WASHINGTON — The Education Department isn’t doing a great job helping students who are trying to clear their student loan defaults, according to a Government Accountability Office report released Wednesday.
A borrower who defaults on his or her student loans has one chance to clear the default. In this process, known as rehabilitation, the borrower must make nine on-time payments on the defaulted loan in 10 months.
In its report, the GAO told a House subcommittee it found “serious weaknesses in Education’s management of the loan rehabilitation process” since the Education Department upgraded its loan management system in October 2011.
Some issues include the department’s failure to allow borrowers who had rehabilitated their loans to receive benefits on time, Melissa Emrey-Arras, director of the GAO’s education team, told the House Subcommittee on Higher Education and Workforce Training. This problem continued for more than a year after the upgrade.
The GAO also found weaknesses in the department’s “ability to effectively monitor collection agency performance and ensure borrowers receive accurate information about loan rehabilitation.”
Education Department representatives acknowledged some of the problems linked with the updated system.
Rep. John Kline, R-Minn., asked Emrey-Arras and Education Department Inspector General Kathleen Tighe whether the federal loan rehabilitation process is fully functional. Both answered “no.”
In December 2012, the system problems had affected more than more than 190,390 loans totaling more than $1.1 billion, according to Tighe.
James Runcie, the Education Department’s Federal Student Aid officer, told subcommittee members that the agency has been working with the GAO to improve management of student loans, and the unprocessed rehabilitations have since been cleared.
Subcommittee Chairwoman Virginia Foxx, R-N.C., closed the hearing by urging the Education Department to come up with a plan to fix the loan program.
“I believe that this program is going to stay in place, and my major concern is that we not mistreat any students in any way, or any people who are former students who had loans, who want to get them rehabilitated,” Foxx said.
