Washington, D.C. - The Government Accountability Office (GAO) today released a final report, commissioned by Congressmen Chris Van Hollen (D-MD) and Dale Kildee (D-MI), which shows that the Department of Education has failed to exercise its oversight responsibility regarding schools that act as
lenders in the federal student local program. Van Hollen and Congressman Kildee today sent the following letter to Education Secretary Margaret Spellings.
January 24, 2005
The Honorable Margaret Spellings
Secretary
U.S Department of Education
400 Maryland Avenue, SW
Washington, D.C. 20202
Dear Secretary Spellings:
Please accept our congratulations on your recent confirmation as Secretary of Education. We are looking forward to working with you to meet the educational aspirations of all our citizens.
In that regard, we are writing to express our dismay regarding the Government Accountability Office’s (GAO) recent finding that the Department of Education is failing to perform timely and adequate oversight regarding whether institutions of higher education acting as lenders are in compliance with the statutory and regulatory provisions of the Higher Education Act (HEA).
Specifically, today’s GAO report entitled “Federal Family Education Loan Program: More Oversight Is Needed For Schools That Are Lenders” found that, as of October 2004, the Federal Student Aid (FSA) Administration had failed to collect required compliance audits from 10 out of 29 school lenders dating back to 2002. Furthermore, GAO reported that the FSA had not used its authority to conduct any program reviews of schools acting as lenders until as recently as 2004.
The compliance audits required under the HEA are designed to help the Department of Education ferret out fraud, waste and abuse in the Federal Family Education Loan (FFEL) program, prevent borrower defaults and enforce anti-inducement provisions in the law. Program reviews of school lenders are intended to supplement the information contained in the compliance audits, thereby improving the integrity of the entire FFEL program.
We are concerned that the Department’s current failure to perform its most basic oversight function regarding school lenders puts the integrity of the FFEL program at risk. As GAO has identified that the number of school lenders is increasing, this is an important area for the Department to conduct vigilant and appropriate oversight. We strongly agree with the GAO’s recommendation that the Department take steps to ensure that school lenders are consistently complying with all applicable statutory and regulatory requirements.
We look forward to working with you on this matter and to hearing what specific steps your Department is taking to ensure timely and adequate oversight of school lenders under the FFEL program. Thank you for your attention to this issue.
Sincerely,
Dale Kildee Chris Van Hollen
Ranking Member Member of Congress
Subcommittee on 21st Century Competitiveness