Issue Summary
College and other postsecondary education—including vocational and graduate programs—play a vital role in supporting economic success for individuals and the nation. To help expand access to a college education, the federal government provided about $114 billion in financial aid in FY 2023 through grants, loans, and work-study funds to almost 10 million students.
However, the amount of federal student loan debt has grown to more than $1.6 trillion, and, in the past, many borrowers have struggled to repay their loans and eventually defaulted. With student loan payments having resumed after a more than 3-year payment pause due to the COVID-19 pandemic, and the launch of a new application for federal student aid, the Department of Education (Education) should take steps to strengthen its management and oversight of federal student aid programs.
For example:
- Student aid application. Students rely on the Free Application for Federal Student Aid (FAFSA) to determine their eligibility for federal grants and loans. However, Education’s rollout of a newly simplified form was plagued by numerous delays and technical issues that led to a decline in submissions among high school students. Education also failed to provide students and colleges with timely and sufficient information about the new FAFSA process.
- Income-driven repayment. To make student loans more affordable, Income-Driven Repayment plans base monthly payments on a borrower’s income and family size and extend repayment periods. Borrowers in these plans are also eligible for loan forgiveness after up to 20 or 25 years of qualifying payments. However, Education has not given borrowers key information about the requirements for forgiveness and their progress toward forgiveness. These plans can also result in high costs to the federal government and taxpayers. To minimize these costs, it is important that Education accurately determine monthly payment amounts for borrowers enrolled in these plans.
- Online education. Colleges can use third-party online program managers to help run their online education programs. These managers often recruit students, in addition to providing other services. Many online managers are paid a share of tuition revenue—an arrangement Education allows only if safeguards against prohibited incentive payments are in place to prevent abusive recruiting practices. For example, online managers must provide multiple services and not be paid separately for recruiting. However, colleges lack clear instructions from Education about disclosing these arrangements, making it hard to detect violations.
- College closures. When a college closes, students can be left with loans, no degree, and no path forward. Some students may be eligible for federal student loan forgiveness through a "closed school discharge.” However, Education’s outreach to potentially eligible borrowers can be confusing and may not be enough to connect with those at risk of default. Also, it can take months after a closure for some borrowers to be notified of their potential eligibility for a discharge.
Image
