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GAO: Better Oversight Could Improve Defaulted Loan Rehabilitation

March 1, 2014

Pursuit's Take

As of fiscal year 2013 about $94 billion—over 11 percent of federal student loan volume in repayment— was in default, which generally occurs when a borrower fails to make a payment for more than 270 days. From fiscal years 2011 to 2013, Education collected about $9 billion on over 1.5 million loans through rehabilitation, most of which was recovered by collection agencies.

For more than a year after the October 2011 upgrade of its defaulted loan information system, Education was unable to provide most borrowers who completed rehabilitation with timely benefits, such as removing defaults from their credit reports. GAO found the delays largely attributable to gaps in Education’s oversight of its system contractor.

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