House Education Leaders Send “No Confidence” Letter to ED on Loan Servicing, Cite NASFAA Survey

By Stephen Payne, Policy & Federal Relations Staff

On Monday, House Committee on Education and the Workforce Chairman John Kline (R-MN) and Subcommittee on Higher Education and Workforce Training Chairwoman Virginia Foxx (R-NC) sent a letter to Secretary of Education John B. King, Jr. expressing general concern over the Department of Education’s (ED) status as a performance-based organization (PBO) and specific skepticism over ED's work towards a “single servicing solution” for federal student loans. The committee leaders outlined a series of concerns about ED’s Office of Federal Student Aid (FSA) before concluding “we have no confidence in the Department’s ability to complete this project without delay, service interruptions, and harm to borrowers.”

The committee leaders identified multiple FSA concerns in the letter, including several critical Government Accountability Office (GAO) reports, ED Office of Inspector General findings, and pieces of testimony from recent hearings. The letter specifically highlights testimony from a November 18, 2015 hearing in which NASFAA President Justin Draeger criticized FSA’s lack of partnership with institutions and lack of accountability to stakeholders.

The letter also references a NASFAA survey of members conducted in April at the request of committee leaders. The survey results, sent to Congress in May, illustrate some of the operational challenges schools face in their interactions with FSA, including processing time of PPA renewals, program reviews, audits, and requested guidance.

“The survey results reaffirm long-standing concerns and demonstrate how FSA has strained its working partnership with institutions and undermined the ability of institutions to best serve students,” said Kline and Foxx in the letter. “Equally alarming are survey results that indicate the significant impact of bureaucratic delays have on the internal operations of institutions and their ability to serve students,” they added.

Ultimately, the committee leaders expressed their reservations that FSA could effectively execute future servicing reforms, specifically the move to a single servicing solution, given “FSA’s failures in contract procurement, management, and oversight, as well as its demonstrated inability to meet statutory requirements as a performance-based organization and maintain proper IT security.”

The letter from the House education committee comes about three weeks after ED sent a 56-page memorandum to FSA on July 20 outlining ED priorities for FSA action on future servicing reforms, including the development of a single loan portal. The letter requests that by August 22 ED arrange for a formal briefing to committee staff.


Publication Date: 8/9/2016

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