While the Department of Education has developed tools for overseeing collection agencies that it works with to find borrowers and explain repayment options, key weaknesses have limited its ability to properly monitor agency performance, according to a Government Accountability Office report on federal student loans.
The GAO examined quarterly call review reports for six collection agencies, issued by the Department of Education from September 2011 to March 2013, and discovered the department could not provide documentation for 11 of the 42 call reviews that should have been performed. The GAO found that while the Department of Education provided feedback on call review results to each collection agency, it did not ensure that the agencies are taking corrective actions and it did not analyze the results.
The GAO has recommended improvements to the call review process and the Department of Education has stated it is revising procedures and working on developing a database to track collection agency errors and associated corrective actions.
Educations oversight of collection agencies provides little assurance that borrowers are provided accurate information about loan rehabilitation, said Melissa Emrey-Arras, the GAO's director of Education, Workforce and Income Security, in testimony this week before the House of Representatives Subcommittee on Higher Education and Workforce Training.
The GAO report also found that for more than a year after the Department of Education upgraded its defaulted loan information system, it did not remove defaults from the credit reports of most borrowers who completed loan rehabilitations, or provide other timely benefits. The department, for example, was unable to process some loan rehabilitations for up to eight months.
Loan rehabilitation allows borrowers who make nine on-time monthly payments within 10 months to have the default status removed from their credit reports, according to Emrey-Arras. As a result of the system upgrade problems, no loan rehabilitations were processed until April 2012, and officials said they needed until January 2013 to clear the resulting backlog, according to the GAO.