Student Loans

Pursuant to a congressional request, GAO provided information on the potential effects of raising the statutory audit threshold for the Federal Family Education Loan Program (FFELP) to lenders with loan portfolios that exceed $10 million, focusing on: (1) the number of lenders with loan portfolios between $5 million and $10 million, and the total loan volume in these lenders' portfolios; and (2) the number, types, monetary impact, and disposition of audit findings reported to the Department of Education by lenders with loan portfolios in that range.

GAO noted that: (1) if the loan volume audit exemption was extended to lenders with loan portfolios between $5 million and $10 million, relatively few of the more than 5,700 lenders participating in FFELP would be affected; (2) in fiscal year (FY) 1995, 193 FFELP lenders (about 3 percent) had loan portfolios between $5 million and $10 million; (3) these lenders held less than 2 percent of the total outstanding FFELP loan volume; (4) if the audit threshold had been $10 million for FY 1995, the audit requirement would have applied to a total of about 9 percent of FFELP lenders, lenders that collectively held about 96 percent of outstanding FFELP loan volume in FY 1995; (5) 16 of the 193 lenders with loan portfolios between $5 million and $10 million submitted audit reports that contained findings requiring corrective action; (6) lenders with portfolios of this size do not have to submit audit reports to the Department of Education unless they contain these kinds of findings; (7) the 16 audit reports contained 31 findings covering such areas as missing documents in loan files, incorrect billing calculations, and improper classifications of loans; (8) three reports had findings with a monetary impact; (9) collectively, the Department owed lenders $8,751; and (10) as of January 1997, all but 1 of the 16 lenders had taken corrective action.