Noncitizen Student Loan Defaults

In response to a congressional request, GAO examined defaults by noncitizens under the National Direct Student Loan (NDSL) program at six Chicago area institutions of higher education. GAO reviewed the authority that permits such loans to noncitizens, the discretion that schools have in making these loans, the number of noncitizen students that have loans, and the number of defaults.

The Department of Education administers five major programs of student financial assistance under title IV of the Higher Education Act of 1965 that generate an estimated $10.9 billion in student assistance during school year 1982-83. Department of Education program regulations permit financial aid to citizens, permanent residents, and those who are in the United States for other than temporary purposes. GAO sought to determine whether noncitizens were defaulting on the NDSL program at a rate disproportionate to that of U.S. citizens and whether a high noncitizen default rate might penalize the schools in view of new NDSL regulations which discontinue or reduce Federal contributions to institutions with high default rates. GAO noted that evaluating schools' verification procedures for citizen/noncitizen eligibility was difficult because there are no requirements for such documentation. In addition, statistics on default by noncitizens are not maintained. In general, GAO found that the effect of noncitizen defaults on NDSL default rates were not significant. School officials at one institution recognized a potential problem and GAO discussed the situation with Immigration and Naturalization Service and Department of Education Inspector General officials. GAO noted that the effect of noncitizen defaults on individual schools could be lessened by assigning defaults to the Department of Education as soon as they became defaults, as recommended in a previous GAO report.