[Congressional Record Volume 142, Number 27 (Monday, March 4, 1996)]
[Extensions of Remarks]
[Page E265]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

[[Page E265]]


          ELIMINATING THE FFELP AUDIT ON LENDING INSTITUTIONS

                                 ______


                          HON. THOMAS W. EWING

                              of illinois

                    in the house of representatives

                         Monday, March 4, 1996

  Mr. EWING. Mr. Speaker, I represent many small to mid-sized lenders 
which maintain and service small student loan portfolios in compliance 
with the Federal Family Education Loan Program [FFEL]. The profit on 
these portfolios is estimated to be around $3,000-$5,000 annually while 
the audit required by the Department of Education costs as much and in 
some cases even more. In the vast majority of these cases audits are 
not even sent to the Department of Education--they just sit and collect 
dust in the financial institution. As you can see it is senseless for 
small lenders to service their portfolios and participate in the FFEL 
Program. In fact, many small lenders are selling their portfolios and 
leaving the student loan business altogether because of this expensive 
and unnecessary audit.
  When contacted about the possibility of a waiver or alternative to 
this detrimental mandate the Department of Education stated ``* * * 
lender audits are required by statute--section 428(b)(U) of the Higher 
Education Act of 1965, as amended by the Higher Education Act of 1992 * 
* *'' and that the ``* * * statute does not provide authority for the 
Department to waive the annual audit based on the size of the lender's 
FFEL portfolio or the cost of conducting the audit.'' Furthermore, 
according to the Department of Education's Office of the inspector 
general, portfolio totaling less than $10 million do not even have to 
send their audits to the Department for review. They are only required 
to `` * * * hold the reports for a period of 3 years and shall submit 
them only if requested.'' That means lenders spend thousands on a 
compliance audit that is never sent anywhere.
  Today I am introducing a bill that would eliminate the lender audit 
on institutions with portfolios equaling $10 million or less. Without a 
change in current law more and more small lending institutions will 
continue to leave the FFEL Program and the result will be fewer 
opportunities for students. This law makes no sense and clearly 
illustrates why Americans are so frustrated with Washington.

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