Despite the overall progress made in reducing the national default rate, the  cumulative student loan funds in default had doubled to almost $22 billion  by fiscal year 2001 from their fiscal year 1990 level of nearly $11 billion. During this same time period, the total student loan portfolio grew by  more than 400 percent from $54.1 billion to $233.2 billion and the defaults,  as a percent of the total loan portfolio, declined from 20.1 percent to 9.4  percent. To address longstanding management  weaknesses, the Congress amended HEA in 1998, establishing FSA as a  performance-based organization (PBO) to improve Education’s delivery of  student financial aid services. FSA’s Default Management Goals Were Mostly to Prevent Defaults, Increase Collections, and Verify Student Eligibility, but the Agency Lacked a Plan to Guide its Efforts

FSA identified 39 default management goals for fiscal years 2000 through  2002, which were mainly to prevent defaults, increase collections, or verify  student eligibility. However, FSA did not prepare annual 5-year  performance plans required by HEA. FSA Met or Exceeded Most Goals, but Did Not Prepare Timely Performance Reports

According to our analysis of FSA’s internal documents, we determined  that the agency met or exceeded performance targets for 36 of its 39  default management goals during fiscal years 2000 through 2002. FSA’s Fiscal Years 2000 and 2001 Performance Report Was Not Timely and Did Not Indicate Whether Goals Were Met

FSA did not prepare performance reports that conform to the  requirements in HEA for fiscal years 2000 and 2001. In  December 2002, FSA issued a performance report that included its  accomplishments for both fiscal year 2000 and fiscal year 2001. Therefore, the report does not  clearly indicate the extent to which goals were or were not met. Surveyed School Officials’ Suggestions Did Not Indicate the Need for Additional Goals

Although nearly a third of the school officials that participated in our  survey made suggestions about ways that FSA could better assist them,  none of the suggestions indicated that FSA needed additional default  management goals. FSA provided similar assistance to all schools by  sharing default management strategies and information through  symposiums, workshops, and other media, and provided individual  assistance to some schools through on-site visits and telephone calls. However, these  suggestions did not indicate a need for additional default management  goals because they either related to existing goals or addressed  operational issues. Suggestions From Survey Respondents Did Not Indicate the Need for Additional Goals, But Could Serve to Improve FSA’s Assistance to Schools

The 11 suggestions made by officials at 7 of the 23 schools responding to  our survey did not indicate the need for additional goals because either  FSA already had goals related to them or the suggestions related to  operational matters. As we have noted in this report, HEA requires FSA to prepare  annual 5-year plans in consultation with the Congress, institutions of  higher education, and other stakeholders.
Why GAO Did This Study

During fiscal year 2002, an estimated 5.8 million people borrowed about $38 billion in federal student loans. Despite a dramatic reduction in annual default rates on those loans since fiscal year 1990 (from 22.4 to 5.9 percent), the total volume of dollars in default doubled to nearly $22 billion by fiscal year 2001 from about $11 billion in fiscal year 1990. During that same period, the total student loans outstanding grew from $54.1 billion to $233.2 billion. The Department of Education's Office of Federal Student Aid (FSA) manages the nation's student financial assistance programs authorized under title IV of the Higher Education Act (HEA). In 1998, Congress amended the HEA and established FSA as a performance-based organization. Among other requirements, the HEA called for FSA to annually develop 5-year plans, issue annual reports, and consult with stakeholders regarding their delivery system. GAO initiated a review to assess FSA's default management efforts and results.

What GAO Found

FSA's default management goals were mostly to prevent defaults, increase collections, and verify student eligibility, but the agency lacked a plan to guide its efforts. FSA had 39 default management goals for fiscal years 2000 through 2002. However, the goals changed significantly during this period and FSA did not annually prepare 5-year performance plans as required by the HEA. FSA met or exceeded most goals, but did not prepare timely performance reports. According to our analysis, FSA met or exceeded performance targets for 36 of its 39 default management goals during fiscal years 2000 through 2002. However, FSA did not issue performance reports for fiscal years 2000 and 2001, as required by the HEA. Instead, in December 2002, FSA issued one report for both fiscal years that lists accomplishments, but does not clearly indicate the extent to which goals were or were not met. Suggestions from survey respondents did not indicate the need for additional goals. While about one-third of the 23 school officials who responded to our survey made suggestions about ways that FSA could better assist them, none of the suggestions indicated the need for additional default management goals. FSA assisted all schools by sharing default management information through symposiums and other media, and provided individual assistance to some schools through visits and telephone calls. Most of the responding officials were generally pleased with FSA's assistance. The suggestions that officials made did not indicate a need for additional goals because they either related to existing goals or addressed operational issues.