from these waivers and modifications by March 2005, as required by HEROES, and currently has no plans to do so. While HEROES does not specify how Education should go about assessing the impact of its waivers and modifications, Education officials said that such a study would require a rigorous experimental design that would be costly and cannot be supported with Education's data systems. However, Education has not explored the possibility of leveraging outside data sources to fulfill the requirement. Federal student loan lenders have implemented policies and practices, many of which are required under Education's waivers and modifications, to provide relief for borrowers serving on active duty. For example, lenders reported that they provide options that allow borrowers to suspend or postpone repayment of their student loans, often with one telephone call. Some lenders are providing additional benefits beyond those covered by HEROES. For example, one lender offered to forgive $2,500 in loans for servicemembers who have lived or attended college in Pennsylvania. Most colleges and universities have had students leave for active duty service prior to the end of an academic term, and have policies or practices to assist them both when they depart and when they return, such as providing tuition refunds and allowing them to withdraw from their classes. When students return, schools often guarantee their readmission and exempt them from changes to degree requirements.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-07-11, Higher Education: More Information Could Help Education Determine the Extent to Which Eligible Servicemembers Serving on Active Duty Benefited from Relief Provided by Lenders and Schools
This is the accessible text file for GAO report number GAO-07-11
entitled 'Higher Education: More Information Could Help Education
Determine the Extent to Which Eligible Servicemembers Serving on Active
Duty Benefited from Relief Provided by Lenders and Schools' which was
released on November 1, 2006.
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
November 2006:
Higher Education:
More Information Could Help Education Determine the Extent to Which
Eligible Servicemembers Serving on Active Duty Benefited from Relief
Provided by Lenders and Schools:
GAO-07-11:
GAO Highlights:
Highlights of GAO-07-11, a report to congressional requesters
Why GAO Did This Study:
Since September 11, 2001, over 1.3 million members of the armed forces
have been deployed in service to the United States. Congress enacted
the Higher Education Relief Opportunities for Students (HEROES) Act to
recognize the needs of those servicemembers who are deployed in the
midst of pursuing postsecondary education or repaying student loans.
GAO was asked to determine (1) how the Department of Education has
implemented HEROES, (2) the policies and practices federal student loan
lenders have in place to assist borrowers serving on active duty, and
(3) the policies and practices postsecondary schools have to assist
students who are serving on active duty. To address these objectives,
GAO interviewed representatives from the nine largest Federal Family
Education Loan program lenders, surveyed a random sample of
postsecondary schools, and visited four colleges and universities.
What GAO Found:
Education has issued waivers and modifications to certain federal
student financial aid provisions to minimize the financial impact and
administrative burden for servicemembers on active duty, for example,
by making it easier to postpone or suspend loan payment. Students who
leave school for active duty service are treated as still enrolled to
ensure that they do not have to begin repaying their student loans.
Borrowers already repaying their student loans no longer have to
provide written documentation of active duty service to suspend
repayment for up to 1 year. However, Education did not complete a study
to assess the extent to which servicemembers are benefiting from these
waivers and modifications by March 2005, as required by HEROES, and
currently has no plans to do so. While HEROES does not specify how
Education should go about assessing the impact of its waivers and
modifications, Education officials said that such a study would require
a rigorous experimental design that would be costly and cannot be
supported with Education‘s data systems. However, Education has not
explored the possibility of leveraging outside data sources to fulfill
the requirement.
Federal student loan lenders have implemented policies and practices,
many of which are required under Education‘s waivers and modifications,
to provide relief for borrowers serving on active duty. For example,
lenders reported that they provide options that allow borrowers to
suspend or postpone repayment of their student loans, often with one
telephone call. Some lenders are providing additional benefits beyond
those covered by HEROES. For example, one lender offered to forgive
$2,500 in loans for servicemembers who have lived or attended college
in Pennsylvania.
Most colleges and universities have had students leave for active duty
service prior to the end of an academic term, and have policies or
practices to assist them both when they depart and when they return,
such as providing tuition refunds and allowing them to withdraw from
their classes. When students return, schools often guarantee their
readmission and exempt them from changes to degree requirements.
Figure: Selected Options Available to Ease Departure and Return for
Students on Active Duty:
[See PDF for Image]
Source: GAO analysis.
[End of Figure]
What GAO Recommends:
GAO recommends that the Secretary of Education undertake the
congressionally mandated study to determine the extent to which
eligible servicemembers are receiving assistance under HEROES.
Education agreed with the report‘s findings and said the recommendation
has merit. Education has agreed to explore options for conducting the
study.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-11].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Cornelia Ashby at (202)
512-7215 or ashbyc@gao.gov.
[End of Section]
Contents:
Letter:
Results in Brief:
Background:
Education Has Issued Waivers and Modifications to Provide Relief for
Aid Recipients Serving on Active Duty, but the Impact of These Changes
Is Not Known:
Lenders Are Assisting Borrowers as Required by Education and Some Are
Providing Additional Benefits:
Most Schools Have Had Students Leave for Active Duty and Have Policies
in Place to Aid Their Departure and Return:
Conclusions:
Recommendation for Executive Action:
Agency Comments:
Appendix I: Methodology for Survey of Colleges and Universities:
Appendix II: Waivers and Modifications:
Appendix III: Comments from the Department of Education:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Responsibility for Interest Payments by Postponement and Loan
Type:
Table 2: Survey of Postsecondary Schools: Population, Sample, and
Survey Respondents by Strata:
Figures:
Figure 1: Options Available to Suspend or Postpone Loan Repayment for
Borrowers Serving on Active duty:
Figure 2: Timeline for HEROES-Related Activities:
Figure 3: Estimated Percentage of Schools with Students Who Have Left
for Active Duty:
Figure 4: States with Laws to Assist Students Who Leave School for
Active Duty:
Figure 5: Selected Options Available to Ease Departure and Return for
Students Serving on Active Duty:
Figure 6: Estimated Percentage of Schools with Policies on Tuition
Refunds for Students Leaving for Active Duty:
Figure 7: Estimated Percentage of Schools That Offer Campus Housing
with Room and Board Refund Policies for Students Leaving for Active
Duty:
Figure 8: Estimated Percentage of Schools with Policies to Minimize the
Academic Impact for Students Leaving for Active Duty:
Figure 9: Estimated Percentage of Schools with Policies to Minimize the
Academic Impact When Students Return from Active Duty:
Abbreviations:
DOD: Department of Defense:
FFEL: Federal Family Education Loan:
HEROES: Higher Education Relief Opportunities for Students:
IPEDS: Integrated Postsecondary Education Data System:
United States Government Accountability Office:
Washington, DC 20548:
November 1, 2006:
The Honorable Howard P. McKeon:
Chairman:
Committee on Education and the Workforce:
House of Representatives:
The Honorable Robert E. Andrews:
House of Representatives:
The Honorable John A. Boehner:
House of Representatives:
The Honorable John Kline:
House of Representatives:
The Higher Education Relief Opportunities for Students (HEROES) Act was
first enacted in January 2002, against the backdrop of one of the most
tragic events in U.S. history. Since September 11, 2001, more than 1.3
million members of the armed forces have been deployed--leaving
families, jobs, and educational pursuits--to serve their
country.[Footnote 1] HEROES specifically recognizes the needs of active
duty servicemembers and members of the National Guard and Reserves who
are deployed in the midst of pursuing their postsecondary education or
repaying student loans. In some instances, servicemembers may only have
a few days to prepare for departure and ensure that their affairs are
in order. They may need to put classes and coursework on hold, notify
school officials and lenders, and some may not be able to make regular
payments on their federal student loans while they are gone. The law
authorizes the Secretary of Education to waive or modify any statutory
or regulatory provisions relating to federal student financial aid to
ensure that individuals who are serving on active duty in connection
with a war, other military operation, or national emergency are not
placed in a worse position financially because of their military
service. The law requires the Department of Education (Education) to
report on the impact of these waivers and modifications on affected
students and student loan borrowers within 15 months of exercising its
authority. HEROES also addresses the needs of servicemembers who must
leave school for active duty service. While the law does not require
postsecondary schools to assist these students, it encourages schools
to provide tuition refunds for courses they were unable to complete and
to minimize reapplication requirements when they return to school.
To better understand the types of relief students and federal student
loan borrowers serving on active duty receive, you asked us to
determine (1) how the Department of Education has implemented HEROES,
(2) the policies and practices federal student loan lenders have in
place to assist borrowers serving on active duty, and (3) the policies
and practices postsecondary schools have to assist students who are
serving on active duty.
To learn how Education has implemented HEROES, we reviewed the waivers
and modifications along with guidance Education communicated through
Dear Colleague Letters to the higher education community, and
interviewed agency officials at Education and the Department of
Defense. We also reviewed summary information about contacts made to
the Ombudsman at Education's Office of Federal Student Aid to determine
the extent to which federal student aid recipients experienced
difficulties with their schools or lenders as a result of active duty
service.[Footnote 2] To determine what policies and practices lenders
have in place to assist student loan borrowers serving on active duty,
we conducted semistructured interviews with representatives of the nine
largest lenders in the Federal Family Education Loan (FFEL) program
that hold about two-thirds of the program's $289 billion in outstanding
federal student loan volume.[Footnote 3] To determine what policies or
practices colleges and universities have in place to assist students
serving on active duty, between January and March 2006, we surveyed a
random sample of 2-year and 4-year public postsecondary schools and 4-
year private, nonprofit postsecondary schools with enrollments of at
least 100.[Footnote 4] We excluded other types of schools, such as
private, for-profit schools, from our sample, as they represent a
relatively small percentage of postsecondary schools. We received a
response rate of 77 percent. The survey collected information about the
types of policies or practices that schools have in place to assist
students leaving for active duty service, but we did not evaluate their
effectiveness. To better understand the range of assistance provided to
students who must leave school for active duty service, we selected
four postsecondary schools to visit based on their extensive experience
with military departures. Specifically, we visited two public
universities from our survey sample that have had more than 100
students leave for active duty service since the passage of HEROES,
along with a community college and public university that serve a large
number of students in the U.S. military at installations throughout the
world. To gain students' perspectives as they transitioned out of and
back into academic life and dealt with their student loans, we
interviewed seven students who experienced an interruption in their
studies as a result of active duty service. The students represented a
range of individuals serving in the National Guard and Reserves at
different stages in their academic careers and personal lives,
including undergraduate and graduate students, both single and married
with dependents. The results from these interviews are not
generalizable to or representative of all students in this affected
population. Instead, the interviews provide a glimpse into the issues
this particular student population faces. We conducted our work between
June 2005 and September 2006 in accordance with generally accepted
government auditing standards. See appendix I for a detailed
description of our survey methodology.
Results in Brief:
Education has waived and modified certain federal student financial aid
provisions and issued guidance to the higher education community to
provide relief for active duty servicemembers, but it has not assessed
the extent to which servicemembers are taking advantage of the relief.
These waivers and modifications are designed to help federal student
financial aid recipients avoid negative financial consequences, such as
defaulting on their student loans, and ease administrative requirements
that might delay the provision of assistance. For example, Education
has expanded opportunities for servicemembers to avoid or postpone
repayment. Students who leave for active duty service no longer have to
return or repay federal grant funds for academic terms they were unable
to complete, and they are treated as still enrolled in school, which
means that they do not yet have to begin repaying any student loan
disbursements they have received. Education also waived the requirement
that borrowers provide written documentation of active duty service in
order to qualify for certain benefits, allowing lenders to provide
immediate assistance to borrowers, such as suspending their loan
payments for up to 1 year, based on verbal notification. Education has
also issued guidance regarding these changes to the higher education
community, including postsecondary schools and lenders. However,
Education has not collected key information that would allow it to
assess the extent to which eligible servicemembers have received
assistance from the flexibilities allowed by the waivers and
modifications, as required by HEROES. Based on the Act's requirements,
Education should have reported to Congress on the impact of its waivers
and modifications by March 2005. Education has no plans to complete the
study because it interpreted the Act as requiring a rigorous
experimental design that officials say would be costly and cannot
currently be supported with Education's data systems. However, it has
not explored the possibility of leveraging outside data sources to
fulfill the mandate.
Federal student loan lenders have implemented policies and practices
that are designed to minimize the financial impact and administrative
burden for borrowers serving on active duty. Many of these are required
by Education's waivers and modifications, such as providing options
that allow borrowers to suspend or postpone repayment of their student
loans. For borrowers who were making payments on their loans at the
time they left for active duty service, lenders said they will suspend
the payments. However, depending on the type of loan they have and the
type of assistance they are eligible for, borrowers may be responsible
for paying the interest that continues to accrue on the loans. Some of
the lenders we interviewed, however, reported practices to minimize the
financial impact on these borrowers that go beyond the requirements of
the HEROES waivers and modifications. Specifically, lenders can
periodically capitalize the interest that continues to accrue during
periods when a borrower's loan repayment is suspended, but three
lenders have chosen not to capitalize the interest, which reduces the
amount of interest that borrowers must pay. Additionally, one lender
offered to forgive $2,500 in loans for servicemembers who have lived in
Pennsylvania or attended college there. To minimize the administrative
burden, lenders have simplified procedures for receiving notification
about a borrower's active duty service. Specifically, borrowers only
need to contact the lender once to receive assistance, and lenders will
also accept notification from someone acting on the borrower's behalf,
such as a family member or commanding officer.
We found that most colleges and universities have had students leave
for active duty service and have policies or practices in place to help
them when they leave and when they return to school. Specifically, we
estimate that about 80 percent of colleges and universities have had
students who departed for active duty service, and nearly three-
quarters have policies or practices to help them. About two-thirds of
colleges reported that their policies were in place prior to the
passage of the HEROES Act of 2001; some schools' policies may have been
influenced by laws in 26 states that are designed to assist students
when they leave school for active duty service. Schools reported a
number of policies or practices to minimize the financial and academic
impact of active duty service, such as providing tuition refunds and
options to withdraw from classes or complete coursework later. Five of
the seven students we interviewed chose to withdraw from their courses,
often to give them time to put their personal affairs in order. We
found that a majority of the colleges and universities with policies to
minimize the academic impact of leaving for active duty service also
have policies to help students reenroll, including suspending the
requirement that they reapply for admission and waiving changes to
degree requirements.
In this report, we recommend that the Secretary of Education undertake
the congressionally mandated study to determine the extent to which
eligible servicemembers are receiving assistance under HEROES.
We provided copies of a draft of this report to the Department of
Education and the Department of Defense for review and comment.
Education agreed with the report's findings and said the recommendation
has merit. Education has agreed to explore options for conducting the
congressionally mandated study. Education's written comments are in
appendix III. The Department of Defense had no comments.
Background:
Congress has demonstrated its commitment to providing education
benefits to members of the armed forces who are interested in pursuing
postsecondary education since the enactment of the Servicemen's
Readjustment Act of 1944, also known as the GI Bill of Rights. Since
that time other programs have been implemented to meet the educational
needs of servicemembers, including the current Montgomery GI Bill,
which provides education assistance to veterans and active duty,
Reserve, and National Guard servicemembers. As of fiscal year 2007,
active duty servicemembers can receive up to $1,075 monthly for a
maximum of 36 months, while Reservists can receive up to $309 monthly
for a maximum of 36 months. In fiscal year 2005, another program, the
Reserve Educational Assistance Program, was implemented to provide
benefits for Reservists who are called or ordered to active duty in
response to a war or national emergency. Those who meet the length of
service requirement can receive up to $827 toward their education, per
month for 36 months. Congress has also given the Army, Navy, Marines,
Air Force, and Coast Guard the ability to provide tuition assistance to
active duty servicemembers and members of the Reserves and National
Guard. These servicemembers can currently receive up to $4,500 in
tuition assistance benefits annually.
In addition to these targeted programs, servicemembers may be eligible
to participate in the federal student financial aid programs authorized
by Title IV of the Higher Education Act, which authorizes federal grant
and loan programs for all eligible students. Specifically, if their
military education benefits, income, and assets do not fully cover the
estimated cost of attendance, servicemembers may be eligible for
federal Pell grants, which do not have to be repaid, as well as
federally subsidized Stafford and Perkins student loans, on which the
federal government pays the interest while the borrower is in school.
Servicemembers, like other borrowers, may also qualify for unsubsidized
federal Stafford and PLUS loans if they do not demonstrate financial
need.[Footnote 5] Because these loans are not subsidized by the federal
government, borrowers are responsible for paying all of the interest
that accrues on the loan from the time the loan is disbursed until it
is paid in full.
The Higher Education Relief Opportunities for Students (HEROES) Act of
2003 was enacted to recognize the difficulties that postsecondary
students and federal student financial aid recipients serving on active
duty may experience in transitioning in and out of college and repaying
their student loans.[Footnote 6] The law covers individuals who are
serving on active duty, during a war, other military operation or
national emergency, including members of the National Guard serving on
full-time active duty and Reserves who are called to active
duty.[Footnote 7] The law extends much of the relief that Congress
initially provided in the HEROES Act of 2001, following the tragic
events of September 11, 2001.[Footnote 8] Specifically, the HEROES Act
of 2003 authorizes the Secretary of Education to waive or modify any
statutory or regulatory provisions relating to federal student
financial aid to minimize the financial impact and administrative
requirements for individuals who are serving on active duty. The law
requires Education to report to Congress on the impact of its efforts
within 15 months of exercising its authority. While the law does not
require postsecondary schools to assist students who leave for active
duty service, it encourages them to provide tuition refunds for
incomplete coursework and to minimize reapplication requirements.
Federal student financial aid provisions include a number of options
designed to allow any federal student loan borrowers--whether serving
on active duty in the military or not--to postpone repayment. For
example, borrowers are not expected to make payments on their loans
while enrolled in school on at least a half-time basis, while
completing a graduate fellowship, or for the first 6 or 9 months after
they have left school, known as the grace period.[Footnote 9] There are
also options that allow borrowers to postpone repayment if they are
having difficulty meeting their repayment schedule. Borrowers may
qualify for a deferment if they have been unable to find full-time
employment or can demonstrate economic hardship.[Footnote 10]
Additionally, members of the armed forces may qualify for a military
deferment while they are serving on active duty during a war, other
military operation, or national emergency.[Footnote 11] Borrowers who
are not eligible for any of the deferment options can request
forbearance, a temporary period during which loan payments are either
reduced or postponed. While borrowers do not have to make loan payments
during in-school, grace, deferment, or forbearance periods, whether or
not they are responsible for paying the interest that continues to
accrue depends on the type of loan and postponement, as shown in table
1.
Table 1: Responsibility for Interest Payments by Postponement and Loan
Type:
Type of postponement: In-school;
Loan type: Subsidized: Federal government;
Loan type: Unsubsidized: Student.
Type of postponement: Grace;
Loan type: Subsidized: Federal government;
Loan type: Unsubsidized: Student.
Type of postponement: Deferment;
Loan type: Subsidized: Federal government;
Loan type: Unsubsidized: Student.
Type of postponement: Forbearance;
Loan type: Subsidized: Student;
Loan type: Unsubsidized: Student.
Source: GAO analysis.
[End of table]
Education Has Issued Waivers and Modifications to Provide Relief for
Aid Recipients Serving on Active Duty, but the Impact of These Changes
Is Not Known:
Education has implemented HEROES by waiving and modifying certain
federal student financial aid provisions to ease the financial impact
and administrative burden of meeting aid obligations for recipients
serving on active duty. The extent to which servicemembers are
benefiting from these waivers and modifications is not known, however,
because Education has not collected key information that would allow it
to assess the impact of these changes as required by HEROES.
Education's Waivers and Modifications under HEROES Aimed at Relieving
Financial and Administrative Burden for Student Financial Aid
Recipients Serving on Active Duty:
To help federal student financial aid recipients who are serving on
active duty avoid negative financial consequences, such as loan
default, Education has expanded opportunities to avoid or postpone
repayment of federal student grants and loans. Students who leave
school for active duty service no longer have to return or repay
federal grant funds for academic terms they were unable to complete.
Moreover, students who leave school for active duty service are
considered to be still enrolled in school, which means that they do not
yet have to begin repaying their student loans. Similarly, Education
has expanded opportunities to postpone repayment for borrowers serving
on active duty who are out of school or enrolled less than half-time.
Specifically, under the HEROES waivers, if borrowers were in a grace
period at the time of departure, lenders are required to maintain loans
in a grace period for up to 3 years while the borrower is performing
active duty service and provide borrowers with a full 6-month or 9-
month grace period once they return, depending on the type of
loan.[Footnote 12] Borrowers in repayment no longer have to provide
their lender written documentation of active duty service to have loan
repayment suspended for up to 1 year. Instead, under the HEROES
waivers, lenders must suspend loan payments based on verbal
notification from borrowers or another reliable source. Figure 1
illustrates the options available to suspend or postpone loan repayment
for federal student loan borrowers serving on active duty.
Figure 1: Options Available to Suspend or Postpone Loan Repayment for
Borrowers Serving on Active duty:
[See PDF for image]
Source: GAO analysis.
[End of figure]
Education's waivers and modifications also cover borrowers who had
already defaulted on their student loans at the time of
departure.[Footnote 13] Specifically, Education has waived the
provisions that require schools and guaranty agencies to attempt to
collect on defaulted loans while the borrower is performing active duty
service.[Footnote 14] Education has also waived requirements related to
getting loans out of default. Specifically, once a borrower has
defaulted on a loan, he or she can usually "rehabilitate" it by making
12 consecutive on-time payments. To ensure that borrowers on active
duty service are not penalized, Education has waived the requirement so
that any payments that are missed during active duty service or during
a 3-month transition period upon return will not be treated as an
interruption.
The waivers and modifications also encourage schools to use their
professional judgment in determining financial need for students whose
family income has been affected by active duty service, regardless of
whether the student or the student's parent or spouse is serving on
active duty. Education's waivers and modifications allow financial aid
administrators to consider more current financial information than what
students typically submit when applying for federal student financial
aid if it reduces the amount the student and his or her family would be
expected to pay toward the cost of attendance. For example, the
expected family contribution for the 2006-2007 academic year would
typically be calculated using financial information from the 2005
calendar year, but the waivers and modifications allow financial aid
administrators to use financial information from the 2006 calendar year
for those serving on active duty and their spouses and dependents.
Financial aid administrators need not make this adjustment if doing so
will provide no financial benefit to the student, such as in cases in
which active duty service leads to an increase in income.
Education's waivers and modifications also ease the administrative, or
"paperwork," burden federal student financial aid recipients may
experience when they are serving on active duty. For example, Education
has made allowances for borrowers who have to depart quickly by
requiring lenders to accept notification from someone acting on the
borrower's behalf, such as a spouse or parent. Education has also
relaxed the requirement that postsecondary schools obtain written
authorization from a borrower regarding the disbursement of financial
aid when military service would make complying with this requirement
difficult. Under the waivers and modifications, borrowers serving on
active duty also have more time to cancel a student loan. While
borrowers normally have 14 days from receiving notification from their
school that their loan has been credited to their account to cancel all
or a portion of their student loan, borrowers serving on active duty
have 60 days.
Education officials told us that when they developed the waivers and
modifications, they began by considering which federal student
financial aid provisions could have negative financial consequences for
individuals eligible for relief under HEROES and then conducted
internal brainstorming sessions to identify options for relief. The
officials said the process was guided by the understanding that
Education was charged with waiving and modifying existing statutory and
regulatory provisions, not creating new regulations or spending
additional funds. Prior to issuing the waivers and modifications,
Education officials reached out to industry groups, such as the
National Association of Student Financial Aid Administrators and the
National Council of Higher Education Loan Programs, to discuss the
changes being considered and elicit additional ideas on how to best
assist students and federal student financial aid recipients serving on
active duty. Additionally, Education officials said the Department of
Defense was instrumental in helping Education understand the deployment
process, in particular how quickly deployment can occur and how little
time servicemembers may have to attend to personal matters. One
Education official said that understanding the nature of deployment was
important in helping Education work through concerns about program
integrity. Specifically, there were concerns that if administrative
requirements were reduced by waiving written documentation requirements
and allowing someone else to act on the borrower's behalf, program
integrity might be adversely affected. Education decided that
minimizing the obstacles to obtaining relief to ensure that borrowers
did not inadvertently default on their student loans outweighed these
concerns. Additionally, the official noted that the risks to the
federal government are minimal since borrowers can only obtain 1 year
of assistance without additional documentation, and they will
eventually have to repay the remaining balance of their loans.
After the passage of HEROES, Education announced limited waivers to
statutory and regulatory provisions in May 2003 and announced more
comprehensive waivers and modifications in December 2003. As required
by HEROES, Education published the waivers and modifications in the
Federal Register, which also provided guidance to help postsecondary
schools, lenders, and guaranty agencies understand the changes. The
waivers and modifications announced as a result of HEROES update and
expand much of the guidance Education issued to the higher education
community through Dear Colleague Letters immediately following the
terrorist attacks of September 11, 2001, and again in March 2003. The
initial Dear Colleague Letters focused on providing relief for students
and federal student loan borrowers affected by the terrorist attacks,
including military personnel. In October 2005, Education extended these
waivers and modifications through September 2007. (See fig. 2.)
Figure 2: Timeline for HEROES-Related Activities:
[See PDF for image]
Source: GAO analysis.
[End of figure]
See appendix II for a full list of the waivers and modifications.
Education Has Not Assessed the Impact of Waivers and Modifications on
Students and Federal Student Financial Aid Recipients, as Required:
Education has not assessed the impact of waivers and modifications on
federal student financial aid recipients and Title IV federal student
financial aid programs as mandated by Congress. Specifically, both the
2001 and 2003 HEROES Acts required Education to report to Congress on
the impact of its waivers and modifications within 15 months of first
exercising its authority to waive or modify federal student financial
aid provisions. Based on Education's issuance of comprehensive waivers
and modifications in December 2003, a study should have been completed
no later than March 2005. While HEROES does not specify how Education
should go about assessing the impact of its waivers and modifications,
Education officials interpreted the Act as requiring a rigorous
experimental design that they say would be costly and cannot currently
be supported with Education's data systems. Therefore, Education
currently has no plans to complete the required study.
Currently, Education does not have a mechanism for identifying the
total number of federal student financial aid recipients who have been
provided assistance under HEROES within its data systems. Education
maintains a central database of all federal student loans and Pell
grants through its National Student Loan Data System, which tracks the
status of loans and grants through their life cycle. The database
collects required information on federal student aid recipients'
enrollment status from schools and the status of their loans from
lenders and guaranty agencies. Based on current reporting requirements,
the system can only be used to identify two types of assistance
provided to borrowers based on their military service, military
deferment and military grace periods, which are coded uniquely in the
system and existed prior to HEROES. Education officials told us that
the system would have to be reengineered to identify other types of
borrowers who received assistance under HEROES, such as those with
loans in forbearance, because there are no additional codes in the
system to explain what made the loan eligible for assistance, such as
military service or financial difficulty.
When Education announced waivers and modifications, it included a
provision requiring postsecondary schools and lenders to document their
use of the waivers and modifications in such a way that they could
report on their effect to Education upon request. However, the
announcement did not include any specific guidance on what types of
data Education wanted and how schools and lenders should collect it to
ensure Education could use the data. Education officials told us that
they thought the requirement went largely unnoticed and that lenders
generally do not collect information on this population in such a way
that would be reportable. For example, the officials said that while
lenders maintain information on the reasons for forbearance in a
borrower's individual loan record, they would not have a mechanism for
running a query to identify every borrower granted forbearance based on
active duty service. In our discussions with lenders we found that
three of the nine could provide us some data on the number of borrowers
whose loan payments had been suspended through forbearance as a result
of military service. Moreover, these lenders could provide some data on
borrowers whose loans had been maintained in an in-school period while
serving on active duty.
Education has not explored other data sources that might be used in
combination with its data systems to complete the congressionally
required study. For example, the Department of Defense (DOD) has data
that may be used in conjunction with Education's data to assess the
number of federal student financial aid recipients who have been
assisted by HEROES. DOD told us that it has extensive information on
servicemembers, including mobilizations and deployments, through its
Defense Manpower Data Center. DOD officials said it would be possible
to conduct a match using common data points, such as Social Security
numbers and dates of birth, with Education's National Student Loan Data
System, to identify servicemembers who were participating in federal
student financial aid programs at the time they were deployed. Once the
target population has been identified, additional analysis to determine
the extent to which these servicemembers received some relief might be
possible. Education officials agreed that such a match would be
possible, but said they would have concerns about being responsible for
sensitive national security data of this nature. Additionally, they
thought resources could be another limitation to such a match, since
Education would likely have to provide funds to cover the work if it
entered into a memorandum of understanding with DOD.
Lenders Are Assisting Borrowers as Required by Education and Some Are
Providing Additional Benefits:
Lenders have a variety of policies and practices in place designed to
provide relief for federal student loan borrowers serving on active
duty, many of which are required under Education's waivers and
modifications. To minimize the financial impact on borrowers, lenders
provide them with options to suspend or postpone repayment on their
student loans. For example, borrowers who were enrolled in school on at
least a half-time basis before leaving for active duty service are
eligible to have their loans maintained in an in-school status period,
which means that they do not enter repayment while they are serving on
active duty and are provided additional time to reenroll after
completing their service. For borrowers who are repaying their loans,
lenders said they will suspend repayment through a military deferment
or forbearance during active duty service. Because borrowers are
responsible for paying the interest that accrues on loans in
forbearance, lenders consider forbearance as the last option for
suspending repayment on a loan when borrowers are not eligible for any
other type of assistance.
Lenders also told us about policies or practices they have to minimize
the financial impact on borrowers that go beyond the requirements of
HEROES. Some lenders we interviewed reported practices to minimize the
amount of interest that accrues while a loan is in forbearance during
active duty service. While borrowers are not required to make any
payments during a forbearance period, the interest on these loans
continues to accrue, and ultimately the borrower is responsible for
paying it. If the borrower elects not to pay any of the interest that
has accrued during the forbearance period, the interest will eventually
be capitalized by adding the accrued interest to the remaining
principal balance. From that point on, interest will be assessed on the
new, higher principal balance. Federal student financial aid provisions
allow lenders to capitalize the interest that accrues on loans in
forbearance either quarterly or at the end of the forbearance period,
depending on when the loan was originally disbursed.[Footnote 15]
However, three lenders told us that they do not capitalize the interest
on loans in forbearance as a result of active duty service, which
reduces the total amount of interest that borrowers serving on active
duty must pay. Additionally, one Pennsylvania-based lender has extended
benefits beyond the requirements of HEROES by offering loan forgiveness
for servicemembers who have lived in Pennsylvania or attended college
there. The program provides a one-time loan-forgiveness benefit of
$2,500 for members of the armed forces who have been in an active duty
status between September 11, 2001, and December 31, 2006.
Lenders also follow Education's waivers and modifications designed to
reduce the administrative burden for borrowers serving on active duty,
for example, by providing immediate assistance to borrowers based on
verbal notification of their active duty service. A representative from
one of the lenders we interviewed told us that the simplified
documentation requirements allowed under the HEROES waivers and
modifications have made it easier for lenders to quickly respond to
borrower needs. She said that without this assistance, borrowers might
have become delinquent on their loans--which could adversely affect
their credit rating--while waiting to be approved for forbearance
because of the documentation requirements.
Lenders told us that with these simplified procedures, they could help
servicemembers with just one short telephone call. For example, all the
lenders we interviewed have toll-free numbers that borrowers can call
to obtain information about or request assistance with their loans, and
borrowers only need to contact the lender once to receive assistance,
such as military deferment or forbearance. Lenders said the borrower is
typically the one who contacts the lender about his or her active duty
service, but they will also accept notification from someone acting on
the borrower's behalf, such as a spouse, parent, or other reliable
source. Three lenders explained that individuals who notify the lender
must have sufficient information about the borrower's account to be
considered a reliable source. During the initial contact, a customer
service representative will determine what benefits the borrower is
eligible for based on his or her individual circumstances. According to
several lenders, this stage of the process can usually be completed in
5 to 10 minutes, and any changes that are made to the loan status will
be processed within 3 to 5 days, at which time a notice is mailed to
the borrower confirming the changes that were made and the time periods
these changes will remain in effect.
The process is similar when borrowers return. However, since borrowers
may not contact the lender when they return from active duty service,
lenders said that they rely on information documented in the borrower's
account to determine the length of the benefit period. Lenders send
borrowers a notice by mail before the benefits lapse to inform them of
what will happen to the loans at the end of the period, along with
contact information should the borrower need additional assistance with
their loans. For example, a borrower with a loan in forbearance would
receive a notice indicating when the forbearance period is scheduled to
end along with repayment terms, such as when the borrower will have to
begin making payments and how much he or she will have to pay each
month. The advance notice is designed to allow sufficient time for
borrowers who are continuing to serve on active duty to submit copies
of military orders to extend the assistance they are receiving with
their loans. Borrowers need not take any action when they receive
notification from the lender if they have returned from active duty
service and do not require further assistance with their loans.
While the benefits available to borrowers under HEROES end after the
borrower has returned from active duty service and used any available
transition period, most of the lenders we talked to said they would
continue to work with any borrowers having difficulty making their
monthly payment after returning from active duty service. For example,
officials from one lender said they would offer borrowers other
repayment alternatives, such as income-sensitive repayment to lower
their monthly payment amount, or additional forbearance time as allowed
under federal student financial aid provisions.
Most Schools Have Had Students Leave for Active Duty and Have Policies
in Place to Aid Their Departure and Return:
The majority of colleges and universities have had students who left
school for active duty service before the end of their academic term
and have policies to assist these students when they leave and when
they return to school. Schools reported having policies covering
refunds of tuition and room and board, grading, and changes to
graduation and degree requirements that might occur while students are
serving on active duty.
Most Colleges and Universities Have Had Students Leave for Active Duty:
The majority of colleges and universities--about 80 percent--have had
students leave school for active duty service prior to the end of their
academic term, according to our survey, with a greater percentage of
public schools having experience with such departures.[Footnote 16] For
example, we estimate that 66 percent of 4-year private schools had
students who left for the military compared to 96 percent of 4-year
public schools (see fig. 3). Although the majority of schools had
students who left for active duty service, most of these schools could
not identify the number of students who left since HEROES was first
enacted in January 2002. Officials at two of the universities we
visited told us that more than 100 of their students had left and
partly attributed the large number of departures to their campuses'
proximity to military bases and National Guard units.
Figure 3: Estimated Percentage of Schools with Students Who Have Left
for Active Duty:
[See PDF for image]
Source: GAO survey of colleges and universities.
Note: The 95 percent confidence interval for the estimated percentage
of 4-year private schools is from 53 to 78 percent.
[End of figure]
Most Schools Have Policies in Place to Aid Students When They Leave for
Active Duty Service and Return to School:
We estimate that nearly three-quarters of schools have policies or
practices for students who leave for active duty service prior to the
end of the academic term.[Footnote 17] Schools with students who have
left were more likely to report having policies. About two-thirds of
schools reported that their policies were in place prior to the
enactment of the first HEROES Act in 2001. For example, officials at
one university we visited said the institution's policies were
developed in the 1990s in response to the many students who had to
leave school for active duty service in Kuwait. Some of these schools'
policies may have been influenced by state law. Specifically, we
identified 26 states that have laws to assist students who leave for
active duty service (see fig. 4). Most of them apply only to public
colleges and universities, and require schools to have nonpunitive
withdrawal policies and issue tuition refunds for students who choose
to withdraw. Both Texas and Florida, for example, require public
colleges and universities to provide students with the option of
receiving a full tuition refund for any course they withdraw from or
completing it at a later date without penalty. Additionally, Texas
provides professors with the flexibility to assign students a grade
based on the work completed at the time of departure.
Figure 4: States with Laws to Assist Students Who Leave School for
Active Duty:
[See PDF for image]
Source: GAO (data); Copyright Corel. All rights reserved (map).
[End of figure]
School Policies Address the Broad Range of Issues Confronting Students
Who Must Leave for Active Duty Service:
Most schools have policies in place to help students who leave for
active duty service transition out of and back into school. Figure 5
illustrates the options that may be available to these students when
they depart and return.
Figure 5: Selected Options Available to Ease Departure and Return for
Students Serving on Active Duty:
[See PDF for image]
Source: GAO analysis.
[End of figure]
For students who leave for active duty service before completing an
academic term, the majority of schools offer tuition refunds and
various options for withdrawing from courses. We estimate that 70
percent of colleges and universities have tuition refund policies for
students leaving for active duty service, and most of them provide a
full tuition refund for these students (see fig. 6). The majority of
schools that provide a partial refund prorate the refund based on how
much of the term the student has completed.
Figure 6: Estimated Percentage of Schools with Policies on Tuition
Refunds for Students Leaving for Active Duty:
[See PDF for image]
Source: GAO survey of colleges and universities.
Note: One percent of schools that have tuition refund policies reported
that their policies do not allow for any portion of the tuition to be
refunded.
[End of figure]
Some schools also reported having policies that allow for the refund of
room and board. Of the schools that offer campus housing, 52 percent
reported having policies regarding room and board refunds. Of those, 82
percent reported that they provide a partial refund of room and board,
usually based on the amount of the term completed, for students leaving
for active duty (see fig. 7).
Figure 7: Estimated Percentage of Schools That Offer Campus Housing
with Room and Board Refund Policies for Students Leaving for Active
Duty:
[See PDF for image]
Source: GAO survey of colleges and universities.
Note: This analysis includes only colleges and universities that offer
campus housing based on data in the Integrated Postsecondary Education
Data System (IPEDS). The 95 percent confidence interval for the
estimated percentage of schools that offer a full refund is from 10 to
30 percent, and the 95 percent confidence interval for schools that
provide a partial refund is from 70 to 90 percent.
[End of figure]
Most of the schools require documentation of active duty service, such
as a copy of military orders, before students can receive a refund of
tuition or room and board, although in some cases students may not have
documentation before leaving. For example, officials at one university
we visited said that their students who left for active duty service
shortly after September 11, 2001, did not receive their military orders
before departing, and as a result their tuition refunds could not be
processed before they left.
Students may also risk failing courses or delaying graduation when they
leave school before the term has been completed, but about two-thirds
of schools have put in place policies to help them minimize the
academic impact of leaving (see fig. 8). Almost all of these schools
allow students leaving for active duty service to receive a grade of
"incomplete"--giving them the option to finish the class later--or
withdraw from a course without receiving a grade. Of the schools that
allow a student to receive an incomplete in an unfinished course, 68
percent require the student to complete the coursework within specific
time frames--anywhere from less than a month to 36 months--to receive a
letter grade in the course. In addition, over half of schools that have
policies to minimize academic impact allow instructors to assign a
grade based on partially completed coursework.
Figure 8: Estimated Percentage of Schools with Policies to Minimize the
Academic Impact for Students Leaving for Active Duty:
[See PDF for image]
Source: GAO survey of colleges and universities.
[End of figure]
Of the seven students we interviewed, one was able to work with his
instructors to complete remaining coursework for a grade before leaving
for active duty service, and five opted to withdraw from their
classes.[Footnote 18] An undergraduate student in the Army National
Guard we interviewed said that he withdrew from his classes as soon as
he received the alert that his military unit would be deployed. He said
that withdrawing from school allowed him to focus on ensuring that
health insurance and medical care were in place for his son, who has a
serious illness. A graduate student in the Marine Reserves who received
1 week advance notice of deployment withdrew from classes to allow time
to handle financial obligations. While withdrawing from classes ensures
that students will not have failing grades to contend with, two
students expressed concern about how the withdrawals on their
transcripts would be perceived by other postsecondary schools when
applying for a transfer or graduate study. The university these
students attend has since begun allowing students to get these
withdrawals deleted from their records, which means there would be no
record of the student having attempted the course on their transcript.
One undergraduate student we spoke to reported difficulty withdrawing
from his classes. He told us that while he was deployed multiple times
for durations of 1 to 3 weeks, his university approved only one of his
requests to withdraw. Even though his deployments were relatively
short, he said it was difficult for him to keep up with the coursework
and his academic performance suffered as a result.
In addition to allowing students to withdraw or receive a grade of
incomplete, some of the colleges we visited provided other options for
students leaving for active duty service to complete classes. Officials
at one college we visited said that some students who have left school
for active duty service have been able to complete a course by
delivering remaining assignments to their professor by Email or
completing a classroom course via the Internet when it is offered in an
online version. One university we visited that has a large number of
military students reported great increases in online course enrollment
in 7 years, from 20,000 to 150,000 students. Also, a college based in
Texas with campuses on military bases worldwide offers courses using
such tools as prerecorded and live lectures displayed over the
Internet, interactive online discussions that can facilitate student
participation, and course materials provided on compact disc.
When students return to school from active duty service, most schools
also have policies to ease their transition. Specifically, about half
of schools with policies to minimize the academic impact of leaving for
active duty service do not require students to reapply for admission
(see fig. 9). Of those schools that require students to reapply, almost
all guarantee readmission, and 84 percent waive application
fees.[Footnote 19] Officials at one college we visited reported that
students returning from active duty service are required to reapply
just to ensure that the school has updated contact information for the
students. Moreover, a student may return from active duty to find that
degree requirements have been changed, such as courses required for a
major, which could delay graduation. Sixty percent of schools with
policies designed to minimize the academic impact of leaving for active
duty service exempt returning students from changes in degree
requirements that occurred during their absence (see fig. 9).
Additionally, the majority of schools with polices to minimize academic
impact reported having mechanisms that allow returning students to
appeal failing grades and changes to degree requirements.
Figure 9: Estimated Percentage of Schools with Policies to Minimize the
Academic Impact When Students Return from Active Duty:
[See PDF for image]
Source: GAO analysis of survey results.
[End of figure]
Conclusions:
Our study showed that most colleges and universities have experienced
military departures, and schools and lenders have marshaled behind
servicemembers by putting in place policies and practices to minimize
the impact of serving their country. Education issued waivers and
modifications to federal student financial aid provisions to protect
this population, and states also have laws in place to support them.
However, critical information to gauge the usefulness of these waivers
and modifications is missing. Specifically, Education does not have
very basic information on the extent to which servicemembers are
benefiting from the waivers and modifications. We know that more than
1.3 million servicemembers have been deployed since September 11, 2001,
but information on the extent to which these individuals are college
students or have federal student loans and are receiving relief under
HEROES is unknown. While an impact study of HEROES as Education has
interpreted the congressional requirement would be difficult and costly
to undertake, important information such as this could be obtained
without using a rigorous experimental design. Such information would be
important to gauge the extent to which those eligible are taking
advantage of HEROES and may provide Education with information about
issues for future study.
Recommendation for Executive Action:
To ensure that Congress knows the extent to which the waivers and
modifications are being used, we recommend that the Secretary of
Education undertake the congressionally mandated study to determine the
extent to which eligible servicemembers are receiving assistance under
HEROES.
Agency Comments:
We provided copies of a draft of this report to the Department of
Education and the Department of Defense for review and comment. In
written comments, the Department of Education agreed with our findings.
With respect to our recommendation, Education said it has merit and
that it will explore options for completing the congressionally
mandated study. Education commented that because highly sensitive
national security data from DOD would be required, DOD should take the
lead in extracting the data. Education said it would explore this
possibility following discussions with Congress and DOD. As we stated
and recommended in our report, the responsibility for conducting the
study resides with Education. Education's written comments are in
appendix III. DOD had no comments on the draft report.
Copies of this report will be sent to the congressional committees and
subcommittees responsible for the Higher Education Act, the Secretary
of Education, the Secretary of Defense, and other interested parties.
Copies will also be made available to others upon request. In addition,
this report will be available at no charge on GAO's Web site at
[Hyperlink, http://www.gao.gov].
If you have any questions about this report, please contact me on (202)
512-7215. Key contributors to this report are listed in appendix IV.
Signed by:
Cornelia M. Ashby:
Director, Education, Workforce, and Income Security Issues:
[End of section]
Appendix I: Methodology for Survey of Colleges and Universities:
To determine what policies or practices colleges and universities have
in place to assist students serving on active duty, we designed a Web-
based survey and distributed it to school administrators of 2-year
public, 4-year public, and 4-year private, nonprofit postsecondary
schools. The survey asked such questions as whether schools had
students that left for active duty service prior to the end of an
academic term and what their policies were for refunding tuition and
room and board for this population of students. The survey included
questions about the types of grading policies they had in place to
accommodate students who left prior to the end of the academic term.
The survey also asked respondents to report on how they assist students
when they return from active duty service and resume their studies,
such as whether the student needed to reapply and how the school
handled changes in degree requirements. The survey was conducted
between January and March 2006.
Sample Design and Errors:
Our sample was drawn using the Department of Education's 2002-2003
Integrated Postsecondary Education Data System (IPEDS), which contains
the most comprehensive data on all postsecondary schools.[Footnote 20]
Our sample consisted of 2-year public, 4-year public and 4-year
private, nonprofit postsecondary schools that participate in Title IV
programs and have an undergraduate enrollment of at least 100 students.
We drew a stratified random sample of 274 schools from the population
of 2,974 that met our criteria. We selected our sample from four strata
defined by size (student enrollment) and institution type (2-year
public, 4-year public, and 4-year nonprofit private schools). Each
school had a known probability of being selected. We received completed
surveys from 75 percent of the 274 colleges and universities in our
sample. Two schools in the sample were considered out of scope because
of changes to their institutional status. The response rate, adjusted
for out-of-scope respondents and weighted to reflect the population
size in each stratum, was 77 percent. The population, sample, and
survey respondents by strata are shown in table 2. We excluded private,
for-profit schools from our sample because they represent a relatively
small percentage of all postsecondary schools.
Table 2: Survey of Postsecondary Schools: Population, Sample, and
Survey Respondents by Strata:
Strata: 4-Year Public,
