A government watchdog reported this week that the Department of Education did not properly hold student loan providers accountable to rules and regulations.

The department's Federal Student Aid (FSA) division "rarely used available contract accountability provisions to hold servicers accountable for instances of noncompliance," an inspector general report published Tuesday found.

ADVERTISEMENT

In fact, the inspector general only noted four instances over the last five years where FSA required loan servicers to return money to the federal government.

"By rarely holding servicers accountable for instances of noncompliance with Federal loan servicing requirements, FSA is not providing servicers with incentive to take actions to mitigate the risk of continued noncompliance that harms students and their families," the report says. 

The inspector general's office also found that FSA did not track noncompliance when servicers fixed the issues. even though that data could have been used to find patterns or reoccurring instances of wrongdoing. FSA employees also did not always follow the correct policies to evaluate how loan servicing companies dealt with people who borrowed money.

The report is based on evaluations done between Jan. 1, 2015, and Sept. 30, 2017.  

FSA disputed the report's findings.  

"We ... disagree that we rarely hold servicers accountable," Acting FSA Chief Operating Officer James F. Manning wrote in response. "We also are concerned that the wording of your findings implies a much broader level of risk than is indicated by the specific examples identified in your report."

"FSA devotes significant resources to vendor oversight and monitoring efforts ... and has established performance-based contracts focused on driving improvements in customer satisfaction and outcomes related to reduced borrower delinquency and default," he added.