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HEHS-95-225R 1 (1995-08-25)

handle is hein.gao/gaobackxl0001 and id is 1 raw text is: GAO United States G AO() General Accounting Office Washington, D.C. 20548 Health, Education and Human Services Division B-261053 August 25, 1995 The Honorable James M. Jeffords Chairman, Subcommittee on Education, Arts and the Humanities Committee on Labor and Human Resources United States Senate Dear Mr. Chairman: In August 1993, the Congress enacted the Student Loan Reform Act of 1993 authorizing the Federal Direct Student Loan Program (FDSLP). In place of the many lenders and guaranty agencies in the Federal Family Education Loan Program (FFELP), schools and their students in FDSLP deal only with the Department of Education and its loan- servicing contractors. The first FDSLP schools (referred to as year-one schools) began making loans in July 1994 for the 1994-95 school year. As of the end of December 1994, 102 schools were participating in the program. This letter presents information on the experience of a judgmentally selected sample of year-one schools. In May 1994--2 months before the first direct loans were made--we conducted a telephone survey of 17 schools that the Department had selected to participate in FDSLP in year one (see enclosure 1 for our methodology). The objective of the interviews was to obtain the perceptions of officials of different types of schools--in both the schools' business and financial aid offices--regarding the adequacy of the Department's preparations for implementing FDSLP. At your request, after participating schools had about 9 months of experience with the program, we interviewed officials at the same 17 schools to determine their schools' satisfaction with FDSLP. This correspondence presents the results as they relate to potential trouble spots we identified in the earlier survey: the process of reconciling schools' loan records with the Department's loan-servicing contractor's records; the computer software the Department developed and provided to the schools; and the adequacy of the loan-servicing contractor's functions, such as loan origination, loan servicing, and accounting. GAO/HEHS-95-225R Direct Student Loans

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