Rules Aim To Aid Recovery of $4.2 Billion in Back Loans

Article Tools
  • PrintPrinter-Friendly
  • EmailEmail Article
  • ReprintReprints
  • CommentsComments

Washington--The Office of Management and Budget has published rules to help the government collect some $50 billion in delinquent government loans, some $4.2 billion of which has not been returned by borrowers from four federal student-loan programs.

The rules will establish a two-year trial program to recoup funds from individuals by withholding income-tax refunds. omb's director, David Stockman, said the federal government, the nation's largest lender, can "no longer afford to manage [its] accounts like a 'Mom and Pop' operation."

The rules also require that seriously delinquent loans be turned over to collection agencies or to the Justice Department and that credit histories of applicants for federal loans be screened carefully, according to omb officials.

The government expects to reclaim some $50 million in delinquent student loans by "offsetting" tax returns in 1986, according to an Education Department spokesman.

The initiative is expected to help all government agencies collect some $253 million in 1986 and $344 million in 1987, according to omb officials.

Under the Debt Collection Act of 1982, the Congress gave federal agencies the authority to release information on the status of delinquent federal loans to the private sector.

"Seven firms that provide credit information to the private sector now receive by computer tape reports on the credit status of individuals and firms who have had dealings with the federal government," an omb spokesman said.

Federal Employees Hit

Enhanced loan-recovery efforts are effective, if the government's efforts to secure repayment from federal employees are any indication.

By matching delinquent student-aid accounts against a list of 10 million federal employees, the Education Department identified some 47,000 employees in default on nearly $68 million.

As of February, the government collected almost $10 million from 15,000 employees, while actually withholding wages from only 264 employees, according to omb officials.

Bennett's Rules

In late February, Secretary of Education William J. Bennett proposed changes in regulations governing the National Direct Student Loan Program. The proposals would require that colleges and universities withhold transcripts and deny loan defaulters student or alumni benefits.

Among other changes, the proposals also would require institutions to refer information regarding defaulted accounts to at least one credit bureau and would encourage colleges to file claims against loan defaulters in small-claims court. (See Education Week, March 13, 1985.)

The Education Department is now in the process of reviewing public comment on the proposed regulations.--sr

Vol. 04, Issue 38

Notice: We recently upgraded our comments. (Learn more here.) If you are logged in as a subscriber or registered user and already have a Display Name on, you can post comments. If you do not already have a Display Name, please create one here.
Ground Rules for Posting
We encourage lively debate, but please be respectful of others. Profanity and personal attacks are prohibited. By commenting, you are agreeing to abide by our user agreement.
All comments are public.

Back to Top Back to Top

Most Popular Stories