FSA audit: Oversight of U.S. student loans lacking

Feb. 15 (UPI) -- The U.S. Department of Education's student loans unit failed to oversee and hold accountable the companies it pays to manage the nation's student loan debt, a new study has found.

The report published Thursday by the department's inspector general audited Federal Student Aid between Jan. 1, 2015, and Sept. 30, 2017.

The report discovered that while the FSA regularly identified instances when servicers, the word it uses for the companies that handle its student load debt portfolio, failed to handle student loans in accordance with federal requirements it rarely held them accountable.

According to the audit, 61 percent of the 343 oversight reports made by the FSA on its servicers showed that they failed to live up to their agreement in some form.

This could lead to the companies pocketing more money than they're entitled to, the report read. "FSA's not holding contracts with servicers accountable could lead to servicers being paid more than they should be," it said.

On top of that, the audit found that FSA did not know if the companies were in compliance with federal requirements when dealing with student loan borrowers' issues due to FSA employees not following policy when evaluating the customer service of servicers.

This leaves borrowers vulnerable to being overcharged, it said.

"Borrowers might not have been protected from poor services, and taxpayers might not have been protected from improper payments," it said.

It further charged that due to the lack of enforcement it could appear that the FSA is indifferent to its customers.

"By not holding servicers accountable, FSA could give its servicers the impression that it is not concerned with servicer noncompliance with Federal loan servicing requirements, including protecting borrowers' rights," the report said.

Some of the instances of noncompliance included companies not properly informing borrowers of available repayment options as well as incorrectly calculating payments based on income.

The report said that the FSA did not establish policies and procedures that would instill confidence that servicers would uphold their responsibilities.

FSA Acting Chief Operating Officer James F. Manning said in a letter that was included with the report that he "strongly disagreed" with the report's conclusions that the FSA failed to establish oversight policies and procedures.

He then said the FSA "disagreed" with the assessment that it failed to hold servicers accountable. The report only investigated until the end of 2017 so it does not reflect the changes that have been implemented, he said.

He said that the six recommendations the inspector general made in the report had either already been implemented or would soon be.

The nation's student loan debt currently sits at $1.5 trillion.