Summary: Borrowers paid an estimated $427 million in origination fees on Stafford loans they received in fiscal year 1990. These fees help offset the federal government's multibillion-dollar cost of subsidizing the Stafford Student Loan Program. GAO found that the government is incurring millions of dollars in unnecessary interest costs associated with the collection of origination fees because (1) it does not receive fees from some lenders, (2) it receives them from other lenders long after they are collected from students, and (3) the Department of Education's interest subsidy offset and other collection practices discourage prompt remittances. Rather than collecting most loan origination fees as offsets to quarterly interest subsidy billings, the Department could be given the authority to collect fees from lenders within 15 days of loan disbursement. The Department, in part because it relies on lenders to maintain records on individual loans, lacks enough data to determine when lenders disburse loans or the origination fees they owe. Until the Department is given authority to collect origination fees and has a new student-loan data system up and running, it should work with the guaranty agencies to ensure that lenders remit the fees they owe within 15 days and impose penalties on late remittances.
