Watchdog Report Finds FSA Lacks Processes to Guide Its Long-Term Strategic Plan

By Owen Daugherty, NASFAA Staff Reporter

The Office of Federal Student Aid (FSA) in its five-year strategic plan did not have documented processes in place to ensure that the goals, objectives, and performance indicators outlined in the plan were effective, according to a recent report from the Department of Education’s (ED) internal watchdog.

The Office of Inspector General (OIG) report released in August details the shortcomings in FSA’s five-year strategic plan, the master plan that charts the course for FSA’s future at a time when the office is tasked with significant tasks in the coming years.

The OIG report did, however, note that despite FSA not having documented processes in place to guide its plan, the strategic goals, objectives, and majority of performance indicators included in the final plan are effective, adding that all five strategic goals and 15 objectives are “specific, measurable, achievable, relevant, and timebound.”

Further, the OIG report found that the goals outlined align with the former education secretary's goals and guidance and ED’s own long-term strategic plan, which covered the fiscal years 2018 through 2022.

As a performance-based organization (PBO), FSA is required by law to, among other things, seek to improve customer satisfaction and provide high quality, cost-effective services, which much of the draft plan focuses on. Several noteworthy trends were outlined in the strategic plan, such as the increase in FSA’s loan portfolio and its impact on taxpayers, with outstanding student loan debt more than doubling from 2009 to 2019, meaning the portfolio has grown more over the last decade than it had during the prior 45 years.

The priorities outlined in the plan underscore the important role FSA plays in the student loan landscape as it has become one of the country’s largest banks, which FSA noted it was not designed to be. As such, the OIG report becomes all the more important in ensuring FSA has policies and procedures in place to help guide its long-term strategic goals. 

Due to FSA not starting the strategic planning activities until six months before the start of the 2020 performance period, the report asserts FSA did not give itself sufficient time to draft, submit through ED’s clearance process, revise, post for the mandatory 30-day public comment period, and finalize its strategic plan before the performance period began. 

The report stresses the importance of not only the documented processes for achieving the goals laid out in the strategic plan, but also the fact that the strategic plan be created, reviewed, approved, and made publicly available by the start of the performance period.

“Without documented processes for ensuring that a strategic plan will be in place at the start of the performance period, FSA officials and other employees might not fully understand what is expected of them or how they will be evaluated during the first year of the 5-year performance period,” the report stated.

Notably, the report also found that chief operating officers (COO) for FSA have not had performance agreements since 2015, a responsibility that falls on the education secretary. The lack of performance agreements for COOs limits the ability of the education secretary, the president, and key stakeholders to hold the COO and FSA in general accountable, the report notes.

The performance plan for new FSA COO Richard Cordray was recently posted and marks the first to be publicly posted for five years. Priorities outlined in Cordray’s performance agreement include increased oversight and enforcement for loan servicers, debt collectors, and institutions of higher education. Other priorities include the implementation of recently passed legislation such as the FUTURE Act and the FAFSA Simplification Act as well as smoothly transitioning millions of borrowers into repayment when the payment pause concludes at the end of January.

The OIG report recommends FSA’s COO work to design and document processes to guide FSA through future strategic planning, including incorporating internal stakeholder feedback processes and the required external stakeholder comment period.

To that end, NASFAA has previously suggested a variety of ways for FSA to increase transparency and oversight surrounding the development of its strategic goals and performance metrics.

Further, the OIG report recommends that the education secretary and the COO ensure they execute and make publicly available the COO’s annual performance agreement in a timely manner.

FSA was presented with the findings outlined in the OIG report before its publication and disagreed with the report’s assertion that it failed to have documented processes in place to ensure its strategic goals, objectives, and performance indicators were effective.

“While it disagreed with the finding, FSA said that it would establish a standard operating procedure document to help strengthen its management of the strategic planning process,” the report states. 


Publication Date: 9/1/2021

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