A r c h i v e d I n f o r m a t i o n

   FOR RELEASE              Contact: Stephanie Babyak (202) 401-2311    June 28, 1995                        Jane Glickman (202) 401-1307

New Student Loan Data System Saves Taxpayers Millions in Loans to Ineligible Borrowers

The U.S. Education Department today reported that its new National Student Loan Data System (NSLDS) has already saved taxpayers an estimated $110 million during its first six months of operation by detecting ineligible borrowers and preventing further loan disbursements to them.

The national data base, that now includes individual borrower data for more than 26 million students and 66 million federally guaranteed and direct loans, is expected to substantially improve student aid program accountability.

"The NSLDS is the student aid equivalent of the computer replacing typewriters; it will revolutionize our ability to manage these programs," said Leo Kornfeld, senior advisor to the secretary for direct lending. "The national data base should help reduce fraud and abuse by providing information on individual student borrower and grant recipients."

The NSLDS is a centralized data base containing timely, verifiable information on students receiving federal financial aid. Previously, individual borrower information resided in 42 guaranty agencies that administer the old guaranteed loan system.

The system provides a prescreening capability that performs student matches to identify defaulters who are ineligible to receive new loans or grants and also applicants who are ineligible to receive additional federal loan aid because they have reached the maximum limit allowed by law. Loan collections should also improve by making it easier to locate borrowers and by reducing the likelihood of erroneous reporting of loans in default.

The system offers additional information for budget and program analysis activities and enhances the department's ability to target audits and reviews of guaranteed loan program participants by providing up-to-date information on each outstanding guaranteed student loan.

The NSLDS will centralize individual borrower information and better enable the department to make its own calculations on school cohort default rates. Before the NSLDS was put in place, the department had to rely on the guaranty agencies to submit loan data in order to calculate default rates for participating schools.

This summer, information will be added on recipients of five million Federal Perkins Loans and four million Federal Pell Grants.

Although Congress authorized the NSLDS in 1989, the department was not permitted to collect individual borrower information necessary to implement and operate the NSLDS. In 1992, Congress agreed with the department on the need for student data collection, authorized that activity, and appropriated funds to develop the NSLDS.

"The NSLDS is another example of our commitment to better management of student aid programs and improved stewardship of taxpayer dollars," said Kornfeld.

The NSLDS was a nominee in the 1995 Computerworld Smithsonian Awards that annually "recognizes and honors examples of technological innovation that benefit society."