oversight

Reporting of Student Loan Enrollment Status

Published by the Government Accountability Office on 1997-02-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

      United States
3A0   General Accounting  Office
      Washington, D.C. 20648

      Health,   Education   and Human Services Division


      B-275720                                               ._-     .

      February 6, 1997

      The Honorable William F. Goodling
      Chairman, Coinmittee on Education
       and the Workforce
      House of Representatives
      The Honorable Pete Hoekstra
      Chairman, Subcommittee on Oversight
       and Investigations
      Committee on Education and the Workforce
      House of Representatives

      The Honorable Howard McKeon
      Chairman, Subcommittee on Postsecondary
       Education, Training, and Life-Long Learning
      Committee on Education and the Workforce
      House of Representatives
      The Department of Education provides loans to students to help finance their
      postsecondary education. For fiscal year 1996,the Department reported that
      the Ford Direct Loan Program (FDLP) provided $9.3 billion in loans to 1.7
      million students. -
      Recently, concerns have been expressed about FDLP student loan borrowers
      not starting to repay their loans when they are no longer enrolled in school.
      Specific concerns involve schools’ failing to report enrollment changesto the
      Department’s FDLP Servicing Cente? or the Servicing Center’s failing to
      accurately or promptly record the reported enrollment changes. Failure to
      record these changesmay result in borrowers not promptly repaying their
      student loans or in the loans becoming delinquent and increasing the likelihood
      of defaulting.


      ‘The Servicing Center services the loan during in-school, grace, and repayment
      periods; collects the loan; and provides customer service to borrowers.
                                       GAOIHEHS-97-44R    Reporting of Student Loan Enrollment   Status
B-276720                                                                                               /-.

Because of concerns that information on students with direct loans leaving a certain
medical college was not being reported to the Servicing Center, you asked that we
provide you with that school’s information on

- the extent to which borrowers’ school enrolhnent dates differ from the dates recorded
  by the Department’s servicer and
- whether the problem lies in the school’s transmissionsto the servicer, the servicer’s
  method of updating its records, or elsewhere.

To respond to your request, we analyzed the records of student loan borrowers who left
the medical college during, or at the completion of, the fall 1996semester (August
through December 1996). For each borrower identified, we compared the date the
borrower left the medical college: as recorded by the school, with the Servicing Center’s
records. We carried out our work at the Department of Education’s headquarters in
Washington, D.C., and at the medical college. We did our review from October 1996
through December 1996in accordance with generally accepted government auditing
standards.
In summary, borrowers’ enrollment dates at the medical college differed from the dates
recorded at the Servicing Center. The dates differed becausethe medical college did not
promptly update the Servicing Center’s records. Department of Education officials said
that they do not plan to penalize the medical college for failing to report the borrowers’
enrollment dates.
BACKGROUND
FDLP, authorized by the Student Loan Reform Act of 1993,began in the 199495 school
year. FDLP provides direct financing and delivery of funds to eligible borrowers to cover
postsecondary education costs and uses loan capital provided by the Department. The
success of FDLR depends on the effective interaction of three primary participants-the
student borrower, the school, and the Department through its Servicing Center. Schools
decide whether to participate in FDLP, either instead of or in addition to the longer
established Federal Family Education Loan Program @‘ELF’).
Department regulations require that schools confirm and report the enrollment dates and
status of borrowers-including when borrowers leave school for any reason-who receive
federal loans. Schools use the Student Status Confhmation Report (SSCR)to submit this


2For this report, the date a borrower left the medical college is referred to as his or her
“completion date.”
2                                    GAO/HEHS-97-44R   Reporting of Student Loan Enrollment   Status
B-276720
information; schools in F’DLPreport it to the Servicing Center. Because a borrower’s
enrollment date and status determine his or her deferment privileges and grace periods,’
as well as the government’s payment of interest subsidies, enrollment status reporting is
 critical for effectively administering student financial aid loans. SSCRis the primary
means of verifying borrowers’ loan privileges and determining the federal government’s
monetary obligations.
Some schools report their student borrowers’ enrollment status changesto the National
Student Loan Clearinghouse (NSLCH), a private third-party loan servicer. NSLCH in turn
submits the information to guaranty agenciesfor loans made under F’FELP and to the
Servicing Center for loans made under F’DLP.
The accuracy of student financial aid loan records depends heavily on the accuraCy of the
data the school reports. The Department, borrowers, schools, and the Servicing Center
are responsible for confhming or updating borrowers’ enrollment status information. As
stated above, schools are required to report the enrollment status of their F’DLP student
borrowers to the Servicing Center. Borrowers are also responsible, according to the
Department’s publication, Borrower’s Rights and Resnonsibilities, to notify their schools’
financial aid office and the Servicing Center if any of the following enrollment- and
address-related events occurs:
-   reduction in enrolhnent status to less than half time,
-   withdrawal from school,
-   graduation from school,
-   stopping class attendance,
-   failure to enroll for any term,
-   change in expected graduation date, or
-   change in name or local or permanent address.
To determine the accuracy of information on students’ enrollment status, the Department
relies on audits of schools and the Servicing Center. The Department expects (1) schools
to promptly update their students’ enrollment status by returning their SSCRsto the
Servicing Center and (2) the Servicing Center to record and maintain correct loan records
on F’DLP borrowers. The Department uses independent auditors and its own program
reviewers through its Institutional Participation and Oversight Services (IPOS) to monitor
compliance by schools and the Servicing Center.



3F’DLPloan borrowers receive a 6-month grace period before their first loan payments
must be made. The grace period begins the day after the borrower ceasesto be enrolled
at least half time.
3                                      GAO/HRHS-97-44R   Reporting of Student Loan Enrollment   Status
B-276720                                                                               -,.

According to a Department official, in May 1996,the Department provided each FDLP
school information outlining the type of enrollment data to be reported. The schools
were expected to report borrowers’ completion dates and enrollment status changes in
July 1996. Becausethe Department and some schools had problems with either the
schools’ submissions or the Department-provided software, the Department extended the
reporting date to August 1996. This was intended to give the Department and schools the
opportunity to resolve software problems. To facilitate this, Department staff visited
schools to train student aid officials on submitting information, including SSCRs,
electronically. The next date all schools are expected to report enrollment information is
February 1997.
SCHOOL’SENROLLMENTDATES DIFFERED FROM
THOSE OF THE FDLP SERVICINGCENTER

The Servicing Center’s enrollment dates differed from the medicaI college’s enrollment
dates. The medical college identified 28 FDLP student loan borrowers who left during the
fall 1996semester,which is when the school began FDLP participation, and who did not
return for the spring 1996semester. According to an official at the medical college, 11 of
those 28 borrowers did, however, return for the fall 1996semester.
As of December 10, 1996,the Servicing Center’s data showed that only 9 of the 28
borrowers had left the medical college during or after the fall 1996semester and that 1 of
the 9 returned to the medical college during the fah 1996 semester. See enclosure I for
detailed information on the 28 borrowers.
SCHOOLDID NOT PROMPTLYREPORT
ENROLLMENT STATUSCHANGES

The main reason why the medical college’s enrollment data differed from the Servicing
Center’s was that, before October 1996,the college had not reported any information to
the Servicing Center. On October 7, 1996,the medical college, using NSLCH, made its
first report on FDLP borrowers to the Servicing Center. The medical college reported
information, however, on only the 11 borrowers who returned for the fall 1996semester.
In other words, as of December 10, 1996,the medical college had not reported
information to the Servicing Center on 17 of the 28 borrowers who left school during the
fall 1996semester.
Although the medical college had not reported that the 17 borrowers had left, the
Servicing Center data showed the following:

- 7 were erroneously recorded as continuing at the medical college,


 4                                  GAO/HJZHS-97-44R Reporting   of Student Loan Enrollment   Status
B-276720
- 4 had contacted the Servicing Center and requested that their completion dates be
  changed,
- 3 were recorded as enrolled at other schools on the basis of loan disbursement data
 received Tom the other schools,
- 2 were recorded as enrolled at the medical college for the fall 1996semester on the
  basis of loan disbursement data received from the medical college, and
- 1 had a new completion date sent in by the medical college.
The seven who were erroneously recorded as continuing at the medical college should
have been asked to begin repaying their loans. Because of the medical college’s failure to
report, however, Department officials said that some of these 17 borrowers probably will
not be expected to begin repayment until 6 months after their anticipated completion or
graduation date: As a result, the borrowers, at a minimum, may be late in repaying their
loans.
According to an official at the medical college, the college had not reported information
to the Servicing Center earlier becauseit did not have a mechanism for doing so before
October 1996. Furthermore, the official commented that the medical college has
contacted NSLCH and plans to report enrollment status to it on the 28 borrowers by
February 1997,if not before. The official also said that in the future (spring 1997) the
medical college will report enrollment status information to the Servicing Center six times
a year, using NSLCH.
THE DEPARTMENTDID NOT KNOW THAT THE MEDICAL
COLLEGEHADNOTREPORTEDENROLLMENTDATA
As of October 1996,the Department did not know that the medical college had not
reported enrollment status changeson student borrowers who left during, or at the
completion of, the fall 1996semester. The Department believes it did not have accurate
enrollment status information for two main reasons:
- Becausethe medical college did not provide updated enrollment status information on
  the 28 borrowers, its FDLP Servicing Center did not know that these borrowers’ status
  had changednor that these changesshould have been recorded and the borrowers
  placed in repayment status.
    Department officials believe that the medical college, which had been used to receiving
    SSCRsperiodically from FFELP lenders or guaranty agencies,had also received


4Theanticipated completion date is determined when borrowers take out a loan. This
date must be updated as appropriate, especially when enrollment status changesoccur.
6                                    GAOWEHS-97-44R   Reporting of Student Loan Enrollment   Status
                                                                                                   ‘.   .’ ..I



B-276720
 automated SSCRsfor the Servicing Center but did not properly complete and return
 them. The medical college did not respond to the SSCRrequest becauseit was having
 difficulties making required computer software and system procedural changes. The
 Servicing Center did not follow up with the medical college when it did not reply to the
 SSCRsit was sent.
- As of October 1996,IPOS had not yet conducted a program review at the medical
  college, and the Department had not yet received a compliance audit for the college.
  Neither an IPOS program review nor a compliance audit had been scheduled for the
  medical college, so these monitoring tools could not have been used to iden- the
  college’s failure to report the enrolhnent status changes of the 28 borrowers.
Although Department officials said that the medical college should have informed the
Servicing Center when the 28 borrowers left school during or after the fall 1996semester,
they do not believe it appropriate to assign financial liability to the medical college for not
doing so. Their explanation is that the college’s error was unintentional and resulted
from misunderstandings during the transition to SSCRreporting procedures.
CONCLUSIONS
The Department’s processesfor ensuring that accurate enrollment status changeswere
recorded in the Servicing Center were inadequate concerning the 28 borrowers who left
the medical college during or after the fall 1996semester. This occurred becauseof
significant confusion about the new procedures, including problems with computer
software, both at the Department and at the medical college. In addition, when the
college failed to report the enrollment status changesof the 28 borrowers, the Servicing
Center did not follow up to obtain the information.
The medical college’s plans to provide the Department’s Servicing Center the correct
enrollment status of the 28 borrowers, however, should ahow the enrollment status of its
borrowers to be correctly recorded by the Servicing Center. And if the Department
appropriately implements its SSCRreporting system in February 1997,with required
updates six times annually, problems like those identified at the medical college should be
avoided.
AGENCY COMMENTS
On January 9 and 21, 1997,the Department of Education provided us comments on a
draft of this report. The Department said that a number of changesto its loan systems
have contributed to the medical college’s, and other colleges’ misunderstanding some
system applications, including the revised SSCRprocess.


 6                                    GAO/HEHS-97-44R   Reporting of Student Loan Enrollment   Status
    B-276720
    The Department also said that it has been working with these schools to ensure their
    future compliance with requirements, and that is why, in part, it did not assign financial
    responsibility for schools’ ‘. . . unintentional misreporting during the transition in SSCR
    reporting procedures.I1It said that after the new SSCRsare generated by its National
    Student Loan Data System in February 1997,the Department will address appropriate
    liabilities against schools it determines to be out of compliance with reporting
    requirements.
    On January 9, 1997, an official at the medical college provided us comments on a draft of
    this report. The official said that the medical college recognizes that it should have
    reported the enrollment status changesof the 28 borrowers who left during or at the end
    of the fall 1996semester. He said that the college’s computer programmers were working
    on other higher priority system changesfor FDLP, and the necessary changesto allow the
    college to report the enrollment status changeswere not made. He said that the medical
    college is making the system changesand that the enrolhnent status changes of the 28
    borrowers will be provided to NSLCH, for transmittal to the Servicing Center, before the
    Department’s February 1997SSCRreporting date.


    We are sending copies of this correspondence to the appropriate congressional
    committees and subcommittees, the Secretary of Education, and other interested parties.
    If you have any questions, please feel free to contact me at (202) 612-7014. Major
    contributors to this correspondence include Joseph J. Eglin, Jr., Assistant Director, and
    Paula N. Denman, Evaluator-in-Charge.




a
e   Carlotta C. Joyner
    Director, Education and
     Employment Issues
    Enclosures - 2




                                         GAO/HEHS-97-44R   Reporting of Student Loan Enrollment   Status
ENCLOSUREI                                                                        ENCLOSUREI            ’ .’
        DETAILED INFORMATION ON THE 28 BORROWERS’COMPLETION DATES

                                   Servicing Center’s borrowers’
                                     completion dates as of
    !3tudent    Date borrower                                          Remarks by the
    13orrower   left the medical   10/17/96        U/10/96             medical college or
                college as of                                          Servicing Center
[
                 10/9/96




    :




    :




    I                                                                    urrently attending
                                                                        George Washington

    I

                                                                        completion date be




                                      GAO/EEHS-97-44R   Reporting of Student Loan Enrollment   Status
ENCLOSUREI                                                  ENCLOSUREI




                                                 Servicing Center



                                                status to NSLCH on
                                                10/7/96;borrower
                                                returned to college in




                                                 On 6/26/96,borrower
                                                completion date be
                                                changed to 12/23/g&
                                                reported enrollment
                                                status to NSLCH on
                                                10/‘7/96;borrower
                                                returned to college in




                                                100796;borrower
                                                returned to college in




             GAO/ElEHS-97-44R   Reporting of Student Loan Enrollment   Status
ENCLOSUREI                                              ENCLOSUREI




                                              completion date be




                                              1O/7/96; borrower
                                              returned to college in




                                               status to NSLCH on
                                               1O/7/96; borrower
                                               returned to college in




10           GAOIHEHS-97-44R   Reporting of Student Loan Enrollment   Statue
ENCLOSTJREI                                                ENCLOSUREI




                                                1O/7/96; borrower
                                                returned to college in



                                                status to NSLCH on
                                                1O/7/96; borrower
                                                returned to college in

                                                Medical college’s data
                                                show that borrower
                                                returned to medical
                                                college in fall 1996;




11            GAO/BEHS-97-44R   Reporting of Student Loan Enrollment   Status
ENCLOSUREI                                                                     ENCLOSUREI

                                Servicing Center’s borrowers’
                                  completion dates as of
 Student     Date borrower          i..                         -:~-L-Remarks by. the
 borrower    left the medical     lOl17i96            12/I 0196       medical college or
             college as of                                            Servicing Center
             1O/9/96
 23b          1Z/8/95           l/30/96          5130/99             On 3/8/96, borrower
                                                                     requested that
                                                                     completion date for
                                                                     the first loan be
                                                                     changed to l/30/96--
                                                                     this loan is currently
                                                                     in deferment;
                                                                     medical college
                                                                     reported enrollment
                                                                     status to NSLCH on
                                                                      I O/7/96; borrower
                                                                     returned to college in
                                                                     fall 1996
 24”                            5130198          5130198             No updates since
                                                                     1O/l 7196




‘The medical college did not report enrollment status to NSLCH for these borrowers.

bBorrower has made or is currently making payments.




12                                  GAO/BEES-97-44R   Reporting of Student Loan Enrollment   Status
ENCLOSUREII                                                                    ENCLOSUREII
                              RELATED GAO PRODUCTS

DeDartment of Education: Status of Actions to Imurove the Managementof Student
F’inanciai Aid (GAO/HEH.S-96143,July 12,1996).

Student F’inancial Aid: Data Not Fulls Utilized to Identifv Inamromiatelv Awarded Loans
and Grants (GAO/T-HEHS-961996,July 12, 1996).
Student Financial Aid: Data Not F'uli~ Utilized to Identifv Inannronriatelv Awarded Loans
and Grants (GAOMEHS-96-89,July 11, 1996).

H&h-mk Series: Student Financial Aid Programs (GAO/HR-9b10, Peb. 95).
Direct Student Loans: The Denartment of Education’s Imnlementation of Direct Lending
(GAO/HRD-93-26,June 10, 1994).
DeDartment of Education: Long-Standing ManagementProblems HammerReforms
(GAOBIRD-93-47,May 28, 1993).
F’inanciaI Audit: Guaranteed Student Loan Program’s Internal Controls and Structure
Need Imnrovement (GAO/AF’MD-93-20,Mar. 16, 1993).
Detxrtment of Education: Management Commitment Needed to Imnrove Information
Resources Maneement (GAO/IMTEC-92-17,Apr. 20, 1992).




(104876)


13                                 GAO/HRHS-97-44R   Reporting of Student Loan Enrollment   Statns
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