The U.S. Department of Education's Office of Inspector General (OIG) released an assessment report last week to provide Department and Federal Student Aid (FSA) with information to help ensure a smooth transition of Federal Family Education Loan (FFEL) Program colleges and universities to the William D. Ford Direct Loan (DL) Program. The OIG evaluated the Department's capacity for the increased volume of loans made and serviced under the DL Program and the ability to monitor institutions for compliance with DL Program requirements.
OIG stated "FSA appears to have access to sufficient resources to assist schools with the transition to the Direct Loan program and that the transition will not impact FSA’s ability to sustain its current level of compliance monitoring activities." Between June 2008 and September 2009 FSA monitored student loan market conditions and estimated the impact of changes on DL origination and servicing. In response to potential volume increases, FSA expanded existing DL processing systems and awarded four additional contracts that could assist in servicing the loans.
However, OIG noted that in the event of increased demand FSA will likely rely heavily on contractors to provide support in ensuring the effective operation of the DL Program. This reliance on contractors will require the Department to monitor practices and ensure the appropriate use of federal funds.
The full OIG report is available at the Department of Education online. To provide members with information about the DL program NACAC created a Direct Loan Program Fact Sheet that discusses the current federal loan programs, Congress' proposal to end the FFEL Program, and basic DL Program information. The Senate version of the Student Aid and Fiscal Responsibility Act (SAFRA) is expected to be released after the ongoing debate over healthcare reform. In the meantime, visit NACAC's SAFRA page for details about the bill.