Guaranteed Student Loans

Better Criteria Needed for Financing Guarantee Agencies Gao ID: HRD-86-57 July 2, 1986

GAO reported on the financing of guarantee agencies under the Department of Education's Guaranteed Student Loan Program, specifically whether reserves exceed the risks guarantee agencies are asked to assume, at the expense of the federal government and student borrowers.

GAO found that: (1) guarantee agencies decided for themselves the levels of reserve funds they needed, but they accumulated more reserves than necessary; (2) the agencies had $986 million in cash reserves at the end of fiscal year (FY) 1985; (3) Education is seeking legislative action to reduce certain sources of funds available to the guarantee agencies; (4) Congress passed a bill requiring Education to recall $75 million in federal advances from the guarantee agencies during FY 1988; and (5) agencies used some of their reserves for non-program purposes. GAO believes that the recall of advances should be conducted over 2 years, rather than as a single payback.

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.

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