The Nation : GAO Reports Excess Student Loan Costs

Banks, credit unions and other firms involved in the Guaranteed Student Loan Program are overpaid millions of dollars a year in excess subsidies on the loans because the Education Department fails to check erroneous billings, a government study said. General Accounting Office auditors who reviewed 2,038 loan accounts at 16 major lenders found 18% were in error or lacked adequate documentation to support the amount billed. Based on the errors found in the loan accounts it reviewed, the GAO estimated that the government overpaid the 16 lenders at least $1.8 million for a quarter, when they received a total of $69.4 million in interest subsidies. Lawrence Thompson, a GAO assistant comptroller general, said the error rate for the 16 lenders cannot be projected to all 14,000 institutions eligible to make the loans. But he stressed “the extent of such errors . . . makes it likely that similar errors are made by many lenders.”