The objective of our audit was to determine whether FSA had established policies and procedures to mitigate the risk of servicers not servicing federally held student loans in accordance with Federal requirements.
FSA needed to take additional actions to mitigate the risk of student loan servicer noncompliance with requirements for servicing federally held student loans. Although FSA oversight activities regularly identified instances of servicers’ noncompliance, it did not track identified instances of noncompliance that servicers remediated, FSA had not analyzed the information it did track to identify trends and recurring instances of noncompliance at each servicer and across all servicers, and FSA rarely used available contract accountability provisions to hold servicers accountable for instances of noncompliance. By not holding servicers accountable for instances of noncompliance with Federal loan servicing requirements, FSA did not provide servicers with an incentive to take actions to mitigate the risk of continued servicer noncompliance that could harm students.
We made six recommendations, including that FSA (1) track all instances of noncompliance identified during its oversight activities; (2) analyze the records relevant to noncompliance, identify trends and recurring noncompliance for each servicer and across all servicers, and use the information as a basis for assessing servicer performance; and (3) use the contractual provisions available to hold servicers accountable for instances of noncompliance.
Oversight and Monitoring—Student Financial Assistance Programs
See Congressional Testimony on the subject, our Eye on ED podcast episode, and other reports on loan servicers.