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 of Education (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). 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 (Pub. L. 104-134) included 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 language
extended 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.
The Omnibus Consolidated Appropriations Act of 1997 (Public Law
104-208) providing Fiscal Year 1997 (October 1, 1996-September
30, 1997) appropriations for the Department contains this same
language. As was noted last year, this provision of the
appropriations bill 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 completed.
In light of possible further legislative action by Congress, the
Department as decided to again postpone the deadline for
completion and, if necessary, submission of the audit until
June 30, 1998 for any audit period in which the lender originated
and/or held FFEL Program loans totalling $5 million or less.
The Department appreciates the concerns raised by small volume
lenders regarding the cost and burden of the audit requirement. The
Department anticipates working with Congress to ensure that the
audit requirement is implemented in a manner consistent with the
goals of the statute.
Elizabeth M. Hicks
Deputy Assistant Secretary
for Student Financial Assistance