GAO Says the Office of Federal Student Aid Is Failing
Posted By Eliana Osborn on December 22, 2015 at 12:20 pm
Student loans are huge money in this country, much of it overseen by the Office of Federal Student Aid. The Government Accountability Office recently testified before Congress with disturbing findings on how the FSA is doing its job.
Problems are found at all levels of FSA service, from how they oversee schools who receive aid to the companies involved with repayment. The Washington Post reports that some of the issues are tied to changes in FSA responsibilities over the past several years. “The amount of federal student aid delivered by FSA has increased from $82 billion in 2008 to $130 billion this year, with the number of students the office serves doubling during that time from 6.8 million to 13 million.”
A forum to collect student complaints about their loan servicers discovered issues with transparency and clarity of information provided to borrowers. The form, from the Consumer Financial Protection Bureau, allows all to see specific complaint narratives. Stories abound about specific companies breaking privacy laws, difficulty getting in touch with appropriate people, mistakes, and especially problems with modification.
Even as the Obama Administration has pushed income-based repayment plans, few servicers are actively helping students enroll. Borrowers who try are often given incorrect or partial information, or told to have their co-signers pay the bills. All of these means of dissuasion are contrary to policy.
The GAO report requests a comprehensive manual be created by FSA for the direct loan program that would apply to all the servicing companies. Many of the problems are a result of differing practices across servicers, so students with multiple loans face confusion. The current handbook is a behemoth document, completely un-user friendly and subject to much interpretation.
The GAO testimony about FSA is titled “Key Weaknesses Limit Education’s Management of Contractors.” Delivered by Melissa Emrey-Arras, they recommend changes to how calls between loan holders and servicers are monitored, emphasizing the need for more scrutiny and training involved in these calls to better oversee and analyze how information is being presented to students.
Other concerns include loans in default. The rehabilitation process is a way for borrowers to fix their credit by repaying on-time for nine out of ten months and getting back on track. That was the plan at least; during 2011 and 2012, no credit reports were cleaned and the FSA needed until January 2013 to get through the backlog. Nevertheless, the default rehabilitation program has improved, according to the GAO, one bright spot in their findings.
The Federal Office of Student Aid wields tremendous power as they can stop schools from receiving aid, effectively shutting them down. The GAO’s findings show that reforms are needed to make sure FSA uses their might to protect student borrowers and make sure all parties involved are following policy. Without such oversight, loan defaults will increase with consequences for students and institutions.