Debt Collection at the Department of Education

GAO discussed debt collection at the Department of Education. During fiscal 1982, Education acted to resolve longstanding debt collection problems and to increase its oversight of schools administering student loans by developing a comprehensive debt collection improvement plan and creating a credit management board. Education sought to improve the accuracy of information systems for the Guaranteed Student Loan and National Direct Student Loan programs, improve the control and reporting of financial transactions, and augment Education's collection staff with private sector collectors and temporary employees. In a 1981 report on defaulted student loans, GAO recommended that Education monitor contractor performance to ensure cost effectiveness. Under the present plan, Education transferred about $635 million of defaulted loans to private collectors and expects to collect about 10 percent of the assigned amount. Through June 1983, about 4 percent had been collected with an increase in the amounts collected monthly. GAO noted that the Office of Management and Budget (OMB) claims that contractor performance is hampered by regulations that do not allow contractors to bring suit directly against debtors. Education believes that the installation of an information system capable of handling all of Education's loan programs will aid greatly in solving its accounting and reporting problems. In conclusion, GAO noted that Education fell short of its OMB debt collection target.