Veterans Administration Education Loan Program Should Be Terminated

Legislative Action Taken Gao ID: HRD-81-128 August 28, 1981

GAO expanded a followup review of the Veterans Administration (VA) education loan program to provide more geographic coverage and to determine whether eligible veterans and dependents were reporting all available resources, if veterans were also eligible for the Department of Education financial aid programs, and if such aid would satisfy their financial needs.

GAO found that a number of actions taken by Congress and VA since May 1978 improved the VA administration of the education loan program by providing additional authority to limit program participation to veterans attending high-cost schools. With the strengthening of the criteria used in defining allowable expenses for determination of financial need, loans awarded decreased significantly in 2 years. About 50 percent of the reduction appeared attributable to the new guidelines. However, VA continued to experience severe problems with loan defaults. The cumulative loan default rate increased to 65 percent; the default rate on matured loans for fiscal year 1980 was even higher, 81 percent. GAO found that: (1) 39 percent of the veterans sampled failed to report financial assistance applied for or received under other financial aid programs; (2) the financial needs of 99 percent of the sampled veterans could probably have been met through the maximum Department of Education financial aid package; (3) the availability of student loans was high, and veterans should have had no problems in obtaining such loans; and (4) it costs VA 70 times more per loan dollar disbursed to administer its loan program than it costs the Department of Education to administer the Guaranteed Student Loan Program. Congress has taken action which will significantly reduce program participation. The Omnibus Budget Reconciliation Act of 1981 limits the VA educational loans and will result in savings of $15 million in outlays in fiscal years 1982 to 1984.


Our 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.

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