Actions Underway To Reduce Delinquencies in the Health Professions and Nursing Student Loan Programs

Gao ID: AFMD-83-7 December 1, 1982

In response to a congressional request, GAO analyzed the problem of loan payment delinquency in the Health Professions and Nursing Student Loan Programs.

According to the latest data available, more than 28 percent of borrowers in the programs were delinquent in payments by 90 days or more. More than $34 million was delinquent on loans with principal amounts totalling $77 million. The 23 participating schools which GAO reviewed generally placed too little emphasis on billing and collection. Promissory notes were not properly controlled, interviews were not always conducted with borrowers before they left school, borrowers were not properly billed, and follow-up action on delinquent debts was not adequate. GAO found that many delinquent borrowers were able to pay but did not. In addition, participating institutions accumulated federal funds in excess of their immediate needs. Despite a law which requires that any interest earned from invested program funds be returned to the programs, only one school returned all interest earnings to the appropriate program and two schools returned part of the earnings. Inadequate monitoring and dependence on the schools to manage the programs for the Department of Health and Human Services (HHS) are primary reasons for debt collection problems at the schools. GAO also found that the interest rates on the loans provided little incentive for borrowers to repay their loans promptly. HHS accounting records do not accurately show the financial status of the loan programs, nor do they record interest earned on student loans. In addition, HHS has written off only $40,000 in loans as uncollectible since the inception of the programs even though some loans have been delinquent for many years.

Recommendations

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: John F. Simonette Team: General Accounting Office: Accounting and Financial Management Division Phone: (202) 275-1581


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