Department of Education Debt Management System Flunks GAO Final
NEW YORK (MainStreet) Can the Department of Education (ED) help borrowers who defaulted on their student loans? Can it manage its own loan default management system designed to do just that?
That's the question the Government Accountability Office (GAO) has been asking. Inquiring minds in Congress have been getting an earful on what's gone wrong and how far back the problem goes.
According to yesterday's House testimony from Melissa Emrey-Arras, GAO's director of education, workforce and income security issues, things started to go awry with a 2011 information technology upgrade that, rather than make things better, kept tens of thousands of borrowers from getting their loans out of default.
People who make nine on-time payments on their defaulted loans in a ten-month span can have their loans rehabilitated. Once that is done, the loan is no longer in default on their credit reports.
But ED's difficulties with its debt management system became so unmanageable that not one loan was rehabbed between September 2011 and March 2012. Another nine months went by before the GAO found that the ED was able to clear the rehabbed loan backlog.
Meanwhile, those loans remained in default and the borrowers' credit scores got whacked.
What's more, the GAO's inspector general, Kathleen Tighe, had warned against the ED's dysfunctional debt management systemand sounded that warning again yesterday before the House higher education subcommittee, when she again expressed concern, this time about ED's "apparent lack of oversight and monitoring of this system."
She said that the ED has not come up with an "acceptable" plan for making the debt management system "fully operational," something her office recommended in December 2012, according to her testimony.
For its part, the ED seems to have bagged basic oversight on the default management system.
The GAO report claims the department did not adequately test the system before it went live. GAO also says ED did not properly oversee the system's contractor, Affiliated Computer Services, a subsidiary of the Norwalk, Conn.-based Xerox Corporation.
"Despite known risks, such as concerns about the contractor's unreliable performance on previous system development efforts, [the] Education [Department] did not have plans for monitoring the upgrade," Emrey-Arras said.
--Written by John Sandman for MainStreet