Texas Guaranteed Student Loan Corporation

STAFF EVALUATION

Texas Guaranteed Student Loan Corporation

A Staff Report

to the

Sunset Advisory Commission

1988

TEXASGUARANTEEDSTUDENTLOANCORPORATION

Mauh1988

TABLE OF CONTENTS

Page

Summary of Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

Agency Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11

Creation and Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

Policy-making Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

Funding and Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17

Programs and Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21

Review of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29

Focus of Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31

Policy-making Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34

The Composition of the Board Should be Changed . . . . . . . . . . . . . . . . .

34

Advisory Committees Should be Required in Statute . . . . . . . . . . . . . .

37

Overall Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39

The State Auditor Should Review the Corporation's Audit

39

The Internal Auditor's Position and Duties Should

be Statutory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40

Increased Efforts are Needed to Reduce the Guarantee Fee . . . . . . . . .

42

Evaluation of Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

50

School's Awareness of Responsibility for Defaults Should

be Increased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

52

Increased Lender Responsiblity for Defaults is Needed

54

Actions Should be Taken to Increase Sanctions

for Defaulted Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

57

Use of State Professional Licensing Agencies Could

Lower Default Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

58

TGSLC Should Evaluate the Benefits of Using

Private Collection Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

64

Other Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67

Minor Modifications of Agency's Statute . . . . . . . . . . . . . . . . . . . . . . . . . . .

69

Across-the-Board Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

73

Summary of Recommendations

The Texas Guaranteed Student Loan Corporation (TGSLC), created in 1979,

administers the federal guaranteed student loan program in Texas and guarantees

student loans under the terms of that program. The TGSLC is a public nonprofit

corporation: it is not a state agency and receives no appropriations of state funds.

The 11-member board of the Texas Guaranteed Student Loan Corporation is made

up of eight members appointed by the governor for six year terms, the Comptroller of

Public Accounts, a member of the Texas Higher Education Coordinating Board, and

a student appointed by the Commissioner of Higher Education. The board hires an

executive director who is chief executive officer of the corporation's 200 employees

and $12 million annual operating budget.

The corporation has only one office and is located in Austin. The corporation

received an initial start-up appropriation from the state of $1.5 million and

approximately $10 million in federal advances. Currently, the main sources of

income are student loan guarantee fees, federal reinsurance receipts, federal

administrative cost allowances, default recoveries, investments, and loan servicing

fees. The corporation guaranteed over $378 million in student loans in 1987 and

over 1,800 schools and 600 lenders currently participate in the program.

The sunset review of the corporation's structure, administration, and programs

concluded that the legislature's decision to establish a state chartered public

nonprofit corporation, instead of a state agency, to administer the program still

makes sense today. The review indicated that the corporation has fulfilled the

purposes for which it was created and should be continued for a 12-year period.

The sunset review also determined that if the corporation is continued, a

number of changes should be made to improve the efficiency and effectiveness of its

operations. These changes are outlined below.

1

RECOMMENDATIONS

THE AGENCY SHOULD BE CONTINUED FOR A 12-YEAR PERIOD

WITH THE FOLLOWING CHANGES:

Policy-making Structure

Composition of Board

1.

Statutory provisions regarding the make-up of the board of

the TGSLC should be modified to provide for the following:

?

nine members with financial expertise appointed by

the governor, one of whom shall be a full-time student;

?

no board member shall be either on the board or an

employee of a participating school or lender or

secondary market in the guaranteed student loan

program; and

?

the Comptroller of Public Accounts, or his designee,

shall serve as an ex officio voting member. (Statutory)

(p. 35)

The board of the Texas Guaranteed Student Loan Corporation is currently composed

of 11 members. Eight of these are appointed by the governor and the other slots are

filled by a member of the Texas Higher Education Coordinating Board, a full-time

student, and the Comptroller of Public Accounts. Of the governor appointed

members, three must be from the field of commercial finance and three from higher

education. The review determined that this composition has inherent conflicts of

interest and that the board should instead be made up of a group of public members

who are not representatives of institutions participating in the program.

2

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download