A r c h i v e d I n f o r m a t i o n
FY 1999 Annual Plan - Volume 1. Objective Performance Plans and Data Quality - February 27, 1998
Objective 3.3. Postsecondary student aid delivery and program management is efficient, financially sound, and customer-responsive.
Context: The Department of Education works with 6,000 postsecondary institutions, 4,800 lenders, and 36 guaranty agencies to deliver nearly $51 billion in grant, loan, and work-study assistance to almost 9 million students who rely on federal student aid to pay for college. The Department is ultimately responsible for the collection of more than $150 billion in outstanding loans, and its data systems track 93 million student loans and 15 million Pell Grants.
Key strategies for FY 1999
The Department is requesting almost $568 million in mandatory and discretionary funds, or about 60 percent of its total administrative budget, to manage the federal postsecondary student aid programs. This amount includes, for example, $220 million to administer Direct Loans, $80 million for student aid delivery (including processing applications, determining student eligibility, and transferring data and funds between the Department and 6,000 participating postsecondary institutions), and $27 million for the National Student Loan Data System (which is used to prevent disbursements to students who have previously defaulted on their student loans). The Department also devotes about 367 full-time equivalent employees to ensuring the eligibility of postsecondary institutions participating in federal student aid programs.
The Administration's FY 1999 President's Budget identified the modernization of the student aid delivery system as one of its 22 highest priority management objectives. Following are the Department's key modernization strategies and initiatives.
- Electronic interfaces
- Work with the financial aid and banking community and establish industry-wide data standards for data exchanges needed in administering student financial aid by December, 1999.
- Reduce burden on individuals and simplify application processes by expanding data matches and exchanges.
- Expand the number of students who apply for financial aid electronically from 1.6 million to 3 million by October 2001.
- Continue to conduct surveys to determine student and institutional satisfaction with the student aid delivery system and to provide feedback on ways to improve the system. Specific surveys will focus on borrowers who applied for loan consolidation in order to determine the timeliness and efficiency of the process.
- Program oversight
- Test and implement an institutional risk assessment model in order to concentrate compliance and enforcement activities on poorly performing institutions while reducing burden for low-risk schools.
- Expand case management approach for high-risk schools encompassing review of recertification applications, compliance audits, financial statements, and program review findings.
- Continue identifying high-default institutions, an emphasis which has reduced the default rate by 50 percent and resulted in the removal of 875 schools from participation in federal grant and loan programs during recent years.
- Loan defaults
- Pursue legislative strategies to restructure guaranty agencies to make them more performance-based and accountable in order to save taxpayers' money, increase their efficiency, lower their operating costs, and improve their coordination with the Department.
- Continue to reduce default costs by improving the quality of data in the National Student Loan Data System (NSLDS), for which the Department is requesting $26.7 million in 1999, and through better institutional oversight.
- Analyze and test alternative default rate measures in order to more accurately reflect a variety of factors that impact default rates.
- Communicate more effectively to students the message that default is a financially costly process that often results in adverse credit ratings and subsequent inability to obtain loans and mortgages.
- Provide more information about the availability of alternative repayment plans linked to earnings.
- Student aid delivery systems
- Develop an integrated, accurate and efficient student aid delivery system. The Department's Project EASI (Easy Access for Students and Institutions), a multi-year effort, will consolidate 16 different current systems using 12 different contractors into a single integrated system. This will be a student-based information tracking and data transfer system that links ED, schools, and other student aid program participants. When fully implemented, EASI will allow students to apply for assistance, to determine their eligibility for aid, and to have their awards delivered to the school of their choice almost immediately; will improve student aid data quality by allowing for more effective verification procedures; and will reduce costs by eliminating redundant systems and errors associated with duplicative record keeping. As a first step toward implementing EASI, a complete system architecture will be developed by December, 1998.
- Emphasize improved contractor performance and contract administration to reduce processing error rates and system delays.
In addition to these specific strategies, the Department will work towards converting the Office of Student Financial Assistance Programs to a performance-based organization and aligning policy initiatives to support Student Financial Aid Programs modernization efforts.
- Data matches. Continue to work with Selective Service and the Immigration and Naturalization Service to perform data matches to efficiently and effectively determine eligibility for student aid.
- Income information. Work with the Internal Revenue Service to obtain adjusted gross income and other tax information on borrowers regarding the repayment of their student loans including tax refund offsets for defaulted borrowers.
- Tracking defaulters. Work with other federal agencies, such as the Social Security Administration, U.S. Postal Service, and the Departments of Defense, Justice, and Housing and Urban Development to better track defaulted borrowers and return them to repayment.
- Oversight. The Student Financial Aid Modernization Board will advise the Secretary on a wide range of student financial aid management issues and make significant steps toward further improving student aid management practices.
Programs supporting this objective
See programs listed for Objective 3.2.
Selected performance indicators and charts
The performance indicators included in the Strategic Plan for objective 3.3 consist of a number of measures designed to assess the Department's progress in improving the delivery of student aid including default rates, customer satisfaction levels, audit results, institutional compliance rates, and contract performance.
The cohort default rates--the percentage of borrowers leaving school who default within two years--for the Federal Family Education Loan and Direct Loan programs, will decline to a level of 10% or less by 2002. (Goal 3, indicator 16)
Indicator background and context. Although default rates have been declining sharply from very high levels over the past several years, future reductions are likely to be steady but smaller because of the large number of high default schools that have already been eliminated from the program.
Progress in reducing the default rate should continue, however, as institutional oversight initiatives are implemented and as borrowers become better informed about the high cost of default and about alternative loan repayment plans.
Data source. Office of Postsecondary Education (OPE) data, annual.
The annual number of students and families submitting or renewing their student aid applications electronically will continue to increase each year, almost doubling to 3 million by October, 2001. (Goal 3, indicator 10)
Indicator background and context. Electronic filing of student aid applications increases the accuracy and timeliness of data received by the Department and results in quicker student aid approvals for the student. This will further the goals of the EASI project and will increase customer satisfaction.
Data source. Office of Postsecondary Education (OPE) program data, annual.
Verification/validation of performance measures: Independent customer satisfaction surveys are conducted by the Planning and Evaluation Service. A major expected outcome of modernizing the student aid delivery system will be improvements in data timeliness and accuracy. Data matches with the Internal Revenue Service and other agencies help ensure data accuracy as will periodic validation evaluations of the National Student Loan Data System.