Direct Student Loans Could Save Money and Simplify Program Administration
Gao ID: T-HRD-92-8 October 29, 1991Can the government save money by replacing Stafford student loans with direct loans under a program proposed by the National Association of State Universities and Land Grant Colleges? This testimony discusses a recent report (GAO/HRD-91-144BR, Sept. 27, 1991) that compared the relative cost of guaranteed and direct student loan. The Stafford Student Loan Program, also known as the guaranteed student loans programs, constitutes the largest form of financial assistance to students seeking postsecondary education. Administrative complexity, high costs, and the lack of accountability in the program have spurred the search for alternative loan delivery systems. GAO testified on (1) the potential federal savings associated with substituting Stafford loans with direct loans and (2) the effect that a direct loan program could have on the administrative functions of the Department of Education and postsecondary educational institutions.