There simply is not enough oversight. Currently, the methodology for approving and releasing student loan funds is vulnerable. Current law states that the student may request a check be issued directly to him or her, when claiming they are attending a foreign school, and a check will be sent directly to them, without the requirement of a cosignature by the school. Verification of enrollment, the disbursement process, the determination of the borrowers' eligibility, standards of administrative and financial capability on the part of the foreign school, and general oversight of foreign schools. The same Office of Inspector General report that is the Department of Education's own inspector general's office within that Department stated that the number of students claiming to attend foreign schools and applying for loans increased each academic year from 1993 to 1997 and went from 4,594 students to 10,715 students.
Later figures show the number continues to increase.
Indeed, in 1998-1999 there were 12,000 foreign loans. My legislation will require the Secretary of Education to initiate a 12-month fraud control pilot program involving guaranty agencies those are the people who put up the loan money guaranteed by the federal government lenders, and a representative group of foreign schools to reduce the incidence of fraud in the student loan program. I believe the Secretary should look into a number of solutions. Maybe the guaranty agencies should confirm that the student is enrolled in the foreign school before the loan is actually disbursed. After the money has been disbursed to the student, maybe the guaranty agencies should confirm that the student remains registered.