Summary: Office of Student Financial Assistance Programs (OSFAP) Update
November 30, 1998
As you may know, these are exciting times for the Office of Student Financial Assistance Programs (OSFAP). OSFAP has been removed from the Office of Postsecondary Education and established as a separate principal office, reporting directly to the Secretary. We are mid-stream in our efforts to prepare for modernization and integration of the student aid systems. And the Higher Education Amendments of 1998 -- signed by President Clinton on October 7 -- granted us the authority to transform OSFAP into a performance-based organization with greater flexibility, incentives for high performance, and accountability for results.
Today, I am leaving OSFAP to be Chief of Staff to Acting Deputy Secretary Marshall Smith. As I end my time as Acting Deputy Assistant Secretary and Acting Chief Operating Officer, I wanted to thank you all for your commitment to students throughout America. In partnership with you, we have made considerable progress.
Before I depart, I wanted to share with you my view of the current state of the federal student aid programs. In this letter, I describe our recent progress in laying the groundwork for student aid modernization, implementing the performance-based organization, and addressing the Year 2000 problem.
Laying the Groundwork for Modernization
The future of the federal student aid programs is a five-star student aid delivery system that is cost-effective, timely, accurate, and focused on the needs of our customers. At the core of this vision is a student-centered database supporting the single student account structure.
Students and families will be able to apply for federal aid quickly; receive federal funds easily and promptly; and access information as needed via the Internet. Enhanced oversight will ensure the right people are receiving the right amount of funds at the right time. Obsolete computer systems and programs will be replaced with effective and efficient integrated systems, further increasing the accurate and timely delivery of funds at a lower cost. Prototype and pilot projects will be used to continually test new and innovative ideas.
Within this vision, the question is how to get there. A critical strategy for achieving these goals is the use of new and exciting technologies. Students, parents, schools, and lending institutions will all benefit from a seamless financial aid system, with a single point of contact for applying for, receiving, and repaying federal aid.
Over the past year, OSFAP has sought to build the foundation for a modernized student aid delivery system. While we still have a long road to travel, we have made significant progress.
First, we are integrating programs and better leveraging private sector expertise by contracting by function, rather than by program. We have already consolidated operations for the National Student Loan Data System (NSLDS) and the Postsecondary Education Participants System (PEPS) into one data center. The NSLDS relocation alone is expected to improve service while saving taxpayers more than $30 million over five years. We will relocate more systems over the next year without disrupting service.
Second, in my time in OSFAP, I have prioritized the development of the master promissory note to relieve students from the need to submit new paperwork every time they borrow. In consultation with the financial aid community, my staff has developed a master promissory note that will be first used next academic year.
Third, because any re-engineered student aid system will depend upon timely and reliable financial data, we have insisted upon a high quality of data, particularly in the NSLDS. By providing guaranty agencies with incentives to provide accurate data, we are more confident in NSLDS data than ever before. We are now focusing on improving the quality of data from Perkins schools, the Direct Loan program, and the Departments Debt Collection Services. We have already begun working with large Perkins loan servicers to improve the quality of their data transmissions through a cooperative, customer-service approach.
Fourth, we are helping establish and have begun to implement mutually agreed-upon, industry-wide standards for data exchanges for administering student financial aid. Data exchange standards will make data requirements uniform, improve data integrity, reduce costly errors, and facilitate student aid data transmissions. I was gratified to hear the Departments efforts in this area publicly acknowledged at a recent meeting of the Project EASI steering committee. Project EASI -- for Easy Access for Students and Institutions -- is a collaborative effort with the postsecondary community to use technology to integrate the Departments aid programs with schools, lenders and other partners to provide comprehensive assistance to students.
Fifth, we have established DUNS numbers as the single electronic identifier for each school and other institutions involved in student aid, to be used in each federal student aid program. The single identifier will reduce schools administrative burdens and allow the Department to integrate and improve its data.
Sixth, we are exploring a promising avenue for student aid modernization: delivering aid through individualized student debit cards. Students would be able to control disbursements from their accounts and access their funds through ATMs. The Department will launch a pilot project in card technology next academic year. Delivering student aid through card technology offers two great advantages. First, it could provide a method of verifying identity electronically. Today, many electronic transactions -- including FAFSA on the Web -- cannot be finalized without a paper signature. An "electronic signature" capability would greatly facilitate electronic interactions with students, opening the door to a wide variety of modernization initiatives. Second, card technology could also create a single student account with a single point of contact for information on all student aid received, simplifying students lives and increasing their control over aid funds.
Finally, we are taking advantage of the Internets capabilities for sharing information quickly, easily, and inexpensively.
We expanded the FAFSA on the Web program in March to allow students to choose their level of data encryption, protecting the security of financial information while expanding the number of students who can access this service. FAFSA on the Web is faster, easier, and cheaper for students to file and the Department to process. It is helping us meet our goal of three million electronic applications by October 2000.
The Department will launch a pilot program in January 1999 integrating FAFSA on the Web with the California State University systems web-based application form. A Project EASI initiative, the program will allow students to apply for financial aid at the same time they apply for admission over the Internet.
We are developing the capability to allow students to access their account information in the NSLDS over the Internet, including their Federal Family Education Loan (FFEL) and Direct Loan balances.
Through the Departments Direct Loan web site, Direct Loan borrowers can read and download all direct loan publications, guides, and forms; use interactive calculators to generate budgeting, repayment, and consolidation payment estimates; and access up-to-date account information. Direct Loan schools can access direct loan bulletins and newsletters, training calendars, and other direct loan publications.
We established the Information for Financial Aid Professionals (IFAP) web site, a comprehensive and up-to-date depository of student aid program information such as regulations, Federal Register notices, publications, and announcements.
I am pleased that the financial aid available through the Departments web site has been selected as one of the most useful sites on the World Wide Web by Links2Go.
The Performance-Based Organization
Legislation reauthorizating the Higher Education Act (HEA) created the first-ever Performance-Based Organization (PBO) in the federal government. I am hopeful that the PBO will improve efficiency and customer service through greater managerial flexibility and greater accountability for results.
The creation of a PBO to administer federal student aid is a historic milestone in the Departments efforts to improve its services to millions of students, their families, and the colleges and universities they attend. We are confident that this new structure and new flexibility will help us continue to modernize and integrate the student aid systems, keep pace with the rapid rate of technological change in the financial services industry, improve customer service, and reduce costs.
As provided for by the HEA, the PBO will be led by a chief operating officer (COO) with a strong executive background in information technology or financial services who will report directly to the Secretary. One of the COOs first tasks will be to build upon the progress that has been made to modernize and integrate OSFAPs systems. The PBO will have greater flexibility in contracting procedures, with an emphasis on performance-based contracting. It will also have greater managerial and personnel flexibility in applying new approaches to its work, particularly with regard to recruitment. Finally, the COO and the employees of the PBO will have specific and measurable performance goals that include targets for improved performance and accountability for defined results.
I am aware of some concern regarding whether the COO will play too large a role in shaping student aid policy. Consistent with the HEA, the COO will advise the Secretary regarding the operational component of proposed policy changes. However, the Secretary will retain control over policy, including setting regulatory policy, and will remain responsible for standards and decisions regarding the admission and removal of schools from Title IV eligibility. The PBO will implement regulatory and operational policy changes and communicate that information to schools and other business partners.
We are enthusiastic about the PBOs potential to help us improve the administration of the student aid programs. We have already begun to take immediate advantage of this opportunity. We have removed OSFAP from the Office of Postsecondary Education and established it as its own principal office, reporting directly to the Secretary. This week, we plan to name a permanent COO, who has been selected based upon the criteria named in the legislation. Finally, in the spirit of the new law, we are developing basic policies and agreements to govern the relationship between the PBO and the rest of the Department.
The PBO will be a results-oriented organization, accountable for specific performance objectives. The establishment of the PBO will enable us to provide the best possible service to students and schools. The PBO also complements and strengthens modernization initiatives already underway within OSFAP, including Project EASI.
Year 2000 Compliance
The specter of potential computer problems related to the Year 2000 is increasingly on the minds of both government officials and leaders of private industry. As with many other areas of our national life, the Title IV students financial aid delivery system is substantially dependent on computer systems and thus faces serious Year 2000 challenges.
The Department is doing everything within its power to ensure that the delivery of federal student aid and related public services will not be disrupted by Year 2000 computer problems. I am pleased to say that we have made rapid and significant progress on all of our mission critical data systems.
Six of the 11 "mission critical" data systems directly related to student financial aid have been renovated, validated, and implemented. Four more systems will be renovated, validated, and implemented by the end of January 1999. The last system, the FFEL Program system, will be completed by the end of March 1999.
We recognize the importance of testing our renovated systems with our partners. In early 1999, the Department will conduct "end-to-end" systems testing of the mission critical business processes supported by the student aid systems. In addition, between April and September 1999, the Department will make available testing opportunities to postsecondary institutions and other external partners as they complete work on their own Year 2000 system renovations.
We believe our Year 2000 renovation efforts will be successful and on-time. However, we recognize the need for contingency plans and procedures in the unlikely event that a data system failure threatens the delivery of student aid funds or services. As a result, the Department has also launched extensive Year 2000 contingency planning efforts and will have an alternative delivery plan for every critical and noncritical system by March 1999.
Year 2000 contingency planning has received the highest priority. We have appointed a career Senior Executive with substantial student aid experience to be the Year 2000 Student Aid Contingency Planning Coordinator and have established seven Department-wide student aid contingency planning teams headed by senior managers of the student aid programs and including experienced former financial aid administrators. The teams will assess our student aid business processes, develop alternative procedures to be used in the event of significant data systems failures, develop trigger scenarios, and test and rehearse the alternative procedures.
The contingency planning teams will be supported by KPMG-Peat Marwick, a management consulting contractor that has extensive student aid experience and is working with colleges and other government agencies on the Year 2000 problem. The work of our contingency planning teams will closely follow the General Accounting Offices August 1998 guidance on "Year 2000 Business Continuity Planning."
Over the past year, I have worked with many talented and dedicated financial aid professionals, outside of the Department as well as within it. I have appreciated that opportunity. Our shared goal -- helping to broaden access to postsecondary education -- is a worthy one. To state the obvious, its achievement is possible because of you and our thousands of colleagues nationwide. Thank you for your hard work.
Diane E. Rogers
Acting Chief Operating Officer
Office of Student Financial Assistance Programs