United States Government Publishing Office publisher pbl distributor dst United States Government Accountability Office Health, Education, and Human Services Division author aut Government Organization text government publication eng GAOREPORTS Legislative Agency Publications gao legislative 2010-08-12 U.S. Government Printing Office 2000-09-25 monographic deposited born digital 28 p. GA 1.13:HEHS-00-170 https://www.govinfo.gov/app/details/GAOREPORTS-HEHS-00-170 P0b002ee18037ccb2 f:he00170 DGPO 2010-08-12 2011-03-24 GAOREPORTS-HEHS-00-170 machine generated eng fdlp REPORT GAOREPORTS-HEHS-00-170 HEHS-00-170 Student loans Risk management Internal controls Lending institutions Loan repayments Federal Family Education Loan Program Letter Report HEHS

Pursuant to a congressional request, GAO provided information on student loan trustee arrangements, focusing on the: (1) number and cost of trustee arrangements and their shared characteristics; (2) benefits and protections afforded the federal government through use of trustee arrangements; and (3) effect of trustee arrangements on market participation and the availability of student loans.<p/>GAO noted that: (1) the Department of Education reports that approximately 125 trustee arrangements exist between 16 eligible lender trustees and 31 ineligible lenders for the purpose of originating or purchasing student loans; (2) these arrangements account for $25.3 billion in outstanding loans--approximately 19 percent of the outstanding balance of all Federal Family Education Loan Program (FFELP) loans as of December 1999; (3) costs of trustee arrangements fall into two categories--costs to initiate the arrangement and annual costs to maintain it; (4) ineligible lenders GAO interviewed said, that the costs did not prohibit them from conducting business in the student loan market; (5) the amount charged by an eligible lender for its trustee services varied and was based on the volume of loans the ineligible lender was anticipated to originate and on the number and kind of other services the trustee provided; (6) both eligible and ineligible lenders reported little, if any, change in the availability of lenders to serve as trustees or the costs of these arrangements since 1998; (7) several characteristics were common among the trustee arrangements GAO reviewed, including the criteria used by trustees to evaluate ineligible lenders before they entered into trustee arrangements, the various elements of the trustee arrangement contracts, and the day-to-day interaction between the trustee and the ineligible lender; (8) trustee arrangements come with some protections to ensure the federal government's investment in FFELP is secure while allowing ineligible lenders to participate in the program; (9) most financial institutions that serve as eligible lender trustees are subject to federal oversight; (10) because most eligible lender trustees also hold student loans in their own name and receive regular FFELP-related payments from the government for those loans, the federal government has recourse for recovering any repayments due the government on ineligible lenders' loans that lose the federal guarantee; (11) Education officials stated that because ineligible lenders are generally not subject to financial safety and soundness reviews by government agencies, Education lacks assurance that these lenders would be able to meet their financial obligations in the program; and (12) both eligible and ineligible lenders said they believe that market participation and loan availability are positively affected by trustee arrangements which allow lenders to make and hold loans. https://www.govinfo.gov/content/pkg/GAOREPORTS-HEHS-00-170/html/GAOREPORTS-HEHS-00-170.htm https://www.govinfo.gov/content/pkg/GAOREPORTS-HEHS-00-170/pdf/GAOREPORTS-HEHS-00-170.pdf GAO/HEHS-00-170 https://www.govinfo.gov/app/details/GAOREPORTS-HEHS-00-170 Letter Report GAO/HEHS-00-170; Higher Education: Trustee Arrangements Serve Useful; Student loans Risk management Internal controls Lending institutions Loan repayments Federal Family Education Loan Program Title 20 Section 1071(d)(1)(A)(ii) 20 U.S.C. 1071(d)(1)(A)(ii)