Summary: Extension of lender audit requirement deadline.
SUBJECT: Extension of lender audit requirement deadline.
Section 428(b)(1)(U)(iii) of the Higher Education Act of 1965, as
amended (HEA) requires all lenders participating in the Federal
Family Education Loan (FFEL) Program to have an annual
compliance audit. See 34 C.F.R. §682.305(c). In transmitting the
Audit Guide for these audits, the Department provided that the
deadline for completion and, if necessary, submission of the initial
audit completed in accordance with this requirement would be
September 30, 1995. See Dear Colleague Letter 95-L-176
(March 1995). However, the Department later extended the deadline
for completion of the audit to June 30, 1996, for any audit period in
which the lender originated and/or held FFEL Program loans
totalling $5 million or less. See Dear Colleague Letter 95-l-183
(September 14, 1995).
The act providing Fiscal Year 1996 appropriations for the
Department of Education (Pub. L. 104-134) includes a provision
prohibiting the Department from using funds made available under
that act to enforce the lender compliance audit requirement
against lenders with loan portfolios equal to or less than $5 million.
This provision only relates to Fiscal Year 1996, which ends
September 30, 1996. This language, therefore, effectively extends
the deadline for submission of the audit by lenders with loan
portfolios equal to or less than $5 million from July 1, 1996 to
October 1, 1996. This provision of the act does not eliminate the
requirement that lenders with this volume of FFEL Program loans
complete an annual compliance audit for all the fiscal years subject
to the audit requirement, rather it simply delays the date by which the
audits must be submitted.
The Department is aware that Congress is still considering a
permanent legislative change that would significantly modify or
eliminate the audit requirement for lenders with small loan
In light of this possible further legislative action by Congress and the
continued concerns raised by small volume lenders regarding the
cost and burden of the audit requirement, the Department has
decided to again postpone the deadline for completion of the audit
until June 30, 1997 for any audit period in which the lender
originated and/or held FFEL Program loans totalling $5 million or
The Department appreciates the concerns raised by small volume
lenders regarding the cost and burden of the audit requirement. The
Department is committed to working with Congress to ensure that
the audit requirement is implemented in a manner consistent with the
goals of the statute.
to the Secretary