Direct Student Loans: Additional Steps Would Increase Borrowers' Awareness of Electronic Debiting and Reduce Federal Administrative Costs

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A letter report issued by the General Accounting Office with an abstract that begins "Since 1999, the Department of Education (Education) has offered a 0.25 percent interest rate reduction to borrowers who agree to an electronic debit (EDA) program. Borrowers pay a lower interest rate, while the federal government receives fewer late payments. Any revenue loss to the federal government from a reduced interest rate would be more than offset by a gain in revenue because some EDA borrowers who had previously paid by check would stop making periodic payments in excess of their scheduled amount due. By ceasing to ... continued below

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United States. General Accounting Office. March 29, 2002.

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Description

A letter report issued by the General Accounting Office with an abstract that begins "Since 1999, the Department of Education (Education) has offered a 0.25 percent interest rate reduction to borrowers who agree to an electronic debit (EDA) program. Borrowers pay a lower interest rate, while the federal government receives fewer late payments. Any revenue loss to the federal government from a reduced interest rate would be more than offset by a gain in revenue because some EDA borrowers who had previously paid by check would stop making periodic payments in excess of their scheduled amount due. By ceasing to make these prepayments, these borrowers would not pay off their loans as soon as they would have without signing up for EDA and, therefore, incur additional interest costs over the life of their loans. Although actual EDA enrollments have exceeded original estimates, Education lacks data on prepayment patterns after borrowers enroll in the program. Education has not informed borrowers of the cost implications of EDA participation, nor has it systematically informed borrowers of their prepayment options. GAO estimates that Education saved $1.5 million in administrative costs in fiscal year 2001 because it did not have to mail bills to EDA borrowers."

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Government Accountability Office Reports

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress investigating how the federal government spends taxpayers' money. Its goal is to increase accountability and improve the performance of the federal government. The Government Accountability Office Reports Collection consists of over 13,000 documents on a variety of topics ranging from fiscal issues to international affairs.

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  • March 29, 2002

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  • June 11, 2014, 5:03 a.m.

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United States. General Accounting Office. Direct Student Loans: Additional Steps Would Increase Borrowers' Awareness of Electronic Debiting and Reduce Federal Administrative Costs, report, March 29, 2002; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc293441/: accessed January 22, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.