Student Loans

Federal support for student financial aid totaled about $35 billion in fiscal year 1995. Most of this aid--$27 billion--was provided through student loans. Eligible postsecondary institutions can choose to give students access to federally supported loans through either the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan Program. This report provides information on comparative levels of activity in the two programs. Legislation requires the Federal Direct Loan Program to provide five percent of federal student loans during school year 1994-95, increasing to at least 60 percent by school year 1998-99. GAO discusses (1) the number of schools in each program and the distribution of student loans between the two, (2) the loan default rate for schools associated with each program, and (3) the number of schools in each program on a state-by-state basis and among the 100 largest postsecondary schools participating in these federal loan programs.

GAO found that: (1) as of October 1996, 1,622 schools were in FDLP, that is, about 26 percent of schools participating in either of the federal loan programs; (2) while many of these schools in FDLP were also in FFELP, the remaining 74 percent of all schools were solely in FFELP; (3) public 4-year and proprietary schools were the most represented kind of schools in FDLP, and 42 and 41 percent of them, respectively, were chosen by the Department of Education to be in the program; (4) the percentage of federal student loan volume provided by FDLP was 7 percent in school year 1994-95 and 30 percent in school year 1995-96; (5) not enough time has elapsed for loan default information to be available for FDLP; (6) for FFELP, a comparison of default rates for schools that used both programs and schools that used FFELP exclusively showed that rates were similar; (7) for schools in FDLP, the FFELP default rate was 10.2 percent for the fiscal year (FY) 1993 cohort year, and for schools only in FFELP, the rate was 9.9 percent; (8) every state has schools in FDLP, although the proportion of schools in the program varies considerably; (9) thirteen states had more than half of their FY 1995 loan volume at FDLP schools, while 17 states had less than 25 percent; (10) the 100 largest schools, a list that primarily includes 4-year public schools but also includes some community colleges and private 4-year schools, were evenly divided as to whether they were in FDLP; and (11) fifty schools were in FDLP and 50 were not.