The Government Accountability Office has called for more
oversight of lender schools in the federal family
education loan program, because the schools stand to profit.
It said that in fiscal 2004, lenders made about $65
billion in loans through program administered by the
Department of Education’s office of federal student
aid, which is charged with ensuring compliance with
program laws and regulations.
GAO said it is concerned that schools increasingly want
to become lenders in a program for which they determine
eligibility and often set the price of attendance —
several schools said they wanted to become lenders
specifically to generate revenue.
In October 2004, FSA learned that 10 our of 29 schools
required to submit an audit for fiscal 2002 failed to
do so and that FSA did not review the programs of
school lenders, according to GAO-05-184.
GAO said, however, that its review spurred three regional
offices to ask 31 school lenders about their compliance
with the regulation pertaining to the use of interest
income and special allowance payments for need-based grants.
