Summary: GAO discussed the Stafford Student Loan Program, specifically: (1) how the program works; (2) the growth in loans guaranteed and defaulted; and (3) recent legislative and regulatory changes. GAO found that: (1) Stafford loans were low-interest loans made on the basis of financial need; (2) the program accounted for about 54 percent of the student aid provided by the Department of Education; and (3) Education reinsured guaranty agencies for 100 percent of defaulted loans, and made interest payments to lenders for borrowers still in school. GAO also found that: (1) between 1983 and 1989, program loans grew from about $7 billion to over $12 billion annually; (2) defaults increased over 338 percent during the same period; (3) the default rate for private schools was significantly higher than for other schools that participated in the Stafford program; and (4) Education and Congress have taken action to standardize schools' policies on refunding tuition and fees, and deny loans to schools with default rates over 30 percent.
