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Education OIG Audit of FSA Oversight of Student Loan Servicing Mar 06, 2019

Show notes

Join us as we talk with Howard Sorensen, Assistant Counsel to the Inspector
General, and Greg Bernert, an auditor from the Education OIG Chicago office. They will talk to us about an Education OIG audit of Federal Student Aid, or FSA, oversight of student loan servicers. Specifically, the audit looked at whether steps FSA took to oversee the servicers lowered the risk of servicers not complying with laws and regulations.
Since 2011, the Department of Education and the Federal Student Aid office has been the sole source of Federal student loans. The Department has more than a trillion dollars in student loans spread over millions of individual borrowers. The Department can’t make and collect these loans all by itself, so it has hired companies called servicers to do the work to collect the loans after students graduate from college. Because FSA has contracts with these companies, FSA needs to make sure the companies do what they promise the Department they will do.
Loan servicers are the companies that send a graduate the first letter, “Congratulations, you’ve graduated, now you need to start paying your loans.” They collect the payments, they send reminder notices to students, these are the companies that answer the phone to answer any questions students have about their loans. If they encounter financial difficulties and need to come up with a different payment plan, these are the companies they have to call to get answers on behalf of the Department of Education. So Federal Student Aid contracts with these companies, and because they contract with these companies, they need to make sure the companies do what they promise the Department they will do.
The Education OIG audit found that overall, FSA’s policies and procedures did not really lower the risk of loan servicers' noncompliance. We had two significant findings. First, the audit that FSA wasn’t tracking all of the noncompliance it identified. In fact, if FSA found something wrong onsite, and the servicer promised to fix it, FSA didn’t enter that noncompliance into the database that it used to record noncompliance. Also, FSA didn't use using the information it did have to identify trends or patterns of repeated noncompliance at each servicer or across servicers. And second, the audit found that FSA rarely held servicers accountable for the noncompliance it did identify.
Why does it matter? Servicer noncompliance can impact taxpayer dollars and borrowers. In terms of the taxpayer dollars that fund the Federal student
aid programs: FSA might be paying the loan servicers more than the servicers are entitled to. If FSA doesn’t recoup money from loan servicers for their noncompliance and doesn’t adjust the number of loans noncompliant servicers are assigned, FSA ends up paying more than it should. Also, if FSA doesn’t hold servicers accountable, the servicers have less incentive to follow all the rules.
There could be a tremendous impact on borrowers, too. Unless the servicers give the borrowers correct information about the repayment options that they have under the law, they may be paying more than they need to under their financial circumstances. They could even end up defaulting on their loan.
Read the full Education OIG audit report on FSA oversight of student loan servicers.
Read the transcript for Eye on ED episode 2.

Education OIG Audit of the Department’s processing of Family Education Rights and Privacy Act complaints Jan 17, 2019

Show notes

What can happen if the U.S. Department of Education doesn't comply with the Family Educational Rights and Privacy Act, commonly referred to as FERPA? FERPA grants rights and protections to students related to the personal information in their education records. FERPA violations can have a big impact on students. Violations could lead to bullying or affect students’ ability to graduate or get a job. So students rely on the Department to take timely action to resolve their complaints.
In this episode, we talk with senior auditor Ruth Dunlop about an Education OIG audit that looked at the Department of Education's processes for reviewing and resolving FERPA complaints. Specifically, it evaluated whether the Department had implemented controls to ensure that it was handling complaints in a timely and effective manner. By “controls,” we mean the mechanisms that management puts in place to ensure that activities are carried out efficiently, effectively, and as required by law or regulation.
The audit found that the Department was not resolving FERPA complaints timely, and in fact, had a substantial backlog of complaints waiting to be investigated. We also found that the Department had control weaknesses that undermined both the timeliness and the effectiveness of the process. Some students and families had to wait years before hearing anything from the Department about their complaints. Some people actually contacted their members of Congress to complain about the Department’s lack of action.
Learn more about our findings and what it means for students and parents in this episode!
Read the full Education OIG audit report on FERPA.
Read the transcript for Eye on ED episode 1.

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