NASFAA President Justin Draeger to Testify Before Congress on Improper Payments

Head of Financial Aid Administrators’ Association Testifies on Improper Pell Grant and Direct Loan Payments, Offers Considerations for Reform

May 25, 2017 – Today at 10:00 am ET Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators (NASFAA), will testify in a joint hearing of the U.S. House of Representatives Subcommittee on Government Operations and the Subcommittee on Intergovernmental Affairs, on "Improper Payments in the Federal Government: Student Aid."

Each year, millions of dollars intended to help needy and deserving college students pay for school are diverted due to improper payments. The programs susceptible to significant improper payments, as identified by the Department of Education (ED), are the Pell Grant Program—a grant program targeted to the poorest of America’s students—and the Direct Loan Program, which is by far the largest source of federal student aid in the United States. In this morning’s hearing, Draeger will answer questions and share testimony about how institutions and federal agencies can partner to further decrease improper payments without also creating barriers for the very student student aid programs have been designed to help. In his prepared testimony, Draeger explains that improper payments, whether they result from intentional fraud or unintentional errors, threaten vital student aid programs that needy students rely upon to fund their education.

“Institutions are very motivated to stamp out improper payments and wholeheartedly accept increases in administrative requirements to that end, when they are proven effective,” states Draeger in his prepared testimony. “The problem today is that institutions are sometimes required to implement new rules to reduce improper payments without reliable data that shows these new rules will actually get at the cause of improper payments.”

NASFAA offers the following observations for Congress as lawmakers move to eliminate improper payments in the federal student financial aid system:

  1. Fraud prevention should not come at the cost of an increase in errors. NASFAA member institutions have reported that the loss of the Data Retrieval Tool (DRT) has resulted in more required verification of FAFSA data, a cumbersome and manual process for students and schools. The DRT is a critical key to mitigating error in self-reported FAFSA information, which is identified by ED as a root cause of improper payments, and should be restored and expanded.

  2. Take steps to ensure minimizing improper payments don’t create barriers to access. ED should rigorously consult with schools and other stakeholders to ensure that efforts to eliminate improper payments do not prevent or delay access to funds for the very students the programs were created to serve. We saw this unfortunate scenario play out last year when the FSA ID was implemented in an effort to crack down on fraud, but ended up creating roadblocks for legitimate access to federal student aid as well.

  3. Simplify the Free Application for Federal Student Aid (FAFSA). The underlying formula used to determine financial need for Title IV funds must be simplified before the form itself can be simplified, but it is clear that a simpler application form could reduce error as well as lower barriers. NASFAA has proposed a simplification scheme based on income tax filing characteristics.

  4. Commit more resources to investigating fraud. When institutions report instances of fraud discovered on their own campuses to ED’s Office of the Inspector General, they find the reports are often not pursued. We understand that limited resources necessitate the prioritizing of larger fraud rings over individual cases of fraud. However, institutions often dedicate significant resources documenting suspected fraud and those reports rarely get investigated.

“All parties involved in the administration of the federal student aid programs agree that the incidence of improper payments, whether arising from fraud or error, should be reduced to the greatest extent possible. Reliable data regarding the nature, types, and root causes of improper payments is essential to achieving that goal, and existing data is inadequate,” according to Draeger’s testimony.

A live webcast of the hearing will be made available. For additional questions about NASFAA’s testimony, or to schedule an interview, please email NASFAA Director of Communications Erin Powers at news@nasfaa.org.

About NASFAA  

The National Association of Student Financial Aid Administrators (NASFAA) is a nonprofit membership organization that represents nearly 20,000 financial aid professionals at more than 3,000 colleges, universities, and career schools across the country. NASFAA member institutions serve nine out of every ten undergraduates in the U.S. Based in Washington, DC, NASFAA is the only national association with a primary focus on student aid legislation, regulatory analysis, and training for financial aid administrators. 

Publication Date: 5/25/2017

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