Web clearinghouse for student loans not needed, GAO says
The Education Department would face numerous problems if it tried to create an online clearinghouse for public and private student loan information, report says.
The Government Accountability Office has put the brakes on Congress' idea for an federal online clearinghouse to allow students to compare available education loans.
Creating such a clearinghouse on the Education Department's website would be expensive and difficult to deploy and may not be necessary, according to a GAO report published on Sept. 29.
“While it would be feasible for Education to establish a student loan tool on its website, the need for such a new source of information is questionable,” the GAO report states.
Under the Higher Education Opportunity Act II, lawmakers required GAO to study the feasibility of developing the national website offering real-time information, such as interest rates and loan terms, for federal and private student loans.
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However, several problems stand in the way of creating such a Web tool such as getting lender cooperation to present complete, accurate and objective information on all available loans consistently, GAO said, adding that such a clearinghouse would be costly to establish and maintain.
"The agency would have to cover the cost of contracting to develop a tool and build a secure system to house it. Education officials and two lenders noted that constantly evolving loan rates and terms would make the tool expensive to maintain. In a customized tool, Education would incur a cost for obtaining each borrower’s credit score," the report states.
Meanwhile, private lenders publish similar information, and schools and other agencies also provide loan information.
GAO did acknowledge that many students have low levels of “financial literacy” and may have difficulty understanding basic loan terms and comparing loans without further guidance.
“Any perceived need for a federal tool must be weighed against the investment required of Education and the considerable challenges inherent in implementation,” GAO concluded.
Education agreed with the findings.