The Department of Education administers four major student financial aid programs under title IV of HEA: FFELP, the William D. Ford Direct Loan Program (FDLP), the Federal Pell Grant Program, and the Federal Campus-Based Programs. These programs together will make available an estimated $47 billion to about 8 million individuals during the 1998-99 academic year—about 80 percent of it in student loans. Schools are responsible for obtaining and evaluating the financial aid history of students to ensure that students are eligible for aid. During our review, we identified 10 tasks inherent to administering federal student aid programs through NSLDS or other methods. These tasks are related to four general processes and functions operational at the time of our survey that the Department made available to schools through NSLDS to help them administer the student financial aid programs more effectively. (See table 1.) Once the school determines that a student is eligible, financial aid funds are disbursed to the student according to program requirements. To support—as well as monitor—these student loan programs, the Department has developed a number of automated processing systems, including NSLDS. The budget for these systems is expected to be about $378 million for fiscal year 1999. (See app. III for descriptions of the major student financial aid systems.) Prior to NSLDS, the Department relied on a system—commonly referred to as the guaranty agency tape dump—to collect selected information from guaranty agencies on each federal student loan. The tape dump, developed in the late 1970s, was initially intended to be used by the Department primarily as an annual source of data for analysis of program trends. According to the Department, it did not expect that every guaranty agency would have historically collected all the data requested because each agency’s system was designed to meet the needs of that individual guaranty agency. The tape dump, according to the Department, was not designed to be used, for example, to prevent awarding loans to ineligible borrowers. Under 1986 HEA amendments, the Secretary of Education was authorized to replace the tape dump and develop a computer system that would make national student loan data accessible to guaranty agencies; however, the Department could not require guaranty agencies to use the database before approving new loans. As a result, planning for the development of the new NSLDS was delayed for several years, when the Department was allowed, under the Omnibus Budget Reconciliation Act of 1989, to require guaranty agencies to use the system in determining student eligibility. The scope of the database expanded when 1992 HEA amendments required the Department to integrate a national student loan database with other financial aid data systems. The 1992 amendments also stated that the Secretary of Education, in establishing a national database, should give priority to providing information on student enrollment and status, current loan holders, and servicers. In response to these legislative mandates, in January 1993, the Department awarded a 5-year, $39 million contract to develop and maintain NSLDS. As of March 1998, the costs for developing, implementing, and maintaining the system have totaled $96.5 million. According to the Department, NSLDS contained about 118 million loan and grant records as of February 1998. These records were provided by guaranty agencies for the FFELP loans they guaranteed, by the contractor that services FDLP loans for the Department, and by schools for Pell grants and campus-based aid they awarded. As figure 1 illustrates, a significant portion of data stored in NSLDS—about 70 percent—related to FFELP loans as of March 1998. The Department’s student financial aid data systems have suffered from data quality problems. For example, in 1996, the Department’s Office of Inspector General (OIG) found in its review of the September 30, 1992, tape dump that the number of FFELP loans in repayment was overstated by approximately 5.9 million loans. OIG also found that a significant number of loans that were incorrectly recorded in the tape dump remained incorrect in NSLDS, affecting the reliability of the new system. As we reported in 1997, poor quality and unreliable FFELP loan data remain in the Department’s systems, and inaccurate loan data were being entered into NSLDS. As a result, the Department cannot obtain complete, accurate, and reliable FFELP data, which, according to its OIG, hinders the Department’s effort to monitor borrowers and properly award aid to those who are eligible. The Department acknowledges that its student financial aid data systems have suffered from data quality problems and has initiated a number of actions to address data accuracy and integrity issues. Regardless of its weaknesses, NSLDS is the most comprehensive departmental database on federal student loans that schools, lenders, and guaranty agencies can use. The Department has stated that it expected NSLDS to significantly reduce schools’ and students’ administrative burden of applying for and accounting for financial aid. With the exception of mid-year transfer students, the Department has not required schools to obtain paper financial aid transcripts since the 1996-97 award year. The Department also envisioned that NSLDS would simplify and enhance the process of updating SSCR information for schools. Prior to NSLDS, schools, for their FFELP loans, received SSCR rosters from every guaranty agency that guaranteed their student loans and had to manually verify and resubmit the rosters to the guaranty agencies. In addition, the Department believes that NSLDS has led to considerable improvements in identifying ineligible student aid recipients. It estimates that since the 1994-95 academic year, for example, NSLDS’ improved default matching capabilities may have prevented over $1 billion from being awarded to ineligible students. Our survey results indicate that a significant proportion—42 percent—of the schools participating in federal student financial aid programs were not using NSLDS’ on-line and batch processing functions, which first became available in November 1994. In addition, of the schools that were using these functions, most were not routinely using them for many of the tasks they were capable of performing. Based on our survey results, we estimate that 58 percent of the 6,181 schools participating in student financial aid programs used NSLDS’ on-line or batch processing functions. (See fig. 2.) Of the schools that were not using these functions, they either had the ability to use it and simply had not done so (19 percent) or did not have the ability to use the system (23 percent). When we asked schools about their use of NSLDS to accomplish the 10 tasks we identified as inherent to program administration, we found that schools were not routinely using NSLDS for most of them. As shown in figure 3, more than half of the schools rarely or never performed 7 of the 10 tasks using NSLDS. The only task that a majority of schools routinely used NSLDS to accomplish was providing or updating SSCR information, which since February 1997, the Department has required schools—or third-party servicers on their behalf—to perform on the system. Specifically, our survey data show that 69 percent of the schools always or most of the time use NSLDS for SSCR processing. An additional 11 percent occasionally use NSLDS for SSCR processing, and another 5 percent rarely use the system for this task. Of the remaining schools—those that never use NSLDS for SSCR processing—13 percent process SSCRs through the Clearinghouse or other third-party servicers; the last 2 percent appear not to be meeting the requirement. The schools’ next most common uses of NSLDS’ on-line and batch processing functions were for correcting or updating student information (33 percent) and determining prior loan defaults (30 percent). However, 43 and 47 percent of schools responded that they rarely or never use NSLDS for these two tasks, respectively. The reason schools most frequently gave for rarely or never using NSLDS to perform any of the 10 tasks was that they use the Department’s Student Aid Reports (SAR) or Institutional Student Information Records (ISIR).Schools can identify loan status and determine student eligibility from information contained in SAR or ISIR, including prior defaults, types of loans, default dates, and outstanding balances. Other reasons schools often gave are that they used the Clearinghouse for SSCR processing, they did not know how to use NSLDS, and that they had experienced problems using the system. When we asked schools that were using NSLDS’ on-line and batch processing functions whether they experienced problems, such as transmitting or receiving data, or whether they encountered inaccuracies in NSLDS data, many reported that they rarely or never experienced problems or encountered inaccuracies in the data fields we specified. Many schools also responded that they are satisfied with the support they received from training and customer service. Some schools, however, responded that they experienced problems more frequently with certain functions, including correcting and updating SSCR information or understanding error messages. Some schools said they occasionally found inaccuracies in data fields critical to correctly identifying students—such as Social Security numbers, last names, and date of birth—and other critical data fields, including enrollment status. While school responses indicate that these problems may not be widespread, they suggest that NSLDS does not yet offer the level of data accuracy expected by the Department. In general, schools’ experiences with most aspects of using NSLDS have been essentially problem free. (See fig. 4.) For example, 85 percent of schools that use NSLDS rarely or never experienced problems identifying multiple entries in the system of the same loans or grants. However, some schools did experience problems with some aspects of the system. For example, about 23 percent always or most of the time had a problem correcting or updating SSCR information, a critical tool for effectively administering student financial aid. As we reported in 1997, some FDLP student loan borrowers have not started to repay their student loans after they are no longer enrolled in school.