Debt Management Disarray

Career College Central summary:

  • Congressional investigators have found “serious weaknesses” in how the Education Department manages a program meant to help defaulted borrowers get their loans back on track, a Government Accountability Office official said on Wednesday. Melissa Emrey-Arras, who oversees education issues at the GAO, told a House panel that the department’s failure to properly oversee a 2011 computer system upgrade was largely responsible for delays that tens of thousands of borrowers experienced in trying to get their loans out of default.
  • Borrowers who are in default on their federal student loans are able to "rehabilitate” those loans by making nine on-time payments in a 10-month period. At that point, the default is supposed to be scrubbed from the borrower’s credit report. But problems with the department’s debt management system were so severe after the system upgrade that it was not able to process a single loan rehabilitation between September 2011 and March 2012, according to the GAO. It took until January 2013 for the department to clear a backlog of rehabilitated loans.
  • The GAO report faults the department for not fully testing the system before it went live and also for failing to properly oversee its system contractor, Affiliated Computer Services, a Xerox subsidiary. The department’s inspector general, Kathleen S. Tighe, has previously sounded the alarm on problems with the department’s debt management system.

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