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FSA Leadership Turnover Underscores Politics of Student Loans and Renews Questions About Office’s Role

Related Topics in the Ref Desk: Discharge, cancellation, forgiveness; Public Service Loan Forgiveness; Third Party Servicers

By Owen Daugherty, NASFAA Staff Reporter

The role of chief operating officer (COO) in charge of the Office of Federal Student (FSA) is designed to be above the fray of political partisanship and avoid the revolving door of leadership when administrations change hands.

It was created that way intentionally, with Congress setting up FSA as a performance-based organization (PBO), ideally to be independent from political pressures, allowing it to focus on day-to-day business operations with a COO on a three or five year contract who remains even when the occupant of the White House changes.

In recent years though, that has not been the case. With the resignation of Mark Brown earlier this year, a retired major general in the U.S. Air Force who was appointed by former Education Secretary Betsy DeVos in 2019 for a three-year term, there have been four COOs in the past five years — and none have finished their terms. 

Shortly after President Joe Biden secured the White House, progressive members of Congress, led by Sen. Elizabeth Warren (D-Mass.), started clamoring for the removal of Brown — a DeVos “holdover” — so Biden and his new leadership at the Department of Education (ED) could appoint a leader of their own to the office that oversees the federal student loan portfolio, as well as other federal student aid programs.

A coalition of mostly progressive groups in a letter to newly confirmed Education Secretary Miguel Cardona and White House Chief of Staff Ron Klain wrote that new leadership in the White House and ED “means there is an ample opportunity to transform and reinvigorate” FSA.

“To do so, DeVos appointees at FSA must be replaced by strong advocates of student borrowers’ interests,” the letter states. 

The request stood in contrast to the intended structure of the COO position. For example, former COO James Runcie, who was appointed under the Obama administration, served for nearly six months in the Trump administration before resigning. The office’s first COO, Greg Woods, was appointed under the Clinton administration and served into the Bush administration before retiring.

And while some of the reasoning behind the pressure was due to Brown’s ties to DeVos, a deeply unpopular figure of former President Donald Trump’s administration who was narrowly confirmed following a contentious confirmation process, it doesn’t tell the whole story.

The political pressure early in Biden and Cardona’s tenure and the ensuing letter underscore the increased attention on FSA as it is tasked with unprecedented duties, first and foremost transitioning tens of millions of borrowers back into repayment when the federal forbearance period ends in the fall and the polarizing debate surrounding the country’s more than $1.6 trillion in federal student loan debt, a figure that has swelled in the past decade. 

As a PBO separate from ED, FSA has a unique role in the government space and is intended to function with quasi-private flexibilities to focus on operations while ensuring borrowers have a smooth loan repayment experience, and government funds are being spent efficiently. It also means the head of FSA is on a contract and is not a political appointee. However, none of the previous four COOs have finished their terms, raising questions of whether this once apolitical position has become de facto another political appointment. 

While the COO was originally thought of as an operational and systems-focused position, it has more recently become more political in nature, with a focus on the financial services aspect of the job, according to Dan Madzelan, the assistant vice president for government relations at the American Council on Education (ACE) and the former acting assistant secretary for postsecondary education at ED.

“It's not an overtly political opposition, but party politics does come into play at some point,” he said. 

Madzelan noted that when FSA was established as a PBO by Congress in 1998, the legislation specifically mentioned the operational type of responsibilities, such as FAFSA processing, Pell Grant payment processing, and audits — “these kinds of activities that lend themselves well to objective measurement.”

“[Congressional] statute said what it says now: Student financial aid policy does not reside with the COO, but instead resides with the secretary,” he said.

In Madzelan’s view, FSA, and more specifically the COO, was not intended to wade into the fraught political debates surrounding polarizing growing student loan debt and potential forgiveness. 

While that may have been the original intent, Yan Cao, a fellow at The Century Foundation who focuses on higher education policy, argues that FSA has a significant role in higher education policy — and by proxy finance policy, debt collection policy, and ultimately public policy that shapes “the economic reality of millions of students and their families.”

“I don't want to discount the role of the policy team and other other units within [ED], but I do think that appointing the COO and reviewing the systems that are functioning within FSA are among the most important things that the department can do to ensure high quality outcomes in the higher education ecosystem,” she said.

Cao added that personnel decisions — such as a political appointee selecting a COO — is by extension a policy decision. Further, implementation of policy changes is inherently political and the blurry divide between ED and FSA comes at the detriment of borrowers. 

“It doesn't quite make sense to me to have one unit at ED designing policy and then another unit to be implementing it,” she said. 

Madzelan said FSA is at its best when there is synergy between it and ED.

“The line that separates student aid policy from not student aid policy is neither bright, straight, nor stationary,” he said. The quality of service “really depends on the working relationship between those two offices.”

Beth Akers, a resident scholar at the American Enterprise Institute (AEI), agreed that for FSA to be at its best, it should be effectively implementing policy. 

“There's so much heavy lifting to do to make the federal student aid system work properly and that's more than enough for that office to be focusing on,” she said.

While the new head of FSA may not wade into the policy discussions, whoever lands in the role will have the responsibility of charting the course of FSA for several years and improving upon existing programs, such as the much maligned Public Service Loan Forgiveness (PSLF) program. 

In announcing Brown’s departure, Cardona outlined a set of priorities for FSA, saying it would “renew its focus on streamlining access to and management of federal financial aid, easing the burden of student debt and carefully stewarding taxpayer dollars.”

To that end, FSA in its most recent long-term strategic plan alluded to borrower-focused elements such as improving its customer service and optimizing its digital offerings.

In the plan, FSA acknowledged that its role in the student loan landscape has changed dramatically over the years, shifting from “a lender of last-resort and a guarantor of student loans to private lenders” to one of the country’s largest banks, which FSA noted it was not designed to be.

Signaling some lawmakers’ concern over a perceived politicization of the office, Warren asked Cardona during his confirmation hearing if he would commit to reform the office so it “works for student borrowers instead of for big corporations.” Cardona answered in the affirmative.

“FSA’s reach and impact is just too vast for it to go unnoticed by powerful lawmakers today,” said NASFAA President Justin Draeger, who pointed to the $1.6 trillion in outstanding student loan balances. “As this agency and the problems facing students have evolved, so has the need for a COO that understands the political nuances of the job and programs they have been tasked with administering. That doesn’t necessarily mean the COO should be a political appointee, but it does mean looking at COOs that bring different skills and experience to the table.”  

ED did not provide comment regarding the search for FSA's next COO and what the office hopes to accomplish under new leadership.

Many — including DeVos — have publicly mused that FSA would better serve its purpose as an entirely separate, stand-alone government entity, with an apolitical board of governors.

Such a concept would in theory resolve the political tension previous COOs had to navigate in recent years.

In a report published by the Center for American Progress (CAP) detailing steps to ensure accountability and effectiveness at FSA, authors Ben Miller, at the time the vice president of postsecondary education at CAP, and Jason Delisle, a visiting fellow at AEI who focuses on higher education financing, wrote that the PBO model is worth protecting, but is in desperate need of more oversight from lawmakers.

“Resolving the tensions between independence and political accountability requires that policymakers hold the PBO and its COO to the goals that Congress has set in law — not overhaul or abandon the PBO structure entirely,” the report noted. 

NASFAA in a white paper published in 2017 outlined recommendations to strengthen oversight and transparency at FSA, concluding that organizational and structural changes are needed in order to help the office meet its congressionally-mandated objectives.

Notably, FSA is the only of the three federal government PBOs that does not have a confirmation process for the COO, instead leaving it to the discretion of the education secretary at the time, who is selected by the sitting president but subject to Senate approval.

At the United States Patent and Trademark Office, the COO is confirmed by the Senate and has a board of commissioners to oversee specific functions. At the Federal Aviation Administration’s Air Traffic Organization, an oversight board must approve the selection of the COO.

As such, NASFAA recommended an independent, seven-person oversight board at FSA be put in place, which would approve the secretary’s COO selection. Another option presented would  call on the president and the secretary of education to appoint a COO who would be confirmed by the Senate.

The conclusion of the paper asks the overarching question: Is FSA tasked with doing too much for one federal agency?

And to think that question was posed in 2017, before FSA was tasked with negotiating new contracts with loan servicing companies to collect student loan payments, overhauling the FAFSA, and perhaps most importantly, navigating the transition back into repayment for roughly 40 million Americans.

As for who comes next to fill Brown’s seat and take on those tasks, along with implementing policy priorities from the new administration, experts are hoping for a shift back to the ways the office should operate, not the beginning of a new level of politicization of the role.

“I'm not willing to describe that reset as a political choice just yet; hopefully what we had was just one aberrant administration and there are still two parties that are united in their desire for evidence-based administration of the federal student aid portfolio,” Cao said.

Akers added that the head of FSA shouldn’t be someone with political ambitions or beholden to political interests.

“The sort of person we want there is not necessarily somebody who is going to be jumping on board and trying to push through an incremental policy change that either suits their interests or suits the interests of someone else working in another part of the administration,” she said.

 

Publication Date: 4/13/2021


David S | 4/14/2021 11:9:17 AM

It would be great if this position and many others were not, as Beth Akers says, "beholden to political interests." But it's Washington. Avoiding political interests is like expecting someone here in Jersey to avoid Bruce Springsteen. It's in the DNA.

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