Improving the Collection of Debts Owed the Government

Legislation, S. 1249, has been proposed to support the comprehensive collection of debts owed the Government. This legislation, as well as increased emphasis by agency heads on debt management are the keys to resolving the Government's longstanding problems in this area. GAO discussed specific problems in the administration of the health professions and nursing student loan programs. The problems represent a general lack of priority given to debt collection by the Government. Despite the fact that the President has not included additional funds for the programs in the fiscal year 1982 budget, under current legislation, schools are allowed to reloan, until December 1986, monies they collect from former student loan recipients. Sufficient emphasis has not been placed on the financial management of these programs. Schools generally have not complied with requirements for due dilligence in their collection programs. Six of the 23 schools which GAO reviewed could not locate or had misfiled promissory notes. Casual handling of promissory notes jeopardizes the schools' ability to collect the loans. Most schools neglect to complete exit interviews, which are an effective tool in collecting a student loan as it provides the school with an opportunity to secure the borrower's correct address, his employer's address, and to reaffirm the borrower's responsibility to repay the loan. Borrowers have not been properly billed and followup actions on delinquent loans are not adequate. The credit ratings in the private sector of many delinquent borrowers indicated that they were able to pay. Institutions participating in the two programs have been allowed to accumulate Federal funds in excess of their immediate needs, which is contrary to Federal regulations and costs the Government millions in interest annually. The Department of Health and Human Service's (HHS) inadequate administration of the programs is one of the primary reasons for the problems at the schools. Few onsite assessments have been performed; there is a large backlog in reviewing annual operating reports; agency officials do not encourage the writing off of loans considered uncollectible because they lack staff for reviewing loan writeoff requests; and the programs are rarely audited. HHS accounting records do not accurately show the financial status of the loan programs. Further distortions occurred because schools were allowed to transfer monies from the loan funds to corresponding scholarship programs.