GAO Releases Report on Student
Loan Consolidation
December 5, 2003 - The General Accounting Office (GAO)
Dec. 2 released a report on student loan consolidation, which
found that "while consolidation loans may remain an important
tool to help borrowers, overall federal costs in providing
for consolidation loans may exceed federal savings from reduced
defaults." The report, "Student
Loan Programs: As Federal Costs of Loan Consolidation Rise,
Other Options Should Be Examined," was completed
at the request of House Education and the Workforce Committee
Chairman John Boehner (R-Ohio) and Subcommittee on 21st Century
Competitiveness Chairman Buck McKeon (R-Calif.).
The study concluded that an increasing number of borrowers
are choosing to consolidate their loans as a way of obtaining
low interest rates, rather than the original purpose of the
program, which was to offer alternative repayment options
to help borrowers manage their debt and reduce defaults. GAO
recommends that the Department of Education study the benefits
of the consolidation program to both the borrowers and the
government and assess options including targeting the program
to high-risk borrowers, extending existing consolidation alternatives
to more borrowers, and changing the program from a fixed to
a variable interest rate.
Information:
Jonathan Fishburn, Director, Research, Education and Veterans' Legislative Affairs
AAMC Office of Governmental Relations
jfishburn@aamc.org
(202) 828-0525
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