Like many federal programs, the Health Education Assistance Loan (HEAL) began with the best of intentions.
HEAL would be a lender of last resort to keep aspiring medical professionals in school who had exhausted private sources of loans. It was not charity. Interest on the loans began accruing immediately and the government expected to be repaid in full.
And from 1978 to 1998, it largely worked. During that time, HEAL loaned $4 billion to about 157,000 graduate students aspiring to become doctors, dentists, optometrists and chiropractors. Of those, 95 percent are current on their payments or have repaid the loans.
But 930 medical professionals remain in default, owing the government more than $116 million. Many of these deadbeats haven’t paid a dime on their loans in more than 18 years.
This is not a case in which a careless or inefficient government agency has allowed the non-payers to slip through the cracks. The Health Resources and Services Administration is spending $2.8 million to monitor a program that ended 14 years ago.
The HRSA tracks not only the 30,000 professionals repaying more than $730 million on time but also those deadbeats who refuse to pay or insist they are unable to. It has limited tools to collect the overdue debts: It can seek a court judgment; it can ban the professional from billing Medicare and Medicaid; it can convince the state to suspend the defaulter’s professional license; and it can put the defaulter on a shaming list.
But publicizing deadbeats is subject to the law of diminishing returns. Initially, the agency collected millions by making the names public, but today 30 percent of those on the default list were on the list in 1995. A 2010 report by the Department of Health and Human Services' inspector general reported that nearly half of the 1,100 deadbeat doctors had no apparent income, and of the 486 defaulters who made any money, only 98 made more than $50,000.
HEAL illustrates a truism about federal loan programs: Before handing out any money, establish an effective mechanism for getting it back.