The Guaranteed Student Loan Information System Needs a Thorough Redesign To Account for the Expenditure of Billions

The Department of Education's Guaranteed Student Loan Program guarantees loans to undergraduate and graduate college students by ensuring federal government loans directly and by reinsuring loans issued by states. To keep track of and to control this multibillion dollar program, Education maintains a computerized information system to process most program transactions. GAO reported on Education's efforts and plans to correct known deficiencies in the system, whether the major system costs under the previous contractor were reasonable and proper, and how well the new contractor is performing.

The system continues to be deficient in four functional areas: (1) some loans to students who had exceeded loan limits were being reinsured; (2) Education pays the lenders' interest and special allowance payments without validating them; (3) if the lender does not pay the first insurance premium bill, the system does not provide for rebilling the lender; and (4) the system has yet to accumulate and report the program's financial status in accordance with the needs of Education's financial managers. GAO believes that Education needs to determine the extent and degree of the controls and accountability it wants to provide for this multibillion-dollar program. GAO did not identify any improper charges to the earlier contract to operate the system. However, GAO believes that the contract costs incurred from fiscal years 1976 through 1979 were high. The new contract does not address the correction of system deficiencies. Although parts of the conversion from the old to the new contractor were delayed up to 5 months, the adverse effects on program recipients were kept to a minimum. However, problems encountered with the conversion will add further to contract costs, and certain critical items to be provided by the contractor had not been accepted by Education as of August 1981. This problem needs to be resolved.

Recommendations

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.

Director: No director on record Team: No team on record Phone: No phone on record