GAO Reports Concerning Federal Student Financial Aid Programs

Gao ID: 117445 February 3, 1982

GAO reported on the academic progress standards for students receiving Federal financial aid, the collection of defaulted National Direct Student Loans, and the Guaranteed Student Loan information system. An effective academic progress standard should measure the quality of students' work and rates of progress toward definite educational goals. Inconsistent, weak, and nonspecific Federal academic progress requirements have led to abuse of the student financial aid programs, particularly those administered by the Department of Education and the Social Security Administration (SSA). Students often have grade point averages well below graduation requirements, are awarded nonpunitive grades, and are progressing toward program completion at a slow rate. The Veterans Administration (VA) has the most comprehensive requirements of the agencies reviewed in a GAO study. Education and SSA requirements should be essentially the same as those set by VA. Changes to the authorizing legislation and program regulations to strengthen academic progress requirements would: (1) save Federal funds; (2) standardize Federal regulations; (3) better coordinate Federal monitoring efforts; and (4) encourage students to enroll in programs which are more nearly suited to their abilities. The Office of Management and Budget should ensure coordination by the agencies in setting and enforcing these requirements. The National Direct Student Loan program has been plagued by high default rates. Education should require schools to: (1) comply with its loan collection procedures; (2) monitor the results of collection agency actions; (3) suspend from the program or withhold funds from schools that exceed an established default rate; (4) determine whether loans should be submitted for collection earlier; (5) advise schools and collection agencies of applicable information disclosure laws; and (6) monitor Education's use of private collection agencies. The Guaranteed Student Loan Information System is deficient because: (1) State agency loans are automatically reinsured regardless of whether the student is qualified; (2) the system pays lender's bills for interest and special allowances without validating them; (3) the system does not rebill lenders; and (4) it does not collect adequate financial information. Education should develop a more systematic process for the design, development, and operation of automated information systems.

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