E.D. Issues Loan-Default Regulations

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Washington--The Education Department last week formally proposed regulations for cracking down on move first proposed by Secretary of Education William J. Bennett last November.

Noting that defaults in the Guaranteed Student Loan program cost taxpayers $1.3 billion in fiscal 1987 and an estimated $1.6 billion in fiscal 1988, Education Department officials with default rates of more than 20 percent be notified that they would face termination from the loan program. Both the House version (HR 4986) and the Senate version (S 2647) would make it more difficult for the Education Department to remove an institution from the loan program than would the department's own proposed regulations.

The Senate version, for instance, would require schools with default rates in excess of 25 percent to enter into a default-management plan. Only after a school had failed for three years to reduce defaults could the department take action to remove it from the program.

The House version of the bill would make it even harder for the Secretary of Education to eliminate an institution from the program. Its provision, which would permit the Secretary to initiate proceedings against a school only if it failed to demonstrate that it had made every effort at compliance, prompted Mr. Carnes to remark that "there is no default rate they [House Education and Labor Committee members] would regard as intolerable."

"A 100 percent default rate would be okay with them," he added, noting that the department would prefer the Senate version. The department's position, he said, is that if the institutions cannot manage their students' participation, they "don't belong in this program."

Both bills may come up for a vote this month.--mw

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