Report Faults Education Dept.'s Oversight Of Debt-Collection Firms It Hires

"An audit report released on Monday criticizes the U.S. Department of Education’s handling of borrower complaints lodged against private companies that help the department collect on defaulted federal student loans," The Chronicle of Higher Education reports

"The report, by the department’s Office of Inspector General, says the agency has not effectively monitored borrowers’ complaints and ensured that corrective actions are taken, that it has been too lax in its oversight of the companies, and that it has failed to penalize companies for continued bad behavior.

In its response to the audit, the Office of Federal Student Aid, the division of the department that oversees the companies, concurred with most of the report’s recommendations for reform, saying corrective policies had been and would continue to be taken.

The inspector general’s investigation found that the student-aid office, known as FSA, did not account for service quality when it decided how to award compensation to these companies. For instance, if a borrower complained about an improper collection practice, one the department had previously warned a company against, FSA did not penalize the company financially for continued poor performance.

Auditors also found FSA officials did not effectively ensure that companies were abiding by federal debt-collection laws and related terms of their contracts. For instance, monthly quality-control reports containing information about the companies’ own monitoring of their compliance with state and federal laws were readily available, the report says, but the auditors 'found no evidence that anyone in FSA evaluated' those reports."

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