NASFAA Statement on GAO Report

April 26, 2018 — In a report released today, the Government Accountability Office (GAO) states that some consultants hired by schools pushed students to choose forbearance as a way to avoid defaulting on their loans over “other potentially more beneficial options for helping borrowers avoid default, such as repayment plans that base monthly payments on income.”

NASFAA President Justin Draeger issued the following statement in response to the report:

“The idea that borrowers would be put into forbearance only to default down the road, does students no service. However, the GAO report highlights an unfortunate truth: it is easier for borrowers to enter forbearance than it is to enter—and sometimes remain—in income-driven repayment plans. Forbearance is a legitimate repayment entitlement with very few administrative hurdles, and in some last case scenarios, may be the quickest and least administratively burdensome way to help borrowers avoid the awful consequences of default.

We need lawmakers to simplify the repayment process and make it easier for borrowers to qualify for and remain in income-driven repayment plans. For years, NASFAA has called for ways to make income-driven repayment easier for borrowers, including models that would implement automatic income-based repayments through payroll withdrawals. Other legislative proposals that NASFAA supports, such as the SIMPLE Act, would allow at-risk borrowers to automatically enroll in income-driven repayment plans.

The best time for schools to help students with loan debt is before they borrow even a single dollar, but today schools have limited tools at their disposal to prevent overborrowing. In many instances, schools are outright prohibited from limiting the amount students borrow or even taking common sense steps like mandating additional loan counseling above and beyond minimal federal requirements. This leaves schools in a situation of trying to help borrowers navigate a complex repayment process after they have already left the institution. Schools need more authority to help students avoid the pitfalls of overborrowing, and ultimately default, upfront, before students have taken out their loans.   

Finally, the fact that some schools could pursue strategies that simply push out an inevitable default highlights an additional policy shortcoming that must be tackled by lawmakers: that  relying solely on cohort default rates is a poor proxy for institutional quality. Default rates are one metric among many that should be taken to into account when determining institutional eligibility for student aid. We look forward to working with lawmakers to determine how default rates, repayment rates, and other student outcomes can be taken into account—fairly and equitably—when determining student aid eligibility.”

To request an interview with a NASFAA spokesperson, please email powerse@nasfaa.org or call (202) 785-6959.

About NASFAA
The National Association of Student Financial Aid Administrators (NASFAA) is a nonprofit membership organization that represents more than 20,000 financial aid professionals at nearly 3,000 colleges, universities, and career schools across the country. NASFAA member institutions serve nine out of every ten undergraduates in the United States. Based in Washington, D.C., NASFAA is the only national association with a primary focus on student aid legislation, regulatory analysis, and training for financial aid administrators. For more information, visit www.nasfaa.org.

Publication Date: 4/26/2018

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