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B-164031(1).136 1 (1979-03-08)

handle is hein.gao/gaobabjmq0001 and id is 1 raw text is: COMPTROLLER GENERAL OF THE UNITED STATES WASHINGTON, D.C. 20548 p ,,. B-164031(l) .136 March 8, 1979 HR9-OTH-93 Mr. J. Fred Bucy, President Texas Instrumentst . c-/6C--C5i/t- P.O. Box 5474 Dallas, Texas 75222 Dear Fred: Your letter of February 5, 1979, discussing Lf I ._a~ on Federal Atudent Jo._ spertains to a problem that is recevling a geat deal of t inhe Congress and the Department of Health, Education, and 'Ca v Welfare. This concern led us to conduct two reviews of the Direct Loan r which resulted in the reports included as enclosures I and II. In our November 1976 report (enclosure I) we recommended that the Office of Education revise its delinquency rate calculation to exclude - the face value of loans which have been fully retired. Although the Office of Education agreed that our recommended method would be similar to commercial banking practices, it did not think that such a method should be applied to the Direct Loan Program because of the unique characteristics of these borrowers such as the lack of past credit histories and requirements for collateral. Therefore, the 11.2 percent delinquency rate calculated for Texas Tec- ech Universi-tywas calculated using a method approved by the Offi-ce-of //66 - Education. This is also true of the rates calculated in enclosures III and IV to this letter even though the terminology default rate appears on the enclosures. In past years, the Office of Education tended to use the terms delinquency and default interchangeably when referring to the Direct Loan Program. Currently, the HEW Audit Agency is advocating that the default rate ,/J& for the National Direct Student Loan Program be calculated by dividing the principal outstanding on loans in default by the face value of matured loans less deferments. This is similar to what is done for the Guaranteed Student Loan Program, and the belief is that this will provide better comparative information for these two major Office of Education loan programs. As can be seen from enclosures III and IV--which cover the period ended June 30, 1977, the latest published information--the 11.2 percent rate for Texas Tech would be quite favorable when compared with the rates of many institutions and when matched against many statewide rates. • •

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