Summary: The Veterans and Dependents Education Loan Program administered by the Veterans Administration (VA) has been growing since its beginning in 1974 and, in the first quarter of 1978, 8,800 loans totalling $11.4 million were made. However, the program has not effectively met the congressional intent of providing financial aid to needy students attending high cost institutions because VA has not restricted loan eligibility to veterans attending high tuition schools and has not provided adequate criteria for evaluating financial needs or defined allowable education-related expenses. Only 28 percent of loans in regions examined were made to veterans attending high tuition schools. During the first 3 years of the program, 71 percent of loan applications analyzed were denied because financial need was not shown. All resources are not considered in determining financial need, and alternative guidelines are needed. The loan default rate has been high, 44 percent according to VA data, and possibly up to 55 percent according to GAO estimates. The high default rate resulted primarily from problems in collection procedures such as borrowers were not contacted promptly after leaving school, due dates for first payments were not clear, collection letters need to be strengthened, some regions were not offsetting defaulted loans against benefits, legislation does not give VA authority to require reduced repayment periods for small loans, and efforts to locate veterans were hampered by a recent Internal Revenue Service (IRS) ruling which does not allow the IRS to provide address information.
