The government plans to tighten up its collection procedures on all federal student loans in the wake of ongoing revelations of mass defaults, but will still maintain a certain "sensitivity and compassion" not found in commercial lending, according to an official of the Department of Health, Education and Welfare.
HEW revealed yesterday that 316 of its own employees, including 37 who earn between $15,000 and $43,923 a year, have failed to pay back federal student loans amounting to more than $403.000.
At least one member of Congress called for harsher measures, including dismissal of employees who did not pay back the money within a "reasonable" time.
A "direct, pleasant, soft letter" will go out to the employees this week, asking them to begin payments on asking them to begin payments on what they owe, according to Leo Kornfeld, deputy commissioner for student financial assistance in the Office of Education.
"If they don't respond, we have re-course to the U.S. Attorney's Office," he said, adding that the government intends to collect.
HEW is refusing to name the defaulters under the provisions of the Privacy Act. But one is a GS-15 who earns between $33.798 and $43.923 a year, according to the agency's report. Three are GS-13s who earn between $24.308 and $31.598: and about 20 others earn between $17,000 and $26.500.
Most of the defaulters (87) are in the GS-4 ranks, earning $8,316 to $10,809.
The names of the HEW employees were discovered in a search procedure in which the agency matched student loan default files against HEW payroll records nationwide.
The loans had been in default for up to two years, Kornfield said. Some of the employees had gone to school at night while working for the government, be indicated.
The government's concern is "not just the large amounts of money involved," he said, but the fact that non-repayment means there is less money in the loan fund so that "it's tougher for the next class coming along."
The student loan cross-check operation is part of a government offensive against fraud, abuse or error in federal programs. HEW and its computer cross-checks recently uncovered more than 1,700 federal employees who are getting welfare payments from the District. Nearly 400 of them earn more than $10,000 a year. The government is also exploring other ways of improving government payment programs.
The government's guaranteed student loans "should be set up and billed like any other installment loan," Kornfield said. He said that the is too new in his post to know why such measures have not been introduced before. The Office of Education announced last month that defaulted federally injured student loan accounts will be handed over to a collection agency this winter.
On the other hand, Kornfeld said, the government will continue to take into consideration a person's ability to pay, whether he has a job or not, and other such factors. A loan recipient might be allowed to pay $30 a month instead of $100, for example, he said. "Unlike a commercial loan where an unemployed person (defaults) and someone comes in the night and takes his car away, we won't do that."
Banks in Washington halted the student loan program here last year when defaults reached 50 year per cent and the city was unable to pay bankers the nearly $2 million in loans it had guaranteed.
Rep. Helen Meyner (D-N.J.) is calling for a full investigation of the defaults among HEW employees and for their dismissal if they don't pay back the loans promptly.
In a letter to HEW Secretary Joseph A. Califano, which, according to an aide, she will urge other members of Congress to sign. Meyner calls the situation "unconscionable" and adds. "Accountability and ethical standards in government should extend from the director of OMB to a GS-4."