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Republican Leaders Request Investigation into Direct Loan Program Management

U.S. House Education and the Workforce Committee Chairman John Kline (R-MN), Subcommittee on Higher Education and Workforce Training Chairwoman Virginia Foxx (R-NC), Representative Judy Biggert (R-IL), Senate Health, Education, Labor, and Pensions Committee Ranking Member Mike Enzi (R-WY), Senator Lamar Alexander (R-TN), Senator Tom Coburn (R-OK), and Senator John Cornyn (R-TX) today sent a letter to the Government Accountability Office (GAO) requesting an investigation into the Obama administration’s management of the Direct Loan program.

"The sheer volume of complaints about the Direct Loan program is extremely disconcerting, and raises serious questions about the Obama administration’s ability to serve student loan borrowers effectively," said Chairman Kline. "With the federal government now responsible for all student lending, we have a responsibility to conduct strong oversight of the Direct Loan program to ensure it is working for borrowers and taxpayers."

In recent months, the House Education and the Workforce Committee has received a number of complaints from student loan borrowers regarding their interactions with the Direct Loan program, including:
  • Missing financial information and payments;
  • Loans moved to new servicers without any notice to the borrower;
  • Borrowers suddenly moved into forbearance;
  • Unexpected changes to the loan principal amount;
  • Lengthy consolidation processes and lack of status updates;
  • Problems with the loan rehabilitation program;
  • Poor customer service and record-keeping; and
  • Data breeches and website outages.
As the members note in their letter:
Recent news reports have highlighted additional problems with the Direct Loan program, leaving policymakers, financial aid administrators, and students questioning whether the department has the capability to protect borrower privacy and effectively administer the student loan program. For example, Inside Higher Ed recently published reports of a second data breach in which certain borrowers received financial information of other borrowers.  The first breach, which took place October 2011, was similar in nature and affected at least 5,000 borrowers.  Diverse: Issues in Higher Education also recently pointed out the department changed the criteria it uses to determine credit-worthiness in the PLUS loan program without providing notice to borrowers. The article notes that because of this change, many students at Historically Black Colleges and Universities were left struggling to figure out how to finance the rest of their education.
The Republican leaders ask GAO to examine the Department of Education’s capacity for effectively administering the Direct Loan program, as well as any policies the department may have in place to protect taxpayers and promote transparency for borrowers.

To read the full letter, click here.

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