Press Releases

A report released today by the nonpartisan Government Accountability Office (GAO) revealed a number of weaknesses in the Department of Education’s federal Direct Loan program, which provides loans to undergraduate and graduate students and their families. Requested by Republican leaders in the House and Senate, the report concludes weaknesses in the department’s “customer service for borrowers and management of the Direct Loan program leave the agency unable to ensure that student loan borrowers are well-served.” The committee has long raised these and similar concerns as part of ongoing efforts to protect student borrowers.

According to the report, some borrowers have “difficulties with contacting [loan] servicers through their call centers,” leaving them with “limited access to assistance” in understanding their loans. The report states that “without a minimum standard for servicer call center hours, some borrowers will continue to have difficulty contacting their assigned servicers, putting them at greater risk of delinquency or default.”

Additionally, GAO’s findings highlight issues with program oversight, noting the department “lacks comprehensive and comparable information on the nature of borrower complaints … hindering its ability to track trends and address borrower concerns.”

These findings are the most recent examples of mismanagement within the federal financial aid system identified by GAO. At a November 2015 oversight hearing on the Department of Education’s Office of Federal Student Aid (FSA), GAO Director of Education, Workforce, and Income Security Melissa Emrey-Arras explained, “Some FSA guidance and instructions to servicers is inadequate, resulting in inconsistent and inefficient services to borrowers.” If FSA fails to address these problems, she warned, “there will continue to be areas of inconsistent implementation, and differences between servicers could have financial consequences that hurt borrowers or risk the integrity of the program.”

Today’s report also outlines needed improvements in the way the department rewards servicers with additional loan assignments, recommending the department evaluate and adjust its performance metrics and compensation. Otherwise, the department’s servicer incentives will “continue to have unintended and adverse effects on the customer service borrowers receive,” and servicers will not be held accountable for poor compliance.

To read the full report, click here.

 

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