Remember that whole student loan scandal, where lenders illegally gave gifts to financial aid officers? The Department of Education doesn’t! A damning GAO report claims that the DOE:
…has no oversight tools in place designed to proactively detect potential instances of lenders providing improper inducements–such as gifts to schools in exchange for preferred status on a school’s suggested lender list–or schools limiting borrower choice of lender, two activities that are prohibited by law. Instead, the department primarily depends on external complaints to identify potential instances of non-compliance with these prohibitions.
Over the past twenty years, the DOE has sanctioned two (2) lenders for violating government rules. As a result, students are subjected to higher interest rates and fewer borrower benefits.
The DOE does not dispute the report’s accuracy.
US not policing college lenders, GAO says [Bloomberg]
Federal Family Education Loan Program: Increased Department of Education Oversight of Lender and School Activities Needed to Help Ensure Program Compliance GAO-07-750 [Government Accountability Office]