Financial Management

Education's Student Loan Program Controls Over Lenders Need Improvement Gao ID: AIMD-93-33 September 9, 1993

Controls used by lenders--banks, savings and loans, and other entities making federally guaranteed student loans--and the Department of Education to ensure accurate and reliable data in lenders' quarterly billings often fall short. As a result, Education has been relying on unverified summary billing data to pay quarterly interest subsidies to lenders, report program financial activity, and manage programs. Although GAO did not discover material overbillings, this operating environment posed a significant potential for errors. For example, GAO found inaccuracies or inconsistencies in the quarterly billings submitted by 27 of the 46 lenders it reviewed. Moreover, Education and guaranty agencies did not do enough comprehensive on-site reviews to determine whether lenders' systems and data generated accurate quarterly billings. Nor did Education's automated edit checks or tests of the reasonableness of information lenders reported ensure the accuracy of the data in the quarterly billings.

GAO found that (1): significant weaknesses exist in several lenders' electronic data processing controls; (2) lender controls do not always reasonably ensure the validity, accuracy, or completeness of processed data; (3) lenders do not always maintain adequate supporting documentation, written policies, or procedures; (4) on-site lender reviews do not adequately assess the accuracy of quarterly billings; and (5) Education has made some erroneous multiple payments to lenders because it relies on unverified billing data to pay interest subsidies to lenders, report program financial activities, and manage program operations.


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: Gloria L. Jarmon Team: General Accounting Office: Accounting and Information Management Division Phone: (202) 512-4476

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