ACSFA's PBO Recommendations to the Congress and the Secretary of Education

ADVISORY COMMITTEE ON STUDENT FINANCIAL ASSISTANCE
January 10, 2002
The Honorable Edward Kennedy United States Senate 315 Russell Senate Office Building Washington, DC 20510 Dear Senator Kennedy: The Advisory Committee on Student Financial Assistance (the Committee) was established by Congress in the Higher Education Amendments of 1986 and serves as an independent source of advice and counsel on student aid policy to Congress and the Secretary of Education. Pursuant to its original legislative charge, the Committee has continuously monitored the Title IV delivery system and made recommendations for improvement. Congress, in the Higher Education Amendments of 1998 (P.L. 105-244), created a performance-based organization within the Department of Education (ED)-Student Financial Assistance (SFA) Programs-to manage the operation and delivery of the Title IV student aid programs. The 1998 Amendments charged the Committee with monitoring and evaluating the performance of SFA, in particular its progress on systems integration and modernization, and reporting to the Congress and the Secretary of Education. In accordance with that charge, the purpose of this letter is to mark SFA's progress to date and recommend priorities for 2002. Recommended Priorities for SFA in 2002
In conducting our assessment, the Committee reviewed all available SFA plans and technical documents, met with SFA officials, ED consultants, and General Accounting Office and U.S. Customs Service officials. Based on the results of that assessment, the Committee recommends that ED's priorities for SFA in 2002 should include: ? Returning remaining policy functions to the Office of Postsecondary Education (OPE); ? Strengthening staff and reducing reliance on contractors; ? Integrating multiple, redundant legacy systems; ? Maximizing returns to its middleware investment; ? Reviewing modernization contracts for cost-savings; and ? Extending modernization benefits to the lowest income students. The following section presents the Committee's rationale for these recommended priorities. Returning Remaining Policy Functions to OPE
In order to improve services to students, institutions, and states, and reduce costs of Title IV delivery, Congress defined the PBO's (SFA's) responsibilities as operational. Policy development, rulemaking and administrative decisions that significantly affected students, institutions, and states were to remain the responsibility of the Secretary and, by delegation, Assistant Secretary for Postsecondary Education (OPE). The Department's General Counsel reiterated Congress's intent in this regard in a memo dated May 31, 2000. While some progress has been made in restoring all policymaking to OPE, as intended by Congress, those functions related to institutional eligibility and guarantor and lender oversight remain under SFA direction, and regulations remain within the SFA organization, although under the direction of the Assistant Secretary for Postsecondary Education. These remaining policy functions should be returned to OPE and, as HEA reauthorization approaches, ED should ensure that all important policy decisions related to need analysis, forms, and delivery are the direct responsibility of OPE and the Assistant Secretary. In fulfilling these responsibilities, the Assistant Secretary should maintain communications with SFA to ensure that policy decisions support operations and proactively inform and seek the advice of SFA and the higher education community about prospective changes. Strengthening Staff and Reducing Reliance on Contractors
SFA's ambitious and energetic approach to modernization requires a talented and highly skilled technical staff. The Committee commends Mr. Woods for assembling a core of experienced managers capable of dramatically improving student aid delivery-in particular, Jennifer Douglas, general manager for students; G. Kay Jacks, general manager for schools; John Reeves, general manager for financial partners; Stephen C. Hawald, chief information officer (CIO); and Jim Lynch, chief financial officer. Under their leadership, services to students and institutions have greatly improved and expectations are very high for both SFA and the modernization process. The Committee recommends that ED continue to build the capabilities of its own management, systems, and operations staff and reduce reliance on contractors to the extent possible to ensure that systems are managed efficiently and effectively. Integrating Multiple, Redundant Legacy Systems
The Department's own Inspector General (IG), GAO, and the Committee over the years have noted the need for reducing and integrating the Department's Title IV student aid systems. As a result, Congress identified systems integration as a priority for the PBO in the Higher Education Amendments of 1998. Yet, significant integration of ED's 13 disparate Title IV legacy systems has yet to occur. While ED has retired the Central Data System (CDS), a small Direct Loan routing system, the Common Origination and Disbursement (COD) project represents the first significant integration effort. Scheduled to become operational in spring 2002, the COD will integrate the origination and disbursement process of the Pell Grant Recipient and Financial Management and Direct Loan Origination systems into one system. The COD also will accept student level data for the Campus- Based programs using a Common Record that uses common data elements, edits and definitions. The Committee commends SFA for the COD effort; it is the right approach to data and systems integration and should be replicated with other Title IV systems. In order to ensure that integration remains a high priority, ED should incorporate specific integration goals and schedules into its strategic and tactical plans and quicken the overall pace of data and systems integration as a means of reducing cost and increasing efficiency. Maximizing Returns to the Middleware Investment
Modernization of products and services for students and institutions continues to be a top priority for SFA. In order to implement its modernization strategy, SFA will use the IBM MQ Series middleware product-commercial messaging software that has been particularly successful in the banking industry and several federal agencies. ED's considerable investment in middleware is justified because it can, if employed judiciously, enhance the operation of legacy systems, improving their overall performance in the short run, while allowing those systems to be retired and replaced with modern ones that are themselves fully integrated. Middleware is not an end in itself; the pay-off, in the long run, must be integration and associated reductions in the costs of operating and maintaining legacy systems-perhaps the major goal of the legislation creating the PBO. Further, in order to maximize the return to its middleware investment, ED staff should have its own in-depth knowledge and expertise in the use of messaging software and use contractors who have knowledge of ED's mission and business functions. This will ensure success and prevent unnecessary cost and burden for both ED and institutions. Reviewing Contracts for Cost-Savings
SFA has made sound progress in several areas and can continue to improve the performance and management of Title IV delivery in the future if costs are managed carefully. Revised figures estimate the cost of the COD through fiscal year 2002 to be at about $50 million. The modernization partner's costs were estimated at approximately $35 million in the first year, rising to $50 million each year thereafter. Future progress will require significant resources and success will depend on well-designed contracts. In order to ensure that modernization goals are met, SFA should carefully review the structure of its modernization contracts and ensure that each is well-defined with measurable products, firm schedules, and manageable costs. In addition, SFA should ensure that any contract extensions are competitive and converted into performance-based agreements. The magnitude of total costs associated with modernization further underscores the need for rapid reduction in the number of legacy systems through integration to reduce the operational and maintenance costs. Extending Modernization Benefits to the Lowest Income Students
While SFA has improved services to students and institutions using Web-based products, the FAFSA currently fails to deliver the full benefits of modernization to the lowest income applicants for Title IV aid. Despite statutory provisions that make such applicants automatically eligible (automatic zero EFC) for aid and permit others to complete a shortened form (the simple needs test or SNT), enacted nearly a decade ago, all applicants currently must complete the entire FAFSA-even on the Web. These facts stand in sharp contrast to clear congressional intent and stated SFA goals regarding modernization and customer service. The Committee urges that ED implement the automatic zero and the SNT through a "smart FASFA on the Web," which can also lower burden associated with data necessary for state aid delivered through the FAFSA. In addition, ED must continue to make the paper FAFSA available in a timely and efficient manner. First-generation college students and their families may be uncomfortable completing the web-based form and prefer to complete the paper form. Therefore, we urge ED to ensure that the paper FAFSA supply is sufficient to accommodate the needs of institutions and the lowest income students and their families and explore effective mechanisms for implementing the auto zero and SNT on the paper FAFSA. As always the Advisory Committee stands ready to assist in any way we can. If you have any questions, please contact our staff director, Dr. Brian K. Fitzgerald. Sincerely, /s/ Dr. Juliet V. Garcia Chariperson cc: The Honorable Roderick R. Paige (Identical original letter sent) The Honorable John A. Boehner (Identical original letter sent) The Honorable William Hansen Mr. Greg Woods Members of the Senate Health, Education, Labor and Pensions Committee Members of the House Committee on Education and the Workforce Advisory Committee members