Thousands of federal student aid recipients have submitted complaints and allegations of suspicious activity in the first five months of the new Federal Student Aid (FSA) Feedback System, according to a preliminary report on the feedback system, which tracked data submitted between April 11 and Sept. 30, 2016.
According to the report, which was released on Tuesday as a part of quarterly reports submitted to the FSA Data Center, more than three-quarters of the 4,811 cases submitted were complaints about a variety of issues related to student aid, including applying for and receiving aid, federal loan servicing, and individual institutions' administration of federal aid programs. Another 21 percent of the cases were allegations of suspicious activity, which can include information about an entity or a person the recipient believes may have violated federal laws regarding federal student aid. Finally, just 3 percent (or 159 cases) submitted during this time frame were positive feedback.
The Federal Student Aid Feedback System was publicly launched in July 2016, but certain stakeholders were able to use the system prior to its formal launch. FSA said the early testing helped the office refine the system before its public launch.
"In the short time since the system's launch, we already have used information learned from customers through the system to make improvements to our communications about income-driven repayment plans and for schools, the criteria for determining a student's dependency status," wrote James Runcie, chief operating officer of FSA, in a letter included in the report. "Because of this system, we are able to communicate with greater consistency to customers, schools, and the service providers who work with us to administer federal student aid. We look forward to using this preliminary report to better refine our analysis of system data ahead of publishing the required report in 2017."
Of the 3,673 complaints submitted, nearly half were submitted as complaints against schools. Some of these complaints included allegations that institutions were not disbursing aid in a timely manner, complaints about not being able to transfer academic credits, and concerns with institutions that close or lose Title IV eligibility. Of the remaining complaints, 21 percent were related to federal aid repayment, 17 were related to the federal aid receipt process, and 13 percent were related to application or eligibility. Another 2 percent, 1 percent, and 0 percent (17 complaints) were related to credit reporting, collection agencies, and military and veteran benefits, respectively.
By far the most frequent complaint subcategory had to do with student eligibility (856 complaints). Other top complaint subcategories included delays in receiving aid, school quality of education, completing the FAFSA, school closure, loan discharge/cancellation/forgiveness, credit balances and refunds, the FSA ID, the loan disbursement process, and FAFSA verification.
And of the school-related complaints, the majority (44 percent) were about proprietary schools. Another 40 percent were about public schools, and 15 percent were about private nonprofit schools. Just 1 percent involved foreign schools.
Overall, more than half (58 percent) of the complaints logged were closed as of Sept. 30, 2016. More than half (56 percent) of the closed cases were resolved.
Although a significant number of aid recipients filed cases alleging suspicious activity or fraud, FSA said in the report that some activity was submitted as fraud when no fraud existed, due to the broad characterization.
"To support its fiduciary responsibility to American taxpayers, FSA designed the feedback system to solicit reports from student aid recipients about practices or activities they suspect or perceive to be fraud, waste, or abuse," the report said. "FSA deliberately provides great latitude in the description in order to encourage customers to submit even potential cases of fraud, waste, and abuse."
Of the 979 allegations of suspicious activity, about half were allegations of fraud on the part of the school. Sixteen percent were allegations of student fraud, 12 percent were allegations of identity theft, and 10 percent were allegations of third party debt relief fraud. Another 12 percent of the submissions were categorized as "other."
After determining that the majority of the cases of alleged school-related fraud were actually school-related complaints, based on the content submitted by the aid recipients, FSA found that the actual number of allegations of fraud dropped to 489. Then, just 8 percent of the allegations were about school-related fraud. Nearly one-third (31 percent) were allegations of student fraud. One-quarter were allegations of identity theft, and 23 percent were allegations of third party debt relief fraud.
Moving forward, FSA said it plans to "expand the system's auto-routing functionality to more efficiently route cases to servicers, private collection agencies, and within FSA and ED," which it said will improve efficiency for resolving complaints.
FSA also plans to add a borrower defense hotline, and give students and parents the opportunity to provide additional feedback about the customer service they received through the FSA Feedback System. FSA will publish its annual report on the feedback system no later than Oct. 1, 2017.
Publication Date: 12/22/2016