ERIC Number: ED462036
Record Type: Non-Journal
Publication Date: 2002-Jan
Reference Count: N/A
Federal Student Loans: Flexible Agreements with Guaranty Agencies Warrant Careful Evaluation. Report to the Honorable James M. Jeffords, U.S. Senate.
Ashby, Cornelia M.
Certain state or not-for-profit agencies guarantee payment to banks and other lending institutions if students fail to repay loans obtained through the Federal Family Education Loan Program. The 1998 amendments to the Higher Education Act authorize the Secretary of Education to enter into voluntary flexible agreements (VFAs) with individual guaranty agencies, and each VFA provides a guaranty agency with flexibility to implement new business practices by waiving or modifying some federal regulations. As of November 2001, the Department of Education had signed VFAs with 4 of the 36 guaranty agencies in the United States, and five agencies had applied but were not selected, withdrew, or did not reach agreement with the Department of Education. In response to a request from Senator James M. Jeffords, the U.S. General Accounting Office (GAO) looked into the development of VFAs and their implementation. Data came from interviews with Department of Education officials involved in the development of the VFAs and officials at each of the 9 guaranty agencies that applied for an agreement and 10 agencies that did not choose to apply. It was found that the VFA development process did not meet the needs of the guaranty agencies fully. The process was frustrating, in part because the Department of Education did not meet its own timetable. The process for determining VFA selection criteria and inviting VFA proposals was not clear enough. VFAs were generally found to comply with legislative requirements, although in one instance the requirement that VFAs not increase projected federal program costs does not appear to have been upheld. The Department of Education is not fully prepared to assess the effects of the VFAs. The GAO makes recommendations in this report to improve the four current VFAs and the development of additional agreements. Five appendixes contain information about the study scope and methodology, some financial projections, comments from the U.S. Department of Education, and a list of GAO contacts and staff involved in the report. (SLD)
Descriptors: Debt (Financial), Federal Aid, Federal Programs, Higher Education, Loan Default, Loan Repayment, Public Agencies, Student Loan Programs
U.S. General Accounting Office, P.O. Box 37050, Washington, DC 20013. Tel: 202-512-6000. For full text: http://www.gao.gov.
Publication Type: Reports - Evaluative
Education Level: N/A
Authoring Institution: General Accounting Office, Washington, DC.
Identifiers - Laws, Policies, & Programs: Family Education Loan Program