Secretary of Education William J. Bennett is expected to announce this week a proposal to restrict participation in the Guaranteed Student Loan program by colleges and other postsecondary schools whose students have a high default rate on the federal loans.
Mr. Bennett has “a range of actions at his disposal” to penalize such institutions, according to Bruce M. Carnes, deputy undersecretary of education for budget, planning, and evaluation.
The Secretary could limit the amount of GSL money the institutions could receive, suspend them temporarily from participating in the program, or exclude them from the program entirely, Mr. Carnes said.
In a related development, the Senate has added an amendment to the trade bill currently pending in the Congress that would allow agencies guaranteeing loans to withdraw their guarantees from institutions with default rates of more than 25 percent. The House version of the bill has no similar provision.
A recent report found that some postsecondary institutions--primarily proprietary schools offering vocational, technical, or other training--have default rates of more than 60 percent.
