• Contents

  Introduction
• FSA as a PBO: Distinctions from Most Agencies
• FSA Leadership
• FSA Personnel Flexibilities
• FSA Procurement Flexibilities
• FSA Independence
• Establishment of a PBO to Administer Federal Student Aid
• Legislation to Establish a PBO to Administer Federal Student Aid
• 2008 Higher Education Act PBO Amendments
• Subsequent Amendments
Changes to Title IV Aid Affecting FSA's Operations
• FSA Functions and Structure
• Statutorily Specified FSA Functions
• FSA Awarding, Disbursing, and Servicing Aid
• Contracting
• FSA Contracting
FSA Information and Assistance to Third-Party Stakeholders
• FSA Oversight
• Selected FSA Statistics
• Funding for Federal Student Aid Administration
• FTE Employment for Federal Student Aid Administration
• Trends Relevant to Federal Student Aid Administration
• FSA Structure
• Statutorily Mandated Roles
• FSA's Relationship with Other Actors
• FSA's Performance underUnder Five-Year Performance Plan
• Assessments of FSA as a PBO
• Current Issues
• Oversight Functions
• IHE Oversight
• Loan Servicer Oversight
• Discussion of Issues in Oversight and the PBO Structure
• Transparency
• Information for Policymakers and Stakeholders
• Information for Members of the Public
• Discussion of Issues in Transparency and the PBO Structure
• Stakeholder Accountability

Summary

The Office of Federal Student Aid (FSA), within the U.S. Department of Education (ED), is established as a performance-based organization (PBO) pursuant to Section 141 of the Higher Education Act (HEA). FSA is a discrete management unit "responsible for managing the administrative and oversight functions supporting" the HEA Title IV federal student aid programs, including the Pell Grant and the Direct Loan programs. As such, it is the largest provider of postsecondary student financial aid in the nation. In FY2019FY2024, FSA oversaw the provision of approximately $130.4120.8 billion in Title IV aid to approximately 11.09.9 million students attending approximately 6,0005,400 participating institutions of higher education (IHEs). In addition, in FY2019FY2024, FSA managed a student loan portfolio encompassing approximately 45 million borrowers with outstanding federal student loans totaling about $1.56 trillion.

Among other administrative and oversight functions, FSA

• develops and maintains the Free Application for Federal Student Aid (FAFSA);
• obtains funds from the Department of the Treasury to make aid available to students;
• contracts with numerous third parties to provide goods and services related to Title IV administration, such as student loan servicing;
• provides oversight of the numerous third parties (e.g., contracted student loan servicers and IHEs) that play a role in administering the Title IV programs; and
• provides information to third-party stakeholders—such as students, the public, and Congress—regarding Title IV program operations and performance.

Responsibility for developing policy and promulgating policy and regulations relating to the Title IV programs, however, remains with the Secretary of Education.

Congress established FSA's PBO structure under the Higher Education Amendments of 1998 (P.L. 105-244) in response to a belief in Congress and ED that the Title IV student aid programs were "severe[ly]" mismanaged and that ED was in need of restructuring to improve federal student aid delivery. In general, PBOs are intended to be business-like, results-driven organizations that have clear objectives and measureablemeasurable goals designed to improve an agency's performance and transparency. PBO leaders are to be held professionally accountable for meeting organization goals, with continued tenure and a portion of compensation linked to these measures of success. In exchange, PBOs and their leaders are granted greater discretion to deviate from certain government-wide management processes and to operate more like private-sector companies.

Specific to FSA's structure as a PBO, the HEA vests management of FSA in a chief operating officer (COO) who is appointed based on demonstrated ability and without regard to political affiliation. Each year, the COO and the Secretary must agree on and publicly make available a five-year performance plan for FSA that establishes measurable goals and objectives addressing a variety of statutory specifications, such as FSA's responsibilities in improving customer service to stakeholders and reducing costs of administering the Title IV student aid programs. The COO is required to annually submit to Congress a report on FSA's performance. In addition, each year the COO and the Secretary, and the COO and FSA senior managers, enter into performance agreements that set forth measurable organizational and individual goals. The COO and senior managers are eligible to receive bonus compensation based on an evaluation of work performed relative to the annual goals specified in their annual performance agreements. The HEA provides FSA with some flexibilities with regard to traditionalgeneral federal rules around hiring, compensation, and procurement.

Since FSA's creation as a PBO, it has experienced some notable successes, including the Title IV aid programs' removal from the Government Accountability Office's High -Risk List in 2005, the transition to 100% direct lending under the Direct Loan program, and implementation of the Internal Revenue Service (IRS) Data Retrieval Tool.

Since FSA's establishment, the programs it administers have grown substantially larger, and the federal student aid programs and benefits have become substantially more complex to administer (e.g., with the addition of numerous loan forgiveness and income-driven repayment plans). In recent years, particularly over the last decade, several issues have arisen related to FSA's Title IV program administration. In broad terms, they pertain to oversight of entities participating in and helping with administration of Title IV programs, transparency, and accountability to certain stakeholders and consumers (i.e., aid recipients).

Oversight issues relate to FSA's oversight of IHEs participating in the Title IV loanHEA aid programs. Criticisms have focused on FSA's assessment of the well-being of IHEs and ability to proactively mitigate risk in the ability to proactively and consistently mitigate institutional risk in Title IV programs. Other concerns relate to FSA's oversight of its contracted student loan servicesservicers, including its monitoring of such entities and the accountability of servicers to FSA in certain areas of their performance. Concerns have also been raised about the shortage of operational guidance FSA has provided to loan servicers to enable them to ensure they are meeting Title IV statutory and regulatory requirements and to assist borrowers in navigating the aid programs.

Transparency issues relate to the extent to which FSA makes available information about the Title IV programs' performance and operations to relevant parties. Congress, other entities with oversight responsibilities, and other federal agenciesPolicymakers sometimes have imperfect information on Title IV program performance and operations, which can make it difficult to make informed, well-honed policy or enforcement decisions. FSA has sometimes not made operational guidance available to Title IV program participants (e.g., IHEs), which can lead to a deterioration in trust between FSA and those participants. In addition, consumers may be faced with incomplete information on the Title IV programs and the IHEs that participate in such programs, which may make it difficult to make informed college-going and financial decisions.

Stakeholder and borrower accountability issues include the extent to which FSA is fulfilling its statutory mandate to consult with relevant stakeholders in developing performance plans and annual reports and whether FSA is leveraging information garnered from stakeholder interactions to make program administration improvements. They also relate to whether FSA is sufficiently responsive to customer needs, especially given that FSA administers programs for which, arguably, there are no comparable competitors.

As Congress contemplates the reauthorizations of the HEA, it As part of its oversight role, Congress might consider whether any adjustments should be made to address any of these issues and, if so, the extent to which any efforts to address issues might involve or affect FSA's PBO function and structure.

Introduction

The Office of Federal Student Aid (FSA) within the U.S. Department of Education (ED) is the primary entity responsible for the administration and oversight of the federal student aid programs authorized under Title IV of the Higher Education Act of 1965, as amended (HEA; P.L. 89-329, as amended).¹ As such, FSA is the largest provider of postsecondary student financial aid in the nation,² performing.² It performs functions that are akin to those of large banks, to which it has sometimes been compared.³ In FY2019FY2024, FSA oversaw the provision of $130.4120.8 billion in Title IV aid to 11.09.9 million students attending approximately 6,000 participating5,400 institutions of higher education (IHEs).⁴ In addition, in FY2019FY2024, FSA managed a student loan portfolio encompassing 45 million borrowers with outstanding federal student loans totaling about $1.56 trillion.⁵

FSA is a performance-based organization (PBO) pursuant to Section 141 of the HEA. Conceptually, PBOs are intended to be results-driven organizations that have clear objectives and measurable goals designed to improve an agency's performance and transparency. PBOs are led by chief executives who are personally accountable for meeting measurable goals within the organization. In exchange, PBOs are granted greater discretion than other government agencies to operate more like private-sector companies, with more control over the budget, personnel decisions, and procurement. FSA was established under the Higher Education Amendments of 1998 (P.L. 105-244) as the federal government's first PBO. This was done in response to the belief that ED needed restructuring to improve federal student aid delivery.⁶

In recent years, FSA has come under scrutiny for its oversight of IHEs participating in the Title IV student aid programs⁷ and contracted student loan servicers,⁸ its perceived lack of transparency to stakeholders,⁹ and its accountability to andimplementation of the FAFSA Simplification Act,⁹ its accounting related to the federal student loan programs,¹⁰ and its engagement with stakeholders.¹⁰11 This report provides information about the structure and organization of FSA, the nature of the work it performs, and its characteristics as a PBO. Additionally, the report attempts to synthesize some challenges experienced by FSAdiscusses FSA challenges that have received considerable attention in recent years. There has been considerable interest in this set of issues from the 116^th Congress. As Congress contemplates the reauthorization of the HEAShould Congress contemplate the reauthorization of the HEA or exercise oversight over FSA, it might examine some of the issues raised by these critiques and the way FSA's organization as a PBO may affect congressional goals and policies.

This report begins by discussing the HEA provisions that distinguish FSA from other types of federal agencies. This is followed by a discussion of the legislative history of the creation of FSA as a PBO and of the HEA Title IV programmatic changes that may affect its operations. Next, the report describes the current operations and structure of FSA. Finally, it discusses several issues related to FSA's operations and how they may relate to its structure as a PBO. The issues presented have received recent congressional and stakeholder attention and have been identified in reviews of FSA's operations.¹¹ There have been numerous recent reports that have examined aspects of FSA's operations. Appendix A provides a bibliography of recent Government Accountability Office (GAO) and ED Office of Inspector General (IG) reports relating to FSA's operations. Appendix B12 Appendix provides a list of selected acronyms used in this report.

FSA as a PBO: Distinctions from Most Agencies

Federal programs are usually carried out by or through agencies that are established in statute, with structural refinements established through directives issued by the agency head.¹²13 Over time, Congress has created governmental and quasi-governmental entities with varying characteristics to address diverse needs in different contexts.¹³14 Most federal agencies in the executive branch, however, are designed to be directly or indirectly accountable to the President. Furthermore, most federal agencies must comply with general management laws regarding financial management, procurement, information management, personnel, and other administrative practices.

As a PBO, FSA has organizational features that are distinct from most other departmental subunits in the executive branch of the federal government.¹⁴15 As the name suggests, PBOs are designed to have a greater focus on results—outcomes rather than outputs. To this end, they are required to have clear objectives and measurable goals. PBO leaders are to be held professionally accountable for meeting measurable goals within the organization, with continued tenure and a portion of compensation linked to these measures of success. In exchange, these organizations and leaders are granted greater discretion to deviate from certain government-wide management processes and to operate more like private-sector companies.

Key statutorily established features of FSA include, among others, the appointment and compensation arrangements for its chief operating officer (COO) and other senior managers, exemptions from certain government-wide personnel and procurement requirements, and greater independence from political pressure in the exercise of its functions.

FSA Leadership

Most high-level subunits within departments are led by political appointees who are appointed by the President or the Secretary and serve at their pleasure for an indefinite term.¹⁵16 Political appointments are not subject to the same statutory requirements as career appointments to the Senior Executive Service (SES) or appointments to the competitive service.¹⁶17 Depending on the authority used to make a political appointment, compensation will usually be determined by the Executive Schedule,¹⁷18 the SES pay system,¹⁸19 or the General Schedule.¹⁹20 Consistent with the PBO framework, the HEA contains provisions aimeddesigned to enable FSA to attract leadership with demonstrated ability and expertise, incentivize leadership to meet performance goals, and shield FSA leadership from political pressures.

FSA is led by a COO, whom the Secretary of Education appoints for a term of three to five years.²⁰21 The appointment is to be made based on "demonstrated management ability and expertise in information technology (IT), including experience with financial systems, and without regard to political affiliation or activity."²¹22 The COO's work and priorities are governed by a performance agreement with the Secretary that includes measurable organizational and individual goals.²²23 The COO may be reappointed to additional terms of three to five years if her or his performance is satisfactory.²³

24 The HEA also specifies the manner in which a COO may be removed:

REMOVAL.—The Chief Operating Officer may be removed by—

(A) the President; or

(B) the Secretary, for misconduct or failure to meet performance goals set forth in the performance agreement in paragraph (4).

The President or Secretary shall communicate the reasons for any such removal to the authorizing committees.²⁴

25 The law appears to authorize the President to remove the COO at will.²⁵26 In addition, the Secretary may remove the COO "for misconduct or failure to meet performance goals set forth in the performance agreement."²⁶27 Either the President or the Secretary must provide their reasons for removal to the authorizing congressional committees.²⁷

28 The COO's compensation includes basic pay, which is tied to the pay levels of the SES, and an annual bonus not to exceed 50% of the basic pay.²⁸

29 The senior managers of FSA are appointed by the COO without regard for the competitive service appointment provisions of Title 5 of the U.S. Code.²⁹30 The work and priorities of these senior officials are governed by annual performance agreements with the COO that include measurable organizational and individual goals.³⁰31 Senior managers serve at the pleasure of the COO or, in the event that the COO position is vacant, the Secretary.³¹32 As is the case for the COO, the compensation of senior managers includes basic pay, which is tied to the pay levels of the SES, and an annual bonus.³²33 The total annual compensation of a manager may not exceed 125% of the maximum basic pay for the SES pay system.³³

34 FSA Personnel Flexibilities

Unless otherwise specified in law, executive branch employment is governed by the civil service laws of Title 5 of the U.S. Code. Consistent with the PBO framework, the HEA includes provisions that give FSA more flexibility in the staffing, classification, and pay of its employees. The statute stipulates that FSA shall not be subject to any cap on the number or grade of its employees.³⁴35 FSA and the Office of Personnel Management (OPM) are directed to jointly develop and implement personnel flexibilities that are consistent with Title 5 of the U.S. Code.³⁵36 In addition, the COO is authorized to establish technical and professional positions that are not subject to the provisions of Title 5 pertaining to competitive service appointments.³⁶37 The HEA provision places covered positions in the excepted service, under which FSA could use alternative hiring procedures that relax the traditional competitive hiring procedures in Title 5 (such as application of veterans' preference, public notice, and/or modified qualification standards). FSA is directed to develop a performance management system consistent with Title 5 that establishes goals or objectives for employees.³⁷

38 FSA Procurement Flexibilities

When executive branch agencies need to acquire goods or services to carry out their functions, they are required to comply with the Federal Acquisition Regulation (FAR)³⁸39 and applicable procurement statutes. The PBO procurement provisions of the HEA are consistent with this overarching requirement while also permitting certain flexibilities. They state, "Except as provided in this section, the PBO shall abide by all applicable Federal procurement laws and regulations when procuring property and services."³⁹

40 The procurement flexibilities provided to the PBO include, for example, those related to the use of experts and consultants. Whereas agencies are generally constrained in obtaining such services by limitations and conditions of Title 5 of the U.S. Code⁴⁰41—such as requirements for a specific appropriation or other statutory authorization and for reporting to OPM on such actions—the PBO may obtain such services without regard to this provision.⁴¹

42 In another example of procurement flexibility, the HEA provides the PBO with authority to "use a two-phase process for selecting a source for a procurement of property or services."⁴²43 In such a process, an agency first issues a general solicitation and then issues a second solicitation with more specific requirements to a limited group of vendors from among respondents to the first solicitation. In contrast, the FAR provides for the use of this authority under limited circumstances.⁴³

44 In a final example, the circumstances and criteria under which the PBO may pursue a procurement with only one company differ from those followed by most agencies. Whereas in most instances the FAR allows "sole-source" procurement only where the needed services or supplies are available from only one responsible source and no other substitute will meet the agency's needs,⁴⁴ FSA may use "single source" procurement to obtain certain systems where multiple vendors could supply the product but one vendor is "the most advantageous source for purposes of the award."⁴⁵

FSA Independence

The Competition in Contracting Act of 1984, as amended, allows seven statutory exceptions to "full and open competition" under which most agencies may make "sole-source" contract awards.⁴⁵ FSA is not subject to these competition requirements when dividing the procurement of a system into smaller components or "modules." After awarding the first module of a system to a vendor on a competitive basis, FSA may award contracts for subsequent modules to the same vendor on a noncompetitive or "single-source basis."⁴⁶ FSA Independence As noted above, most high-level subunits within departments are led by political appointees who serve at the pleasure of, and under the direction of, the Secretary. In some cases, however, subunits are statutorily structured to have some independence from political leadership. A variety of structural mechanisms in different combinations have been used over time to establish such independence. Consequently, agencies vary in their level of structural independence from political leadership. In addition, notwithstanding these structural features, a specific leader of such a departmental subunit might elect to adhere to the Secretary's agenda for other political or policy reasons.⁴⁶

47 Although the HEA explicitly states that FSA is subject to the direction of the Secretary of Education,⁴⁸,⁴⁷ the agency is afforded a greater level of independence from political leadership than most departmental subunits in the executive branch.⁴⁸49 This is due to the HEA provisions that pertain to the appointment and removal of the FSA COO, as well as those that stipulate FSA's independence in carrying out certain functions. As noted above, the COO's appointment is to be made for a three- to five-year term on the basis of specified abilities, expertise, and experience "without regard to political affiliation or activity."⁴⁹50 Although the COO may be removed from office before the end of a term, the statute includes atypical specifications of the circumstances and manner in which this may occur.⁵⁰51 The statute also specifies that FSA "shall exercise independent control of its budget allocations and expenditures, personnel decisions and processes, procurements, and other administrative and management functions."⁵¹52 Although this authority is subject to the direction of the Secretary, it is not a common specification for a departmental subunit.⁵²

53 Establishment of a PBO to Administer Federal Student Aid

FSA⁵³54 was established as the federal government's first PBO in 1998. When Congress established this structure, it departed from conventional organizational arrangements that were then in use within the federal government. The PBO model was drawn from government innovations in Great Britain in the 1980s and 1990s.⁵⁴55 It was then developed and promoted for American governmental use by the National Partnership for Reinventing Government (NPR),⁵⁵56 a major Clinton Administration governmental reform initiative. The Administration's rollout of the PBO touted the model's potential benefits and portrayed it as a commonsense development in the effort to streamline the federal government and make it more responsive to its "customers."

The NPR initiative, led by Vice President Al Gore, aimed to improve federal government performance by reorganizing agencies and processes to be guided by market principles and incentives.⁵⁶57 The NPR's first report put forth hundreds of recommendations.⁵⁷58 These recommendations were intended to lead to better government service delivery and greater "customer" satisfaction.⁵⁸59 In general, this would be accomplished through the streamlining of personnel practices, procurement, and other government operations; improvement of management tools and incentives; and promotion of efficiency and economy in administration.

Administration-endorsed PBO-related legislation was introduced in late 1995,⁵⁹60 but it was not until early 1996 that the Vice President introduced the PBO concept as a major new focus of the ongoing NPR.⁶⁰61 The aim was to improve government service delivery by implementing certain functions through the use of business-like practices and incentive structures. Agencies reorganized as PBOs would be freed from adherence to certain procurement and civil service laws and would, at the same time, develop systems of performance incentives and accountability for results. In advocating for the creation of federal PBOs, Vice President Gore stated:

Government agencies need to change their incentives and internal cultures to shift from a focus on process to a focus on customers and achieving results. They need to become more responsive to citizens, yet account for program costs and safeguard broader public interests. This can be done by creating performance-based organizations (PBOs) that set forth clear measures of performance, hold the head of the organization clearly accountable for achieving results, and grant the head of the organization authority to deviate from governmentwide rules if this is needed to achieve agreed-upon results. PBOs involve structural changes as well as changes in incentives affecting federal employees.⁶¹

62 The NPR identified seven candidates for conversion, but none has been formally converted into a PBO.⁶²63 However, one of the entities targeted for conversion, the Patent and Trademark Office, was statutorily reorganized and given many PBO-like structural characteristics. Because it has these features, some observers have referred to it as a PBO.⁶³64 Though not contemplated as a potential PBO within the scope of the initial NPR list, FSA represented the first organization aligned with the PBO framework outlined in the NPR. In addition to FSA, one other entity—the Air Traffic Organization of the Federal Aviation Administration—has been explicitly established as a PBO in statute.

Legislation to Establish a PBO to Administer Federal Student Aid

Prior to the establishment of FSA, federal student loan programs were administered by the Office of Student Financial Assistance Programs (SFAP), a unit within ED's Office of Postsecondary Education (OPE). As discussed below, in the mid-1990s, leadership of these programs had temporarily become divided between SFAP and a unit in the Secretary of Education's office that had been established for the purpose of accelerating the implementation of the Direct Loan program.

Although the Higher Education Amendments of 1998 (P.L. 105-244) established FSA's PBO structure, interest in converting SFAP into a PBO seems to have arisen as early as 1996 amid growing concerns within Congress and ED that the student financial aid programs were "severe[ly]" mismanaged.⁶⁴65 The model was attractive to some congressional advocates of SFAP reform, as it appeared that its design features might address some of the agency's perceived problems while maintaining the financial assistance function within ED.⁶⁵66 Moreover, it appears that the possibility of establishing a PBO within ED to implement these programs was under consideration by the Secretary of Education prior to Vice President Gore's introduction of the new organizational model in 1996, which, as described earlier, did not include SFAP as a candidate for conversion into a PBO.⁶⁶

67 As the Clinton Administration was introducing the PBO model, congressional committees were monitoring and expressing concern about difficulties in the management of the student financial aid programs at ED. At a July 1996 hearing, ED's IG reported on a number of difficulties at ED, including program leadership being divided between OPE and the Senior Advisor to the Secretary for Direct Lending, poor coordination and communication between these offices, poor OPE staff morale, and a shortage of employees qualified in IT and financial analysis. Related problems included an interruption in efforts to improve the existing Federal Family Education Loan program, growth in the backlog of institutional cohort default rate appeals, confusion in the student loan community about where to find help for technical questions, concerns about the monitoring of financial statements and the procurement of needed IT, and difficulties with the processing the Free Application for Federal Student Aid (FAFSA).⁶⁷

68 In a February 12, 1996, memorandum, the Secretary of Education reportedly expressed an interest in establishing SFAP as a PBO.⁶⁸69 ED's IG testified in July of that year that such a transition appeared to be premature but that certain changes—such as leadership from a highly qualified chief executive officer to provide a stable, long-term leadership and consistency of purpose and a significant, focused reengineering effort—could be made to SFAP to prepare it for such a transition.⁶⁹

70 In May 1997, the Advisory Committee on Student Financial Assistance (ACSFA)⁷⁰71 reported that implementation of financial aid programs was plagued by staff without the necessary experience, outdated computer systems and "a web of large, uncoordinated, uncompetitive contracts which fail to deliver on time and produce unacceptable cost overruns."⁷¹72 ACSFA recommended restructuring the delivery of federal student aid under a PBO and reengineering Title IV systems and contracts, two processes the committee asserted were closely linked.⁷²

73 During a July 1997 hearing, the Assistant Secretary heading OPE testified that the Administration was reviewing the PBO model among several different organizational modifications that might improve management of federal student assistance programs.⁷³74 By March 1998, the Secretary of Education was voicing his support specifically for the PBO approach, stating that such a conversion would enhance ED's flexibility with regard to potential management and procurement reforms and allow it to more efficiently deliver student aid yet also hold it accountable for results and allow the Secretary to maintain control of policy.⁷⁴

75 In September 1997, the chair and ranking member of the House Committee on Education and the Workforce subcommittee with jurisdiction over higher education policy introduced a standalone bill to establish a PBO within ED to manage the information systems associated with Title IV programs.⁷⁵76 In his introductory remarks, the chair noted problems with federal student aid information systems and financial statements before asserting, "A customer-focused, performance-based organization within the Department, run by an experienced Chief Operating Officer, can take the steps necessary to properly reengineer the current systems and contracts."⁷⁶77 Provisions from this bill were included in the HEA reauthorization bill as reported by the committee in April 1998.⁷⁷

78 The Senate Committee on Labor and Human Resources reported out its main bill for the HEA reauthorization in May 1998.⁷⁸79 This bill included provisions that were "developed in cooperation with the administration" to establish a federal student aid-related PBO in ED.⁷⁹80 The role of the PBO that would have been established by this legislation was arguably broader than that in the House committee-reported measure. The PBO established in the House bill would have been "a discrete management unit responsible for managing the information systems supporting" Title IV programs,⁸⁰81 whereas the Senate bill would have empowered the PBO "to administer various functions relating to student financial assistance programs authorized under" Title IV.⁸¹

82 Text from the committee reports concerning the PBO sections of the reauthorization legislation provides a snapshot of the committees' perceptions about the management of financial aid distribution programs by ED at the time. Report language also laid out the committees' intentions for and expectations of this change in organizational structure and management paradigm.

Both the House and Senate committees of jurisdiction appeared to be concerned with perceived management problems at ED. The House Committee on Education and the Workforce discussed the prevalence and persistence of IT problems and their apparent impact on the ability of ED to deliver student aid economically, effectively, and efficiently. Specifically, the committee noted ED's limited progress in integrating numerous data systems despite legislative mandates; the tripling over five years of ED's budget for student aid information systems; and the fact that even with significant expenditures, student aid systems required dozens of paper forms and experienced "needless" process delays and breakdowns.⁸²

83 The Senate Committee on Labor and Human Resources described a more general and overlapping set of issues related to the need to improve the administration of Title IV aid and problems regarding the Direct Loan Consolidation program, the printing of the FAFSA, and reports that ED was falling significantly behind in its efforts to become Year 2000 compliant.⁸³

84 Both the House and Senate committees intended for the establishment of a PBO organizational structure to address the management problems they had identified. For example, the House Committee on Education and the Workforce noted that the purposes of the proposed change were to increase effectiveness, economy, and efficiency by giving administrators greater management flexibility while requiring greater accountability for results. The committee also expected that a PBO structure would accomplish the following aims that were specifically delineated in the HEA:

• Improve service to program participants,
• Reduce the costs of administering the programs,
• Increase accountability,
• Provide greater flexibility in management and administration of the programs, and
• Integrate the information systems that support the federal student aid programs.⁸⁴

85In doing so, the committee stated:

The Committee firmly believes that a customer-based, Performance-Based Organization within the Department, operated by an experienced Chief Operating Officer can take the necessary steps to properly reengineer the current systems and contracts…. The Committee also believes the creation of a PBO will result in a more efficient, effective, less expensive and less bureaucratic financial aid delivery system. The end result should be a system that is easy for students and parents to use and one that ensures that students have the information they need to select the education that is best for them—all while ensuring that taxpayer funds are being used efficiently and effectively.⁸⁵

86 The Senate Committee on Labor and Human Resources also identified its goal for the change, although it did so more generally. The committee also noted its effort to divide policy functions, which were to be retained by OPE, from operational functions, which were to be carried out by the new PBO:

The goal of the performance-based organization has been, and remains, to improve the delivery of student financial aid to students and their families. In order to accomplish this, the committee has attempted to identify the functions performed by the Office of Postsecondary Education and segregate those that are essentially policy functions that must be retained by OPE from those that are administrative and that may appropriately be handled by the performance-based organization. The PBO will be responsible for administration of the information and financial systems that support student financial assistance programs as well as any additional functions that the Secretary determines are necessary or appropriate to improve the delivery of student aid.⁸⁶

87 Both the Senate- and House-passed bills would have established a new PBO vested with responsibilities related to federal student aid delivery. Specific differences between the competing versions regarding the new entity's authority, purposes, functions, relationship with ED, and other organizational features were ironed out through a conference process that yielded a consensus measure.⁸⁷88 Resolution of the PBO-related differences does not appear to have been a sticking point in the conference process.⁸⁸89 The conference report was agreed to by the two chambers and President Clinton signed the Higher Education Amendments of 1998 into law on October 7, 1998.

2008 Higher Education Act PBO Amendments

In 2008, the Higher Education Opportunity Act (HEOA; P.L. 110-315)⁸⁹90 amended the HEA PBO provisions. The report of the Senate Committee on Health, Education, Labor and Pensions noted its general approval, at that time, of the PBO as implemented:

The committee applauds the efforts since the last reauthorization to implement the PBO. Schools and individuals have benefited from improved efficiency in originating, servicing and processing grant and loan aid. The ombudsman has provided needed guidance to students struggling to navigate the complex system. There is strong support for continuation of these efforts to make further progress in the delivery of student financial aid.⁹⁰

91 In line with this assessment, the 2008 amendments appear to have clarified and expanded FSA's role in the administration of Title IV programs. They changed the characterization of the PBO's functions from "operational" to "administrative and oversight," seemingly broadening the mandate of the agency.⁹¹92 In addition, whereas the previous provisions vested the PBO with responsibility for administration of the information and financial systems supporting Title IV programs, the 2008 amendments enlarged the scope of responsibilities beyond this specified support function to administration of "the Federal student financial assistance programs authorized under title IV."⁹²93 The HEOA also amended FSA's personnel and procurement flexibility provisions, as discussed below.⁹³

Changes to Title IV Aid Affecting FSA's Operations

94 Subsequent Amendments

Since enactment of the HEOA, the HEA PBO provisions have been updated to address somewhat limited issues. For example, the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (P.L. 115-232) made modest changes to FSA's procurement flexibilities as part of a set of amendments across multiple federal statutes to update federal procurement flexibilities.⁹⁵ Additionally, the Stop Student Debt Relief Scams Act (P.L. 116-251) updated the PBO's statutory functions to include helping prevent improper use of FSA's student loan systems by unauthorized users as part of broader updates to the HEA to prevent fraud, commercial advantage, or private financial gain.⁹⁶

At the time of FSA's formation in 1998, HEA Title IV of the HEA authorized and ED administered two primary federal student loan programs: the Federal Family Education Loan (FFEL) program and the Direct Loan program. These two programs provided borrowers with loans for postsecondary education with substantially similar terms and conditions as one another, but each program had significantly different administrative structures. Private lenders originated FFEL program loans, and either they or secondary market loan purchasers (who bought loans from originating lenders) were responsible for completing many loan servicing tasks, including working with postsecondary institutions to track students' enrollment and loan eligibility status, billing borrowers, and conducting initial collection services if a loan became delinquent. Additionally, under the FFEL program, state and nonprofit guaranty agencies received federal funds to administer many aspects of the program, such as providing technical assistance to IHEs and lenders, providing credit and loan rehabilitation counseling to borrowers, and performing collections work.

Under the Direct Loan program, the federal government essentially serves as the "banker" by providing loans to students and their families using federal capital. ED assumes the primary role in administering the Direct Loan program (described below), including providing technical assistance to IHEs, contracting with loan servicers to perform day-to-day administrative tasks, providing loan counseling to borrowers, and initiating collections work.

In May 2008, in response to concerns about the continued availability of FFEL program loans due to several FFEL program lenders curtailing or ceasing their participation in the program, the Ensuring Continued Access to Student Loans Act of 2008 (P.L. 110-227) granted ED the temporary authority to purchase student loans made under the FFEL program. In October 2008, P.L. 110-350 extended this authority through July 1, 2010. After purchasing loans made under the FFEL program, control of loan servicing was transferred to ED. In 2009, the SAFRA Act (P.L. 111-152, Title II) terminated the authority to make new loans under the FFEL program after June 30, 2010. Since July 1, 2010, the Direct Loan program has been the primary federal student loan program,⁹⁴97 although many FFEL program loans remain outstanding,⁹⁵98 and FFEL program lenders and guaranty agencies remain responsible for administering several aspects of those programs.

These changes have vested FSA with a larger scope of responsibility than Congress might have originally contemplated when it authorized FSA's PBO structure, as FSA became responsible for administering a larger share of the federal student loan programs (in terms of loan volume and individual borrowers associated with these changes) than that for which it had previously been responsible under the FFEL program.

Moreover, the switch to almost 100% direct lending in 2010 had the effect of fundamentally altering the federal student loan marketplace. During the roughly 15-year period that the two programs operated concurrently, IHEs and borrowers were provided the opportunity to "shop around." That is, IHEs chose whether to apply to participate in the FFEL program or Direct Loan program, and the caliber of administrative and servicing work available within the respective loan programs may have been a factor in those decisions.⁹⁶99 Additionally, schools opting to participate in the FFEL program usually compiled preferred lender lists that they shared with students. Again, assessments of the caliber of administrative and servicing work provided through differing lenders likely factored into the selection of lenders for such lists.⁹⁷100 Borrowers attending FFEL program participating IHEs were free to select among an array of lenders, including but not limited to those on the preferred lender lists.⁹⁸101 There were opportunities available for IHEs and for borrowers who were dissatisfied with customer service to pursue other options.⁹⁹102 The competition that existed within the FFEL program and across the loan programs provided incentives for those involved in administrative and servicing work to provide enhanced customer service. By transitioning to a single model of federal student lending (the Direct Loan program) under which a single entity (the federal government) both makes and is responsible for administering loans, the federal student loan marketplace transitioned from one with some built-in incentives to provide enhanced customer service to one in which there may be less incentive to do so.¹⁰⁰

103 Several other statutorily and administratively driven changes in the Title IV aid programs since FSA's creation as a PBO may have also had the effect of increasing the scope and complexity of FSA's administrative functions. These include but are not limited to the following:

• increases in the amount and type of aid benefits available to students, including extension of PLUS Loan availability to graduate and professional students under the Deficit Reduction Act of 2005 (P.L. 109-171) and the authorization of the TEACH Grant program under the College Costs Reduction and Access Act of 2007 (P.L. 110-84);
• authorization and implementation of myriad income-driven loan repayment plans that allow borrowers to make monthly payments in amounts indexed to their adjusted gross income;¹⁰¹
• 104 increased complexity of aid benefits, including establishment of a 6% interest rate cap on federal student loans during military service under the Servicemembers Civil Relief Act (P.L. 108-189), the Public Service Loan Forgiveness (PSLF) program¹⁰²105 under the College Costs Reduction and Access Act (P.L. 110-84), cumulative lifetime maximums on certain students' eligibility to receive Pell Grants established under the HEOA¹⁰³106 and amended under the Consolidated Appropriations Act, 2012 (P.L. 112-74),¹⁰⁴ and limitations placed on certain borrower's eligibility to borrow Direct Subsidized Loans established under the Moving Ahead for Progress in the 21^st Century Act (P.L. 112-141);¹⁰⁵ and
• ;¹⁰⁷and administrative attempts to effectuate broad-based student loan cancellation policies;¹⁰⁸ and changes made to aid administration, including the process to receive a discharge of federal student loans after a determination that a borrower is totally and permanently disabled as established under the HEOA and implemented via subsequent regulatory changes,¹⁰⁶ the requirement that ED (via FSA) contract with not-for-profit loan servicers under the SAFRA Act,¹⁰⁷ and regulatory changes to borrower defense to repayment discharge procedures.¹⁰⁸

FSA Functions and Structure

statutory changes made by the FUTURE Act (P.L. 116-91) authorizing ED to access Internal Revenue Service tax return data for the purposes of administering Title IV student aid programs, and significant statutory changes to the underlying processes and methodologies for determining federal student aid eligibility made by the FAFSA Simplification Act (Title VII, Division FF of P.L. 116-260). FSA Functions and Structure Section 141 of the HEA tasks FSA with managing administration and oversight of the Title IV federal student aid programs. Among other functions, FSA develops and maintains the FAFSA; obtains student aid funds from the Treasury and makes them available for disbursement to students; contracts with third parties that perform myriad administrative tasks associated with the Title IV programs (e.g., loan servicing); provides information on the Title IV programs to students, Title IV participants (e.g., IHEs), Congress, and other stakeholders; and provides oversight of Title IV program participants, including IHEs and the third-party loan servicers with which it contracts.

The HEA specifically establishes two roles within FSA—the COO and the Student Loan Ombudsman—to carry out FSA's functions, but much of FSA's organizational structure has been established through administrative action by the COO. In addition, many outside entities may have an interest in or have asserted a role over aspects of the federal student aid programs.¹⁰⁹ Thus, in coordination with ED, FSA maintains relationships with outside stakeholders, executive branch entities, and Congress. FSA also maintains relationships with offices within ED at large.

Statutorily Specified FSA Functions

HEA Section 141 Section 141 of the HEA specifies several high-level aspects of aid administration for which FSA is responsible. These include the following:

• The administrative, accounting, and financial management functions for the Title IV aid programs, including
• collection collecting, processing, and transmissiontransmitting of data to students, IHEs, and other authorized stakeholders;
• development of specifications for software and procurement of systems to support Title IV aid administration;
• acquisitions of all hardware and software and procurement and management of all IT contracts to support Title IV aid administration;
• contracting for information and financial systems to support Title IV aid administration;
• providing customer service, training, and user support related to Title IV aid administration; and
• ensuring the integrity of the Title IV aid programs.
• Development, in consultation with the Secretary, of FSA's annual budget, and Taking action on improper access and use of FSA's student loan systems by unauthorized users.¹¹⁰

The Secretary may delegate additional functions to FSA as necessary or appropriate to achieve FSA's purposes.¹¹¹ FSA is given control of its budget allocations and expenditures, procurements, personnel decisions and processes, and other administrative and management functions but remains subject to the direction of the Secretary.¹¹²

The HEA specifies that the Secretary "shall maintain responsibility for the development and promulgation of policy and regulations" related to Title IV aid.¹¹³ In doing so, the HEA requires the Secretary to "request the advice of, and work in cooperation with" FSA.¹¹⁴

To fulfill its statutory responsibilities, FSA undertakes many discrete tasks (discussed below).

FSA Awarding, Disbursing, and Servicing Aid

Students wishing to receive Title IV student aid must annually apply for assistance using the FAFSA, which is developed and maintained by FSA in accordance with specifications set forth in the HEA.¹¹⁵ After a student submits the FAFSA, an automated system contracted by FSA processes the FAFSA,¹¹⁶ and then IHEs (or the third-party servicers with which they contract)¹¹⁷ use information from it to calculate the amount of aid for which a student is eligible. FSA obtains funds from the Treasury and makes them available to IHEs, which in turn disburse those funds to students.

Once a grant is disbursed, in many cases administrative functions are significantly decreased.¹¹⁸ However, FSA may be required to implement and/or oversee administrative functions after a grant has been disbursed. For instance, if an individual receives a Pell Grant in excess of the amount for which he or she is eligible, he or shethey are eligible, they may be required to return a portion to FSA.

Once a Direct Loan program¹¹⁹ loan is disbursed, FSA assigns it to a contracted loan servicer. Loan servicers perform a variety of administrative functions such as collecting payments and performing delinquency prevention activities. ^{Certain "specialty loan servicing programs" (such as the Public Service Loan Forgiveness program and Total and Permanent Disability discharges) are managed internally by FSA, although some third-party contractors—known as business process operations vendors—may perform manual processing and customer service functions for these programs.120} FSA may, if necessary, assign a defaulted loan to a contracted private collection agency (PCA)its defaulted loan servicer, the Default Resolution Group, which attempts to recover payment on defaulted loans from borrowers. FSA may also use other options to collect on defaulted Direct Loans, including referring a borrower's account to the Treasury Offset Program.¹²¹

Contracting

In FY2018, FSA maintained major contracts¹²² with approximately 20 vendors, totaling about $1.1 billion. (These contracts constituted approximately 63% of appropriations provided for student aid administration in general in FY2018.¹²³) FSA Contracting FSA "relies on a multitude of contracts and thousands of vendor employees to deliver its mission."¹²² Services for which FSA maintains contracts include servicing of Direct Loans and ED-held FFEL program loans and Perkins Loans,¹²⁴123 collection of defaulted Direct Loans and ED-held FFEL program loans and Perkins Loans, and IT infrastructure to support myriad tasks such as the processing of submitted FAFSAs. FSA also has a contract for the National Student Loan Data System (NSLDS), which is a central database for student aid. NSLDS maintains detailed administrative data to track Title IV grants and loans throughout their lifecycle and to support Title IV administrative functions such as verifying a student's Title IV eligibility.¹²⁵

.¹²⁴ FSA Information and Assistance to Third-Party Stakeholders

Numerous individuals and entities have a stake in the Title IV federal student aid programs and rely on FSA to provide timely and accurate information regarding the programsabout them. Students, their families, and borrowers rely on FSA to provide information and assistance throughout the entire financial aid process. IHEs and FSA's third-party contractors rely on communications and assistance from FSA to administer various aspects of the aid programs. Members of Congress and the general public rely on FSA for information about the performance of the Title IV aid programs.

FSA operates several websites that enable stakeholders to access relevant information about program operations. FSA maintains the website http://www.studentaid.gov, which is FSA's "primary online portal for customers"¹²⁶ and the 'Information for Financial Aid Professionals'customer-facing website"¹²⁵ and the FSA Partner Connect website, which consolidates guidance and resources related to Title IV administration for use by the entire financial aid community.¹²⁷

individuals involved in Title IV administration.¹²⁶ FSA also operates several repositories of Title IV program data to enable it and stakeholders to access information about the programs and their performance. HEA Section 485B of the HEA tasks ED with development of the NSLDS. FSA has primary responsibility for administration of the NSLDS and has contracted with a third party to operate it. FSA also maintains the Federal Student Aid Data Center—a centralized, publicly available source for selected administrative data and other information related to the Title IV programs.¹²⁸127 The Title IV program data on FSA's Data Center are often derived from NSLDS.¹²⁹ In addition, FSA operates the Enterprise Data Warehouse Analytics, which contains data from multiple FSA data sources, such as NSLDS. It provides FSA with analytic tools to provide "quick and accurate access to inform internal and external data requests"¹³⁰ and is often used to provide Title IV program data and analysis to internal stakeholders such as ED's Budget Office and to external stakeholders such as congressional requesters, other federal agencies, and the public.

Management Analytics Platform Service, which is a "data analytics platform that ingests data from multiple Federal Student Aid (FSA) systems of records to perform big-data analytics on FSA data in one common location, produce reports and statistical models, and serve as a centralize repository of information about FSA customers across the full student aid life cycle."¹²⁸ FSA also makes its statutorily required annual report¹³¹129 to Congress publicallypublicly available.¹³²130 Finally, the Office of Consumer Education and Ombudsman¹³¹—a subunit within FSA—serves as a single point of contact for students and aid recipients Finally, the Ombudsman Group¹³³—a subunit within FSA—provides students and aid recipients with a single point of entry (the Feedback and Dispute Management System) to provide feedback or to file complaints and disputes about the Title IV programs.¹³⁴

132 FSA Oversight

FSA has a large oversight role in ensuring that various Title IV program participants comply with Title IV program requirements. Both statute and regulations prescribe many aspects of the Title IV programs, including student aid program terms and conditions and requirements IHEs must meet to participate in the programs. IHEs and third-party contractors play a significant role in ensuring that the Title IV programs are administered properly. In addition, some Title IV programs (e.g., the campus-based aid programs¹³⁵133) vest a larger share of administrative functions with IHEs, while others (e.g., the FFEL program) vest additional administrative functions with outside entities such as guaranty agencies.

IHEs and Their Third-Party Servicers

FSA's oversight of IHEs relates largely to ensuring that they meet eligibility requirements to participate in the Title IV programs¹³⁶134 and that they (and any third-party servicers with which they may contract) properly administer the Title IV programs.¹³⁵ FSA certifies an IHE's eligibility to participate in the Title IV programs and recertifies its eligibility thereafter.¹³⁷136 FSA verifies each IHE's accreditation status and whether the IHE is legally authorized to operate within a state. FSA also evaluates an IHE's financial responsibility and administrative capability to administer the Title IV programs.¹³⁸

After an IHE is certified to participate in the Title IV programs, FSA ensures that it is conforming to eligibility and administrative requirements. FSA does this by performing program reviews and by reviewing required IHE compliance audits and financial statement audits conducted by third-party auditors.¹³⁹137 FSA reviews the IHE's required third-party compliance and financial statement audits and attempts to resolve issues with them.¹⁴⁰ During a program review, FSA evaluates an IHE's compliance with Title IV requirements. Review priority is given to certain IHEs specified in statute (e.g., those IHEs with high cohort default rates).¹⁴¹

138 FSA has the authority to impose sanctions and corrective actions on IHEs and their third-party servicers. Examples include imposing fines, imposing specific conditions or restrictions related to administration of Title IV funds, and terminating Title IV participation.¹⁴²

139 FSA Contractors

FSA's oversight of its third-party contractors generally consists of ensuring that they fulfill the terms and conditions of their contracts with FSA. In general, federal agencies, including FSA, have a number of tools to help ensure a contractor adequately performs a contract.¹⁴³140 Examples include requiring corrective action,¹⁴⁴141 using performance-based incentives,¹⁴⁵142 and terminating the contract. FSA contracts with numerous third-parties for a variety of goods and services related to administration of the Title IV programs, including student loan servicers and PCAs.

In FY2019, FSA contracted with 12 student loan servicers. FSA contracts with seven vendors to perform a variety of student loan servicing and debt collection tasks largely related to the Direct Loan program.¹⁴⁶ 143 For the primary set of loan servicing contracts (referred to as the Unified Servicing and Data Solution), FSA uses performance-based incentives to encourage loan servicersvendors to meet desired results (e.g., ensuring borrowers are in current repayment status¹⁴⁷ and meeting customer service satisfaction goals). It does so by basing the number of borrower loan accounts allocated and compensation levels on servicers' ability to meet stated goals.¹⁴⁸ In addition, FSA issues guidance to loan servicers to assist them in day-to-day operations and conducts monitoring activities, such as completing annual compliance audits and assessing borrower-servicer interactions.¹⁴⁹

FSA also contracts with numerous PCAs¹⁵⁰ to attempt to collect the $140.3 billion in defaulted loans of 7.2 million borrowers.¹⁵¹ Similar to its oversight of loan servicers, FSA uses performance-based incentives to meet desired goals. PCA compensation is based on a PCA's overall performance.¹⁵² Previously awarded contracts have based borrower account allocation on PCA performance. However, current PCA contracts with FSA are not readily available for review,¹⁵³ and it is unknown how future PCA contracts might be structured. In addition, FSA issues guidance to PCAs144 For contracts related to the specialty loan servicing program (i.e., those FSA contracts with business process operations vendors), FSA similarly uses performance-based metrics to determine future work allocations.¹⁴⁵ In addition, FSA issues guidance to vendors to assist them in day-to-day operations and conducts monitoring activities, such as assessing PCAs' interactions with borrowers.¹⁵⁴

audits and quality assurance reviews.¹⁴⁶ The terms of the final FSA contract with the vendor that performs debt collection work are not publicly available. Entities Engaged in Selected Title IV Programs

For FFEL program loans not held by ED, guaranty agencies administer many aspects of the program, such as providing default aversion assistance¹⁵⁵147 to FFEL program lenders and services related to the federal loan guarantee. In the campus-based programs, IHEs perform many of the administrative functions described earlier in this section (e.g., award disbursement and loan servicing) and are also afforded some discretion in determining the mix and amount of campus-based aid funds awarded to students. FSA oversees these entities in their fulfillment of these functions.

Selected FSA Statistics

As described above, the scope of FSA's operations covers many activities and responsibilities. Selected statistics and additional information provide insight into the scale of FSA's operations. TableFigure 1 presents information on funds obligated for student aid administration. TableFigure 2 presents data on full-time equivalent (FTE)FTE employment for federal student aid administration. Funding for Federal Student Aid Administration Funding obligations for federal student aid administration generally comprise two broad categories: (1) salaries and expenses¹⁴⁸ and (2) student loan servicing.¹⁴⁹ Figure 1 presents annual inflation-adjusted funding obligated for federal student aid administration for FY2009-FY2024.¹⁵⁰ Over this period, obligations for federal student aid administration increased from $1.1 billion in FY2009 to about $2.2 billion in FY2024. Obligations for student aid administration have increased by 30% since FY2011 (the first full fiscal year in which no new FFEL program loans were made). Since FY2016, the composition of student aid administration between salaries and expenses and discretionary servicing activities has remained somewhat even (about 50% for each category). Prior to that time, salaries and expenses comprised the majority of obligations for student aid administration.¹⁵¹

Figure 1

Figure is interactive in the HTML version of this report.

Funding for Federal Student Aid Administration

There are two broad categories of funding obligations for federal student aid administration: (1) salaries and expenses¹⁵⁹ and (2) student loan servicing.¹⁶⁰ Table 1 presents annual funding obligated for federal student aid for FY2009-FY2019.¹⁶¹ Over this period of time, obligations for federal student aid administration increased from $754 million in FY2009 to $1.7 billion in FY2019. Obligations for student aid administration have increased by 47% since FY2011 (the first full fiscal year in which no new FFEL program loans were made). Beginning with FY2016, obligations for loan servicing have constituted the majority of student aid administration costs.¹⁶²

FTE Employment for Federal Student Aid Administration

Figures on FTE employment for FY2009-FY2019 for federal student aid administration are presented in Table 2 Data are inflation-adjusted using the Consumer Price Index for All Urban Consumers: All Items in U.S. City Average (CPI-U). In FY2009, servicing activities were not reported separately from student aid administration.

FY2024 figures exclude approximately $17 million in "reimbursable program activity," which comprised about $16.5 million allotted to FSA from ED's Nonrecurring Expenses Fund to support FSA's Unified Servicing and Data Solution and about $55,000 in "reimbursables" to ED for parking at ED's Lyndon Baines Johnson building. CRS communication with ED, Office of Congressional Affairs, August 26, 2025.

The number of FTE employment for other ED offices in FY2024 is estimated. Trends Relevant to Federal Student Aid Administration

Over the past several years, the workload of FSA has increased considerablyvaried. Table 31 provides information related to FSA's workload, including the number of FAFSAs processed, the number of students receiving aid, the total dollar amount of federal student aid provided through the Title IV federal student aid programs, the total number of federal student loan recipients who have outstanding balances, and the total dollar amount of principal and interest outstanding for even-numbered years during the FY2010-FY2024 period. .

As shown in Table 31, the number of individuals receiving Title IV aid and the number of FAFSAs processed peaked in FY2011 and FY2012, respectivelyhas declined since FY2012. However, the total number of federal student loan recipients with outstanding loan balances and the total dollar amount of principal and interest outstanding increased substantially over the period examined and increased year-over-year for each complete fiscal year under review.

FSA Structure

Statutorily Mandated Roles

• authority to take certain personnel actions, such as carrying out reductions-in-force for FSA in coordination with ED, approving telework agreements, and handling FSA employee grievances;¹⁷⁸
• programmatic authorities related to Title IV programs, such as awarding certain formula grants (e.g., awarding campus-based funds to IHEs) and entering into agreements with entities outside of ED (e.g., IHEs or other federal agencies);¹⁷⁹
• authority to compromise, waive, and write-off certain claims against individuals under Title IV programs, such as waiving or writing off the collection of current or defaulted federal student loans;¹⁸⁰
• authority to compromise, waive, and write-off certain claims against individuals under Title IV programs, such as waiving or writing off the collection of current or defaulted federal student loans; and¹⁷¹ authority to develop, implement, and manage an Employee Personnel Security Program and a Contractor Personnel Security Program in accordance with established ED directives and guidance.¹⁸¹172

Student Loan Ombudsman

HEA Section 141(f) of the HEA specifies that the COO, in consultation with the Secretary, shall appoint an ombudsman "to provide timely assistance to borrowers of loans made, insured, or guaranteed under Title IV." Specifically, the ombudsman is to (1) review and attempt to informally resolve borrower disputes with Title IV loan program participants and (2) compile and analyze data on borrower complaints and make recommendations. Each year, the ombudsman is to submit to the COO (for inclusion in the COO's annual report) a report describing the ombudsman's activities and effectiveness during the preceding year.

FSA's Ombudsman Group FSA's Office of Consumer Education and Ombudsman (the Ombudsman) is the specific office tasked with fulfilling the HEA Section 141 requirements for a student loan ombudsman. The Ombudsman Groupoffice also administers FSA's comprehensive informal complaint resolution and customer inquiry/case resolution processes related to all Title IV student aid programs, not just those related to student loans, although the. The most frequent types of cases received by the Ombudsman Groupoffice relate to student loans, however.¹⁷³.¹⁸² Addressing customer cases regarding non-loan Title IV student aid programs is not part of the ombudsman's specific statutory mandate.¹⁸³

FSA's Relationship with Other Actors

174 On September 5, 2025, FSA announced that the office's mission and work was "expanding … to focus on providing information to students and families on the benefits and risks of federal student loan borrowing" by taking a "proactive approach to improve financial literacy among students, parents, and borrowers."¹⁷⁵ FSA's Relationship with Other Actors Many tasks related to student aid are vested (either through statute or secretarial authority) within other ED offices,¹⁸⁴176 and other executive branch entities may have an interest in, or jurisdiction over, aspects of federal student aid. In addition, FSA is subject to congressional direction (e.g., via amendments to the HEA orand appropriations laws) and oversight. As such, FSA may have occasion to interact and maintain relationships with numerous outside stakeholders.

ED's FSA and the Office of the Secretary

The Secretary "is responsible for the overall direction, supervision, and coordination of all activities of [ED] and is the principal adviser to the President on Federal policies, programs, and activities related to education in the United States."¹⁸⁵177 The Office of the Secretary directly oversees the Office of the Under Secretary (which, in turn, oversees FSA). In addition, the Office of the Secretary oversees several other entities that interact with FSA on a regular basis:

• The Office of the Inspector General is responsible for "identifying waste, fraudfraud, waste, abuse, and criminal activity involving ED[ED] funds, programs, and operations."¹⁸⁶178 To this end, it conducts independent audits and reviews of ED programs, including the Title IV student aid programs and FSA's operations.
• The Office of General Counsel (OGC) is responsible for providing "legal assistance to the Secretary concerning the programs and policies of the Department."¹⁸⁷179 OGC also provides legal assistance to other ED offices, including FSA. Among other services, OGC provides legal advice, litigation services, legislative services (e.g., drafts legislative proposals),¹⁸⁸ and assistance in drafting subregulatory guidance.¹⁸⁹
• regulatory documents.¹⁸⁰ The Office of Budget Service¹⁹⁰181 has the lead responsibility for, among other functions, ED's budget, budget and related legislative policies for ED programs, and the review and analysis of ED program operations, including budget and policy implementation.developing and implementing ED's budget.¹⁸² It develops cost estimates for the Title IV student aid programs and maintains computer models to estimate such costs, coordinates methodology and data with FSA and OPE, and liaises with FSA other ED offices to analyze data sources and assumptions for the student aid cost estimation models.¹⁹¹

ED'sFSA and Office of the Under Secretary

The Office of the Under Secretary oversees"coordinates policies, programs, and activities related to vocational and adult education, postsecondary education, college grant aid, and federal student loans. The Under Secretary directs and coordinates policies, programs, and activities related to postsecondary education and federal student aid.¹⁹²postsecondary education, career and technical education, and adult education."¹⁸³ The Under Secretary also supervisesoversees FSA, which administers federal student aid, and OPE, which provides overall direction, coordination, and leadership on matters related to postsecondary education. The Under Secretary serves as the principal advisor to the Secretary on postsecondary education.¹⁹³

As previously described, HEA Section 141 "works to strengthen the capacity of colleges and universities to promote reform, innovation and improvement in postsecondary education" and to "promote and expand access to postsecondary education."¹⁸⁴ As previously described, Section 141 of the HEA specifies that the Secretary maintains responsibility for the development and promulgation of policy and regulations related to Title IV aid but must coordinate with FSA.¹⁹⁴185 With Under Secretary oversight, OPE fulfills the policy development and promulgation role for the Secretary. OPE develops both regulations and subregulatory guidance for the Title IV student aid programs (e.g., Dear Colleague letters to financial aid professionals).¹⁹⁵186 In doing so, OPE liaises with FSA's PLISPIOD (and other offices such as OGC) in the development, implementation, and dissemination of Title IV student aid policy.¹⁹⁶

FSA and Other Executive Branch Entities

Other executive branch entities may have some level of authority over or interest in aspects of federal student aid programs. As such, ED and FSA may maintain relationships with these entities to help ensure proper functioning of the aid programs. Based on its functions, FSA likely, at least in part, has played a role in these partnerships even when ED may be officially responsible.¹⁹⁷

187 Executive branch entities with which ED and FSA may maintain relationships to help ensure proper functioning of the aid programs include the following:

• Department of the Treasury. FSA obtains funds from Treasury to make available to students in the form of federal student aid. FSA may refer a borrower's defaulted loan to the Treasury Offset Program for offset of certain benefits such as federal income tax refunds and Social Security benefits. Moreover, while the Debt Collections Improvement Act generally requires federal agencies to transfer nontax debts that are 180 days or more delinquent to Treasury's Fiscal Service for centralized debt collection (referred to as cross-servicing),¹⁹⁸188 since 2001, the Secretary of the Treasury has granted FSA a permanent exemption from this requirement.¹⁹⁹189 Thus, FSA is responsible for collecting delinquent and defaulted federal student loan debt assigned to or held by ED. The act also authorizes the Secretary of the Treasury to exempt certain classes of debt from cross-servicing. Since 2005, debtsDebts that are being collected through administrative wage garnishment²⁰⁰190 and meet certain conditions have been exempted from cross-servicing.²⁰¹
• 191 Consumer Financial Protection Bureau (CFPB): The CFPB²⁰²192 has asserted a role in ensuring compliance with consumer protection laws that may apply to federal student loans. For example, the CFPB has brought lawsuits against some FSA-contracted federal student loan servicers for consumer compliance violations relating to federal student loan servicing.²⁰³193 CFPB also maintains resources for both federal student loan and private education loan borrowers²⁰⁴,¹⁹⁴ and it fields complaints from student loan borrowers.²⁰⁵ The CFBP and ED participated in an interagency task force²⁰⁶ to help ensure sufficient oversight of proprietary IHEs.²⁰⁷ However, it appears that the CFPB and ED may no longer be working together as closely as they previously had been.²⁰⁸ For example, in 2017, ED terminated its memoranda of understanding with the CFPB to share data and information relating to the student loan servicing market, stating that the CFPB violated the terms of the memoranda.²⁰⁹
• 195 The level of collaboration between the CFPB and ED has varied over time. For example, during the Obama Administration, the CFPB and ED had entered into memoranda of understanding to share data and information relating to the student loan servicing market. In 2017, under the first Trump Administration, ED terminated the memoranda, stating that the CFPB violated the terms of the memoranda.¹⁹⁶ Subsequently, in 2020, the CFPB and ED entered into a memorandum of understanding under the first Trump Administration to share data and information relating to student loan complaints (including Title IV loan servicing).¹⁹⁷ Department of Justice (DOJ): DOJ may play a role in law enforcement related to federal student loans, including, through U.S. Attorneys' offices, prosecuting violations of federal criminal laws and representing the federal government in civil proceedings. For instance, FSA may refer a defaulted federal student loan borrower's account to DOJ for civil litigation against the borrower.²¹⁰198 In addition, DOJ may file lawsuits against federal student loan program participants, such as contracted student loan servicers, for failure to comply with federal statutes related to student loans²¹¹199 and individuals for acts of fraud.²¹²

200 DOJ also serves as the lead agency representing the federal government in bankruptcy proceedings to discharge student loan debt. Previously, ED and DOJ have coordinated to implement policies related to these bankruptcy proceedings.²⁰¹Other executive branch entities with which ED and FSA may interact include the Federal Trade Commission,²¹³202 the Internal Revenue Service (IRS),²¹⁴203 the Department of Veterans Affairs,²¹⁵204 and the Social Security Administration.²¹⁶

205 In processing the FAFSA, FSA's CentralFAFSA Processing System matches student provided information against other federal entities' databases to confirm elements of each student's aid eligibility. In total, the CentralFAFSA Processing System performs matches against databases maintained by the Department of Defense, DOJ, the Social Security Administration, the Department of Veterans Affairs, and the Department of Homeland Security, and the Selective Service System.²¹⁷ In addition, FSA's systems interface with the IRS Data Retrieval Tool, which links students', students' spouses, and parents' IRS tax information to the FAFSA and/or the income verification component of applying for and recertifying information for the various income-driven repayment plans.²¹⁸

.²⁰⁶ To initiate and/or maintain these relationships, ED and FSA may enter into formal agreements (e.g., memoranda of understanding) with the relevant federal entity or maintain a less formal interagency relationship.²¹⁹

207 FSA and Congress

Congress may guide and affect the way FSA operationalizes and manages the day-to-day functions of the federal student aid programs. First, Congress and the President may enact laws that impact or amend federal student aid programs or FSA itself. For example, Congress could amend the HEA Sections 141-143 of the HEA, which relate specifically to FSA as a PBO, or the Title IV student aid programs in general. In addition, during the appropriations process, Congress determines discretionary funding levels for FSA activities.²²⁰208 In some instances, Congress may include stipulations or directives regarding the use of these funds.²²¹

209 Second, Congress exercises oversight of FSA.²²²210 This oversight may include requiring FSA or ED representatives to testify before Congress, requiring or requesting FSA to report additional information regarding its operations, and requesting that GAO or the IG conduct an in-depth investigation of FSA. Congress has exercised its oversight authority regarding Title IV aid administration numerous times in recent years.²²³

211 FSA's Performance underUnder Five-Year Performance Plan

The COO is required to annually report to Congress on FSA's progress in achieving its goals and objectives described in its five-year performance plan (also known as the strategic plan). Among other items, the performance plan is to address FSA's responsibilities in improving service to stakeholders, reducing costs of administering the Title IV student aid programs, improving and integrating the systems that support the student aid programs, and making progress in other areas identified by the Secretary. The Secretary and FSA, in consultation with stakeholders, develop the strategic goals and objectives described in FSA's five-year performance plan. As part of the plan, FSA develops the metricsindicators (or metrics) by which its performance under these strategicgoals and objectives are measured.²²⁴ FSA also sets its specific annual goalstargets for meeting each metric. In doing so, most of its annual goals are based on FSA's performance under the metric in the prior year.²²⁵

Table 4 indicator. In its annual report, FSA is to include an evaluation of its performance under the goals and objectives of the five-year performance plan.²¹² Table 2 presents information on FSA's performance for each metricindicator under its strategic objectives as set forth in its Strategic Plan: FY2015-19²²⁶ for FY2016-FY2019.²²⁷ For each metric, FSA's goal and actual performance goals and objectives for FY2023-FY2024 as set forth in its most recent strategic plan—its Strategic Plan: FY2023-27.²¹³ For each goal, FSA developed objectives and then indicators by which to measure its performance under the objectives. FSA's targets and actual performance under each indicator are presented. The text for FSA's actual performance under each measurement indicatesindicator shows whether FSA met its goal in the given year. Bolded text indicates that FSA did not achieve its goal, while regular text indicates that FSA did achieve its goal.

Assessments of FSA as a PBO

Table 2 summarizes the performance information for FY2023 and FY2024. Many of FSA's goals, objectives, and indicators were new for its FY2023-2027 strategic plan. As such, in FY2023, FSA completed baseline assessments for 16 (50%) of its indicators against which to measure FSA's performance in future years. FSA generally met or exceeded those goals, objectives, and indicators already in place in FY2023. For FY2023 and FY2024, FSA consistently met its objectives under Strategic Goal 3—strengthen engagement and accountability for educational and financial institutions—and most of its objectives under Strategic Goal 5—boost operational efficiency—which includes objectives related to strengthening FSA's information management, enhancing its procurement processes, and improving its cybersecurity posture. FSA also met many of its FY2024 goals for Strategic Goal 1—improve customer service and outcomes for students and borrowers. Perhaps most notably under this strategic goal, the number of borrowers who received student loan forgiveness (an indicator for one of the strategic goal's objectives)²¹⁴ increased about 76% from FY2023 to FY2024.

FSA did not meet most of its targets for Strategic Goal 2—advance equity and access to student financial assistance. This was driven by the fact that FSA did not meet all targets for the strategic goal's objective "Provide accurate, seamless, easy, and customized interactions throughout the student aid lifecycle." FSA attributed this trend primarily to the rollout of the 2024-2025 FAFSA, which reflected significant statutory changes made to the FAFSA and need analysis methodologies by the FAFSA Simplification Act (Title VII, Division FF of P.L. 116-260) and the Fostering Undergraduate Talent by Unlocking Resources for Education Act (FUTURE Act; P.L. 116-91)²¹⁵ and for which FSA and ED received considerable criticism.²¹⁶

Finally, in FY2024, FSA did not meet most (75%) of its target indicators for Strategic Goal 4—increase workforce and workplace capabilities. For example, it did not meet all targets for its objective "Foster an organizational culture that promotes a productive, connected, and engaged workforce, particularly in a hybrid workplace environment." FSA hypothesized that these missed targets might be attributed to a number of factors, such as return-to-office policies following a prolonged period of telework in light of the COVID-19 pandemic, FSA staff needing to take on additional responsibilities for a prolonged period to support the rollout of the 2023-2024 FAFSA, and "unexpected operational changes within the organization and leadership."²¹⁷

FY2023

FY2024

Performance Indicator

Target

Actual

Goal

Actual

Objective 1.1: Simplify the student loan repayment process to reduce future delinquency and default rates and improve accessibility of loan forgiveness programs.

Baseline

1.32 million

1.36 million

2.39 million

Percentage of borrowers using auto-debit

Baseline

20.90%

23.90%

21.50%

≥56.70%

60.50%

≥60.50%

64.10%

Objective 1.2: Enhance the quality of contact center and loan servicing operations, leveraging data to assess progress toward customer service and product delivery standards.

Baseline

98.10%

≥95%

98.60%

Objective 1.3: Engage with stakeholders to improve delivery of student aid.

Implement survey

Survey implemented

Baseline

7%

Objective 1.4: Address complaints and inquiries regarding financial aid products and services.

Baseline

78%

≥78%

74%

Baseline

58%

≥58%

Baseline

32%

≥32.1%

38.10%

Strategic Goal 2: Advance equity and access to student financial assistance

Objective 2.1: Enable financial education and empowerment by helping students and families understand the benefits and responsibilities of financing postsecondary education.

Baseline

90

≥90

90

Objective 2.2: Simplify the Free Application for Federal Student Aid (FAFSA) process.

Customer satisfaction survey score associated with completing the Free Application for Federal Student Aid

78

80

80

80

StudentAid.gov digital satisfaction

≥66

72

≥72

60

StudentAid.gov post-transaction satisfaction

Baseline

83

≥83

82

Customer Center satisfaction

Baseline

71

≥71

52

Email campaign helpfulness

Baseline

79

≥79

58

Strategic Goal 3: Strengthen engagement and accountability for educational and financial institutions

Objective 3.1: Utilize a comprehensive suite of monitoring tools to oversee participating partners.

40%

66.50%

60%

79.10%

Objective 3.2: Build enforcement capabilities, in coordination with federal and state partners, to protect students, families, and taxpayers from deceptive, fraudulent, or harmful practices in the student aid marketplace.

Build and implement an FSA Enforcement Strategy that incorporates a risk model for identifying schools that pose risk to students and taxpayers

Develop strategic plan

Strategic plan completed

Implement strategic plan

Strategic plan implemented

Objective 3.3: Provide inclusive and effective partner outreach, training, and technical assistance.

Institutional participation rates in Title IV training and specialized technical assistance programs

75%-80%

84%

80%-82%

86%

Strategic Goal 4: Increase Workforce and Workplace Capabilities

Objective 4.1: Promote workforce diversity, equity, inclusion, and accessibility.

Baseline

73%

≥74%

72%

Percentage of qualified new hires and backfills coming from identified underrepresented workforce populations

Baseline

37%

3%-5% of new hires

51%

Percentage of underrepresented populations included in organizational talent acquisition, promotion, and development/training activities

Baseline

36%

≥37%

39%

Percentage of employees participating in formal diversity, equity, inclusion, and accessibility efforts

10%-15% of total employee count

8%

12%-17%

10%

Objective 4.2: Attract, develop, and retain an agile workforce that can quickly respond to a changing environment and emerging priorities.

Baseline

76%

≥77%

74%

Objective 4.3: Foster an organizational culture that promotes a productive, connected, and engaged workforce, particularly in a hybrid workplace environment.

≥73%

75%

≥76%

72%

Baseline

61%

≥62%

58%

Baseline

84%

≥85%

83%

Strategic Goal 5: Boost Operational Efficiency

Objective 5.1: Strengthen enterprise-wide data analytics and information management to foster a customer-centric, data-driven, performance-based organization.

56

69

71

Successful maintenance and use of statistical models in Title IV operations

8 total number of new and existing modeling initiatives

8

9 total number of new and existing modeling initiatives

9

Implement new Statistical Modeling Initiatives

2 total number of new initiatives

2

2 total number of new initiatives

2

Objective 5.2: Continuously improve systems, structures, and operations to enhance organizational efficiency and performance.

Investment portfolio aligned to key organizational drivers and current fiscal year enacted appropriation. Investment portfolio achieves 75% milestones. Organization/program risks are documented. (Y/N)

Y

Enhance continual delivery and implementation of improved Financial Management and support sound investment decision making to effectively drive FSA's mission. (Y/N)

Y

Objective 5.3: Enhance procurement planning, management, and execution.

Time-duration estimates for procurement-related tasks for use in Program Schedules

Identify requisite tasks and durations for other procurement methods based upon law, regulation, policy, and historic performance.

Completion of FSA Acquisitions Directorate Collaboration Site (met)

Identify requisite tasks and durations for other procurement methods based upon law, regulation, policy, and historic performance.

Identified requisite tasks and durations for government policy's preferred procurement method, i.e., full and open competition (met)

Plan, develop and implement a new investment management process aligning acquisitions, budget, and human capital with program planning

Planning

Planning

Development

Planning

Objective 5.4: Improve cybersecurity detection, prevention, and protection ensuring data confidentiality, integrity, and availability.

60% at level 3 or higher

100%

70% at level 3 of higher

100%

Source: FSA, Annual Reports, FY2023-FY2024.

Notes:

Close observers assessed FSA's progress in addressing the congressionally identified issues that prompted FSA's establishment as a PBO in 1998.

Immediately following the enactment of the HEA provisions establishing a PBO, ACSFA acknowledged the difficulty of simultaneously undertaking a major reorganization and system modernization. ACSFA noted the commitment and energy of the first permanent COO and praised "his willingness to communicate with the higher education community" as well as his early senior personnel choices.²¹⁸

ACSFA also criticized the priorities of the new unit as well as its adherence to the congressional intent behind, and the requirements of, the new statute. Among other concerns, it noted that

• ED appeared to be transplanting the organizational arrangements of SFAP (FSA's predecessor), as an office of OPE, into a new PBO that reported directly to the Secretary without making more fundamental changes to its management and organizational structure;
• ED was failing to "adequately separate policy making and regulatory responsibilities of OPE and operations responsibilities of the PBO as intended by Congress;"²¹⁹ and
• rather than "directing its attention and scarce resources toward solving its basic systems, data, and contract problems, the PBO appear[ed] to be … concentrating on the twin objectives of improving day-to-day customer service and providing students web access to their data through 'a single federal point of contact' for all financial aid transactions."²²⁰

In 2002, ACSFA reported, among other findings, that some progress had been made on transferring policymaking functions to OPE but that "functions related to institutional eligibility and guarantor and lender oversight" remained within the purview of FSA.²²¹ ASFCA called for the transfer of these functions to OPE, with OPE consulting with FSA to ensure that proposed federal aid policies supported FSA operations. ACSFA also reported that FSA was strengthening the capacity of its management, systems, and operations staff while reducing its reliance on contractors and recommended FSA continue to do so. In addition, it expressed concern that minimal progress had been made on systems integration. ACSFA called for ED to "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."²²²

By 2001, FSA had developed an organizational performance plan identifying three strategic goals: increase customer satisfaction, increase employee satisfaction, and reduce unit costs.²²³ However, ED's IG and GAO noted that it did not clearly address some of the new office's statutory purposes that had been identified during the HEA reauthorization process. For example, both entities found that the performance plan did not sufficiently address the means by which systems integration would be accomplished, nor did it include any objective measures of forward movement in that area.²²⁴ Both ED's IG and GAO recommended that FSA establish clear goals, strategies, and performance measures related to systems integration. FSA disagreed with the IG's recommendation, reasoning that the agency could not achieve its three stated goals without systems integration. In a response to the GAO recommendation, which came later, however, ED's Deputy Secretary agreed with the recommendation, committing to directing that FSA's performance plan "be revised to establish measurable goals and milestones for systems integration efforts to provide both direction to FSA and enhance its accountability."²²⁵

The GAO report also assessed the progress FSA had made in measuring and achieving its three strategic goals. It noted that FSA had made measurable progress in the general improvement of customer and employee satisfaction—two of its three strategic goals.²²⁶ With regard to its third goal (reduce unit costs), GAO found that the indicator FSA used to measure unit cost was deficient.

GAO also noted that the relationship between FSA and ED was still evolving:

227 In 2005, GAO removed the Title IV federal student aid programs from its High Risk List.²³⁸228 The student aid programs had been on GAO's High Risk List since the list's inception in 1990. In removing the Title IV student aid programs from the list, GAO found that while FSA still needed to take additional steps to fully address some of its recommendations, overall, management of the programs had improved enough to warrant removal from the High Risk List. In removing the student aid programs from its High Risk List, GAO cited many factors, including FSA's

• "sustained improvements to address financial mismanagement and internal control weaknesses,"
• receipt of an unqualified or "clean" opinion on its financial statements for FY2002-FY2004,
• actions to ensure that aid was not being awarded to ineligible students,
• actions to "integrat[e] its many disparate information systems,"
• steps to reduce student loan default rates, and
• steps to address its "human capital challenges."²³⁹

In more recent years, FSA has been229In the 2010s, FSA's performance in a variety of areas was mixed. For example, it was praised for its handling of the transition to 100% direct lending under the Direct Loan program and for other improvements to the administration of the Title IV aid programs, such as implementation of the IRS Data Retrieval Tool to allow students and their parents to import their federal income tax data directly into their FAFSA.²⁴⁰ Some more recent GAO and IG reports have noted cases in which FSA met its objectives.²⁴¹

Some sizable issues have also been identified in GAO and IG reports, by some Members of Congress, and by other230 However, sizable issues were identified by stakeholders. For example, FSA's oversight of its contracted loan servicers has comecame under scrutiny from Congress,²⁴²231 ED's IG,²⁴³232 GAO,²⁴⁴233 and the CFPB.²⁴⁵234 Seemingly large deficiencies in ED's implementation of and communication with borrowers about of the PSLF program have beenwere identified by GAO²⁴⁶235 and have garnered congressional interest as well.²⁴⁷236 Concerns have also beenwere also raised over FSA's ability to identify and address poorly performing IHEs or those that may be at risk of closure.²⁴⁸ These more recent 237

In more recent years, FSA has come under scrutiny for a variety of issues, including its financial audits,²³⁸ its Direct Loan program cost estimates,²³⁹ and its implementation of the FAFSA Simplification Act.²⁴⁰ Additionally, some previously identified issues, such as ED's communication to stakeholders, remained, albeit in different contexts.²⁴¹ These more recent and ongoing issues are discussed in more detail below.

Current Issues

ED's federal student aid operations were statutorily reorganized into a PBO with the hope of addressing significant management problems, including limited progress in integrating numerous data systems, student aid delivery delays and breakdowns, and infighting over student aid delivery turf among ED's senior managers. In this context, the then-untried PBO model seemed promising: It was built on the idea that business-like performance incentives and management flexibility would motivate and permit the organization and its leaders to provide economical, efficient, and effective service to student aid recipients. The organization would be given a higher-than-typical level of independence from political leadership and direction on operational processes in return for accountability for results, as measured by performance agreements and assessments. Potential concerns about independent policymaking by a PBO's leaders could be allayed by separating the policymaking functions from the operational functions. The former would remain accountable to Administration leadership, and the latter would be vested in the semi-independent PBO.²⁴⁹242 While the establishment of FSA as a PBO seems to have addressed at least some of the congressional concerns prompting its establishment, new issues have arisen in recent years, and some of the previously cited issues that led to the adoption of a PBO approach may yet remain unresolved.

others appear to be unresolved. In addition, new issues have arisen since, and some of these appear to be unresolved. Federal oversight entities and other outside observers have raisedidentified current issues pertaining to FSA, including those relating to oversight, transparency, and accountability. As these issues receive continued attention, and as Congress contemplates the reauthorization of the HEA, this final section of the report highlights some of the issues relating to FSA's operations that have garnered attention over the past several years and transparency. Regarding another long-term issue, stakeholder accountability, FSA appears to have made improvements. As these issues receive continued attention, this final section of the report highlights some of these. Issues highlighted and options for addressing them have, for the most part, been gathered from reports from GAO, ED's IG, and outside organizations. CRS has also identified some of the options available to address these issues.

In some instances, documents referenced hereTable 3 provides a high-level summary of the issues highlighted in this report. Table 3. Summary of Selected Current Issues Relating to FSA

Oversight Functions

As summarized here and discussed in detail below, observers have identified FSA shortcomings in the performance of some of its statutory oversight functions. HEA Section 141 specifies that one of FSA's functions as a PBO is to ensure the integrity of the federal student aid programs. Thus, FSA is tasked with overseeing a variety of entities that play a role in administration of the Title IV student aid programs. FSA's oversight of key student aid program participants such as IHEs and contracted loan servicers has been criticized in recent years. Some criticisms have focused on perceived deficiencies in FSA's assessment of IHEs, its ability to proactively inability to mitigate risk in the Title IV programs, and its ability to resolve issues at IHEs in a timely manner.

inconsistency in ensuring that IHEs meet Title IV requirements. Similarly, FSA has experienced difficulties in its monitoring of loan servicers, including failure to hold loan servicers accountable for noncompliance with contract terms. Some of these difficulties seem to have stemmed from FSA providing's incomplete or fragmented guidance to loan servicers, which havehas impeded theirservicers' efforts to comply with requirements for servicing federally held loans and to assist borrowers in navigating the aid programs. The oversight issues introduced here are explored in greater depth below.

Should any congressional action be taken Should Congress elect to take action to address these issues, Congress might considerconsideration might be given to whether or how it should specify desired outcomes and actions taken by FSA. There may be tradeoffs between meeting congressional goals and shoring up current perceived oversight deficiencies and enabling FSA to operate independently and with flexibility to address difficult or novel issues. Consideration might also be given to the apparent difficulties in separating operational functions delegated to FSA from policymaking functions retained by ED.

IHE Oversight

FSA oversees, through enforcement activities, IHE compliance in meeting requirements to participatewith requirements for participation in the Title IV aid programs. These requirements are intended to ensure that IHEs provide sufficient educational quality, provide a level of consumer protection, and ensure administrative and fiscal integrity of Title IV programs at IHEs.²⁵⁰243 Through oversight of the IHEs participating in the Title IV student aid programs, FSA is able to identify instances of noncompliance and take appropriate action, such as sanctioning IHEs or providing assistance to IHEs to come into compliance—both tools that can help mitigate student and taxpayer risk.

Interest in the issue ofOver the years, FSA's oversight of IHEs has been of interest given the large scale of the Title IV programs and multiple instances in which it has discharged billions of dollars in federal student loans in response to findings of institutional misrepresentations to students.²⁴⁴ GAO and ED's IG have launched several investigations into FSA's practices surrounding IHE Title IV oversight and have found that FSA often did not have complete written procedures or sufficient internal controls to monitor and ensure institutional Title IV compliance. These types of frailties could result in failure to identify some IHEs that are not complying with Title IV requirements as well as a failure to impose appropriate penalties when warranted.²⁴⁵

For example, one GAO report found that although FSA investigated and imposed penalties on some IHEs for making substantial misrepresentations to their students, it had not completed written procedures for those investigations and had not updated written procedures for such penalties in several years.²⁴⁶ GAO noted that as a result of changes in leadership priorities with respect to investigative work, FSA had changed, multiple times over several years, the structure of the primary units tasked with investigating IHE misrepresentation and staffing resources for such work. GAO asserted that complete written procedures could ensure that FSA would be investigating the highest-risk IHEs and using consistent investigative practices "regardless of staff experience or turnover" and that updated procedures for imposing penalties would help it "impose appropriate penalties to hold colleges accountable."²⁴⁷ FSA subsequently implemented all of GAO's recommendations related to GAO's findings.²⁴⁸

As another example, ED's IG found that while ED had established processes for assessing and recouping Title IV liabilities against IHEs that had closed, FSA did not always follow those processes. The IG also found that FSA did not always comply with procedures to send notices to its stakeholders about an IHE's pending or completed closure. The IG asserted that FSA's inconsistent application of such procedures may increase the risk that ED is unable to recoup institutional liabilities to ED, thus resulting in loss or misapplication of taxpayer funds.²⁴⁹ The primary office within FSA tasked with determining IHEs' Title IV liabilities is its School Eligibility and Oversight Service Group, which at the time of the IG's report was divided into multiple regional offices. Subsequently, in 2025, the Trump Administration instituted a reduction in force across ED that resulted in, among other actions, the elimination or consolidation of all but two such offices.²⁵⁰ ED has sought to assure stakeholders that the functions handled by the affected offices were "being transferred to other offices and experts."²⁵¹ However, loss of personnel and expertise may exacerbate issues such as those identified in the IG report. For example, a survey conducted by the National Association of Student Financial Aid Administrators (NASFAA)—a prominent professional organization of student financial aid administrators—indicates that some student aid administrators have experienced "delays, federal systems breakdowns, and a lack of clear federal communication" in the wake of FSA staff reductions.²⁵²

Ensuring IHEs compliance with Title IV requirements arguably addresses one of the HEA-specified functions of FSA as a PBO: ensuring integrity of the Title IV aid programs. It also arguably addresses FSA's strategic goal to "proactively manage the student aid portfolio and mitigate risk," which FSA describes as aimed to "strengthen FSA's role in working to ensure protection of customers and holding stakeholders accountable for their actions."²⁶¹ Under the two metrics FSA has identified as measures of its performance under this goal, FSA has had mixed success (see Table 4). However, neither metric seems to directly address IHE oversight and accountability in the Title IV aid programs.²⁶²

Loan Servicer Oversight

compliance with Title IV requirements arguably addresses one of the HEA-specified functions of FSA as a PBO: ensuring integrity of the Title IV aid programs. It also arguably addresses FSA's strategic goal to "strengthen engagement and accountability for education and financial institutions," which FSA describes as aimed to "deliver and safeguard federal student aid with integrity."²⁵³ FSA has been successful in meeting the three objectives and their performance indicators it has identified as measures of its performance under this goal. However, it is unclear whether FSA has resolved issues identified by stakeholders that are seemingly relevant to these objectives and indicators.²⁵⁴ Loan Servicer Oversight FSA-contracted loan servicers are tasked with various day-to-day administrative tasks associated with federal student loans and some other forms of student aid. FSA's oversight of loan servicers generally consists of ensuring that the loan servicers are meeting federal requirements for student loans (e.g., ensuring that borrowers' interest rates are correctly calculated) and fulfilling the terms and conditions of their contracts with FSA and providing. The agency also provides guidance to loan servicers to enable them to meet such standards. Oversight of contracted loan servicers can help FSA mitigate risks in the Title IV program and enable it to help ensure the provision of effective customer service to students and their families.

In recent For several years, issues associated with federal student loan servicing have received considerable attention. For instance, some borrowers and consumer advocates have alleged that somespecified loan servicers have engaged in undesirable conduct, such as steering borrowers away from more beneficial loan repayment options²⁶³255 or providing inaccurate or incomplete information to borrowers.²⁶⁴ Still others have detailed borrowers' experiencing problems when seeking to have loan servicers resolve servicing errors, identified issues with loan payment processing that may cause problems for borrowers seeking to repay their loans, and256 Others have detailed loan servicer billing and communication errors and delays that may lead to borrower injury (e.g., they may risk missing payments on their loans).²⁵⁷ Still others have identified issues with respect to the implementation of specific loan terms and conditions such as the PSLF program.²⁶⁵

Concernsincome-driven repayment (IDR) plans.²⁵⁸ Previously, concerns raised about loan servicing have focused in particular on whether FSA is sufficiently reviewing, monitoring, and holding loan servicers accountable. GAO hasFor example, in 2015 GAO reported that FSA's monitoring of loan servicers' interactioninteractions with borrowers may be insufficient to ensure that servicers are providing accurate information and quality customer service to borrowers. For instance, GAO found that FSA primarily monitored inbound calls from borrowers to loan servicers, which constitute a small percentage of the calls loan servicers participate in. Thus, GAO opined that "FSA may not be focusing its call monitoring on the most frequent and critical types of calls."²⁶⁶ GAO also found that FSA's call monitoring was poorly documented and its tracking of borrower complaints was disjointed, with complaints being tracked across multiple systems.²⁶⁷ While some of these issues have seemingly been resolved,²⁶⁸ it is unclear whether others have been resolved. Without a systematic approach to reviewing loan servicer interactions with borrowers, it may be difficult for FSA to target oversight of its loan servicers and improve its services to student loan borrowers.²⁶⁹

A difficulty loan servicers may face in complying with requirements for servicing federally held students259 As another example, ED's IG previously found that FSA rarely used available tools to hold loan servicers accountable and did not incorporate a performance metric relating to servicer compliance into the otherwise performance-driven terms of its contracts with loan servicers.²⁶⁰ Some of these issues have seemingly been resolved,²⁶¹ and in recent years FSA has taken some steps to hold loan servicers accountable for their errors.²⁶² Nonetheless, borrowers continue to voice loan servicing complaints.²⁶³ This may call into question whether FSA's recent actions to exert additional loan servicer oversight are sufficient.

Additionally, ED recently transitioned to a new loan servicing environment to, among other objectives, "hold servicers to a high level of performance."²⁶⁴ ED's IG has stated that this initiative "has significant potential to improve FSA's ability to oversee and hold accountable its key contractors servicing Federal student aid" but noted that FSA must ensure the initiative is effectively implemented and that FSA "follows through to hold its contractors accountable for effectively administering their responsibilities."²⁶⁵ A key feature of this new loan servicing environment is that, once fully implemented, borrowers would log into a single loan servicing platform (StudentAid.gov), rather than individual loan servicers' platforms, to manage their student loan accounts.²⁶⁶ However, some observers posit that "student loan servicing will not become simpler based on these updates" and that the single loan servicing platform "will be white-labeled on the StudentAid.gov website, which could make it more difficult to hold servicers accountable if third-party servicers cannot be accurately and readily identified by borrowers or other law enforcement entities."²⁶⁷

In the case of deficiencies in FSA's implementation of the IDR plans, ED instituted IDR "account adjustment" procedures under which it counted additional months toward IDR forgiveness (even if, per statute and regulation, those months did not count toward IDR forgiveness) to address "historical failures in the administration of the federal student loan programs."²⁶⁹ Doing so complied with one of GAO's recommendations. However, four other GAO recommendations remain outstanding, including a recommendation that FSA "develop and implement procedures for verifying counts of qualifying payments toward IDR forgiveness."²⁷⁰

In September 2025, FSA published a Request for Information in the Federal Register seeking stakeholder input on its development of a proposed Direct Loan Common Manual.²⁷¹ The purpose of the manual would be to establish consistent standards across loan servicing and collections. FSA intends that it will "promote consistency, transparency, and effectiveness" across loan servicing and collections functions.²⁷² Successful implementation may help address several issues FSA and loan servicers have faced in administering the Direct Loan program, such as gaps in authoritative guidance to loan servicers and attendant inconsistent interpretations of law, inefficiencies in Direct Loan administration, and borrower confusion.²⁷³

Ensuring loan servicer compliance with Title IV and contract requirements arguably addresses one of the HEA-specified functions of FSA as a PBO—ensuring integrity of the Title IV aid programs—and FSA's strategic goal to "proactively manage the student aid portfolio and mitigate risk." Under the two metrics FSA has identified as measures of its performance under this goal, FSA has had mixed results (see Table 4). While some of the metrics FSA has identified under this performance goal seem intended to address loan servicing practices, the extent to which they may do so is unclear. For instance, it is unclear whether the metrics used to assess the efficacy of FSA directly gauge the accuracy and completeness of information provided by their contracted loan services.

Discussion of Issues in Oversight and the PBO Structure

275

This issue may be exacerbated by recent (and sometimes frequent) forces outside of loan servicers' control. For instance, following the resumption of student loan payments after a more than three-year COVID-19 related pause and a near simultaneous implementation of new loan repayment plan, ED penalized loan servicers for sending incorrect billing statements. However, loan servicers indicated that such errors were not surprising "when the government doesn't have an operational plan, keeps changing it, does that at the last moment, and doesn't provide enough resources."²⁷⁶

Ensuring loan servicer compliance with Title IV and contract requirements arguably addresses one of the HEA-specified functions of FSA as a PBO—ensuring integrity of the Title IV aid programs—and FSA's strategic goal to "improve customer service and outcomes for students and borrowers." FSA generally met its targets for the indicators associated with this goal, including the single indicator that seems to directly evaluate loan servicer compliance (i.e., percentage of contractor interactions reviewed that received a passing score).

Some of these changes might involve tradeoffs between improving perceived oversight deficiencies and enabling FSA to operate independently and with flexibility to address difficult or novel issues. To the degree that additional statutorily specified direction might stipulate the way in which FSA is to conduct day-to-day operations, there may be potential for it to be in tension with the goal of accountability for results, as opposed to processes, that is key to the PBO model. Arguably, such action might also impair the agency's ability to make business-like operational decisions based on nonpolitical considerations rather than responsiveness to political leaders.

The choice of the PBO model was predicated on the idea that ED's political leadership would retain policymaking functions and that the PBO's role would be limited to operational functions.²⁷⁹277 Seemingly, ED and FSA have made organizational adjustments—such as FSA's Office of Policy Liaison and Implementation StaffPolicy Implementation and Oversight Directorate, which consults with the Secretary on the development and promulgation of Title IV student aid policies and regulations—that allow for FSA input into the formal policymaking process that is at least nominally under the authority of ED.

A different kind of policymaking—that which occurs as a byproduct of implementation—is a long -noted facet of public administration that might prove more difficult to address.²⁸⁰278 Issues around loan servicing illustrate how it may be difficult to completely remove policymaking from the operational functions delegated to FSA. For example, Congress sets the terms and conditions of federal student loans in general, and ED may add precision to them, while FSA designs and enforces contracts for loan servicers to administer the loan programs. However, a program's administration may shape how policies work in real life. For instance, some have observed that the payment structure of loan servicing contracts established by FSA may incentivizeprevious loan servicing contracts may have incentivized loan servicers to encourage borrowers to pursue one loan benefit (e.g., forbearance²⁸¹279) over another (e.g., income-based repayment), which may contradicthave contradicted ED's policy preferences.²⁸²280 Although such policymaking through implementation probably can be reduced by limiting the scope of discretion in a delegated authority or by increasing oversight of the agency's activities, these steps might reduce agency efficiency and hinder the effectiveness of the PBO model.

Transparency

Numerous outside parties have a stake in the aid programs and rely on FSA to provide timely and accurate information about them. Criticisms have been raised that FSA may lack sufficient transparency regarding Title IV program operations. Congress and other entities with oversight responsibilities (e.g., the CFPB)stakeholders sometimes seem to have incomplete or imperfect information on Title IV program performance and operations, which may make it difficult to make informed, well-honed policy or enforcement decisions.

Many consumers are decisions and, in some cases, to effectively implement federal student aid programs. Many consumers also seemingly have incomplete or imperfect consumer information on the Title IV programs and Title IV participation, which may make it difficult for them to make informed college-going and financial decisions.

Some have called on FSA to publicly release a variety of data²⁸³ and to enhance communications regarding such information.²⁸⁴enhance reporting and communications of information about the HEA Title IV aid programs.²⁸¹ It does not appear that FSA's PBO model would necessarily hinder transparency, nor would increasing transparency appear to be directly at odds with the model's design. However, there may be some tradeoffs between increasing transparency and maintaining the effectiveness of the PBO's business-like design, which was specifically intended to shield Title IV aid administration, at least in part, from political pressures and increase efficiency within the aid programs. Additionally, FSA must grapple with privacy requirements when contemplating the potential release of, and how to appropriately make available, many types of data in its possession.

Information for Policymakers and Stakeholders

Congress and other policymakers have an interest in understanding how the Title IV federal student aid programs operate and the outcomes associated with those programs, as the dollar amount of federal student aid awarded and number of aid recipients represents a large federal investment. In FY2019FY2024, FSA provided approximately $130.4120.8 billion in Title IV aid to approximately 11.09.9 million students,²⁸⁵282 and FSA managed a student loan portfolio encompassing approximately 45 million borrowers with outstanding federal student loans totaling about $1.56 trillion.²⁸⁶

283 Concerns have been raised that FSA may not provide access to information that may enable stakeholders to make informed policy recommendations and decisions. SomeHistorically, some stakeholders have noted that while FSA possesses large quantities of student-level records that measure grant and loan receipt, postsecondary education completion status, and loan repayment, FSA has "often been less than responsive to requests for data and research that would benefit the rest of the nation."²⁸⁷284 Even when information on Title IV program performance is made available, some have found it to be insufficient. For example, ED's IG recently found that while FSA has provided, through its Data Center, information on the loan portfolio that was formerly unavailable, it does not include other potentially relevant information, such as more detailed information on costs to the federal government associated with the income-driven repayment plans and loan forgiveness programs—two loan features that are increasingly being used by borrowers and garnering attention—that could assist policymakers and the public understand the future impact of those loan terms.²⁸⁸

Providing requested information to stakeholders arguably aligns with at least one of FSA's strategic goals: "Foster trust and collaboration among stakeholders." Based on the three performance metrics FSA has identified as measures of its performance under this goal, FSA has seemingly generally succeeded in fulfilling this goal in recent years (see Table 4). However, generally speaking, the performance metrics do not appear to encompass the provision of timely and useful information to stakeholders. Moreover, it is unclear how some of the three performance metrics (e.g., collection rate) address the strategic goal in general.²⁹³ The metric "Ease of doing business with FSA" seems most relevant to the quality and timeliness of its efforts to meet the information needs of the stakeholders discussed here. However, it is not clear that this metric is constructed in a manner that would capture the extent to which FSA's efforts are successful in meeting the information needs of policymaking and oversight entities who presumably constitute high-priority stakeholders.

Information for Members of the Public

GAO has stated that although ED has asserted it follows statutory and Office of Management and Budget reporting requirements for the Direct Loan program, given the program's scope, "policymakers and the public would benefit from additional information." GAO went on to state that ED may be

missing opportunities to help inform policymakers on relevant Direct Loan program performance and risk information to consider when implementing reforms and guiding policy, and opportunities to inform the public on how taxpayer dollars are supporting the program.²⁸⁵

we identified errors in the underlying data used to develop assumptions used to calculate the subsidy re-estimates for FSA's direct loan and loan guaranty programs. In addition, management identified other errors in the underlying data used in the subsidy re-estimates calculation.²⁸⁸

The underlying errors in data leading to the disclaimer of opinion could make it difficult to determine student loan program costs. Without an accurate determination of these costs, stakeholders may find it challenging to make informed policy decisions.

Relatedly, in 2025 ED's IG found that FSA did "not have readily available full accountings of appropriated funds, obligations, administrative expenses, and staffing" related to its implementation of the FAFSA Simplification Act and its student loan forgiveness initiatives for FY2021-2024.²⁸⁹ For example, the IG found that FSA did not have any lines of accounting specific to student loan forgiveness initiatives prior to FY2023, even though several of those initiatives were announced and/or implemented prior to FY2023. In response, FSA noted steps it could take to potentially provide the relevant data to the IG but stated doing so may take months and might not yield quality data. The IG asserted that FSA's ability to readily provide such information could "assist FSA in implementing such initiatives and provides transparency with external entities, such as Congress."²⁹⁰

As a final example, significant concerns were raised about FSA's ability to consistently provide timely and accurate guidance to IHEs regarding the implementation of the FAFSA Simplification Act and the rollout of the associated newly redesigned FAFSA. In December 2020, the FAFSA Simplification Act was enacted and represented a "significant overhaul of the processes and methodology used to calculate and award federal student aid."²⁹¹ However, FSA faced several challenges in implementing the act, including delays in FSA's release of the updated FAFSA and delays in FSA's processing of FAFSAs and providing schools with guidance and information needed to develop students' financial aid offers.²⁹² NASFAA asserted that early warning signs of potential issues with the updated FAFSA's rollout were present but that ED failed to take seriously its concerns about those issues. It also asserted that FSA "created a crisis of credibility by prioritizing public relations over straightforward, timely communication."²⁹³ Finally, NASFAA identified instances in which FSA failed to provide operational guidance at all. The net effect, the NASFAA asserted, "is a breakdown in trust between practitioners and the Department of Education."²⁹⁴ GAO subsequently reported on similar issues and a breakdown in trust between ED and IHEs.²⁹⁵

Generally speaking, none of FSA's strategic goals appears to directly address stakeholder transparency. At least one objective, "Engage with stakeholders to improve delivery of student aid" arguably aligns with stakeholder transparency. However, as described by FSA, the Ombudsman is tasked with leading FSA's efforts in this area, and the objective appears largely related to whether stakeholders such as IHEs and students are satisfied with the federal student aid data system.²⁹⁶ Thus, it is unclear whether the objective might also address the provision of timely and useful information to other stakeholders, such as policymakers.

In addition to the issues of FSA's transparency and communication regarding implementation of the FAFSA Simplification Act to IHEs described above, concerns were also raised about FSA's transparency and communications to students and their families during the process. GAO found that FSA did not consistently provide students with "timely and sufficient information or support to complete the new FAFSA."²⁹⁷ For example, GAO found that during the FAFSA rollout, FSA's call center did not meet the demand for needed support with the FAFSA, nor did it consistently provide students and their families with timely updates on the status of their FAFSAs or other solutions to problems they encountered during the FAFSA process.²⁹⁸ Such issues, GAO concluded, may have contributed to delaying or entirely preventing some students from successfully accessing and completing the FAFSA and to complicating students' college-attendance decisions.²⁹⁹

For example, GAO has found that while FSA makes available detailed information about loan terms and conditions, borrowers must often actively had taken steps to improve its communications to borrowers regarding one student loan term—closed school discharge—its outreach remains limited, and borrowers must often seek out the information. This limited outreach, GAO concluded, may result in some borrowers being unaware or uncertain about whether they are eligible for student loan debt relief due to their schools' closures.³⁰⁰ seek out the information.²⁹⁸ Moreover, FSA often relies on its loan servicers to communicate loan terms and conditions to borrowers, but there may be inconsistencies or incompleteness among loan servicers in the information they provide to borrowers.²⁹⁹

Communications about program requirements among borrowers, FSA, and loan servicers may also be imperfect.³⁰⁰301 These issues are similar to those reported in older GAO reports with respect to other student loan terms and conditions.³⁰² Inconsistent and/or imperfect information about program terms may lead to borrowers' being unaware of or confusedlack of awareness or confusion about program requirements, which may put them. This shortage of information about program terms may put borrowers at risk of making suboptimal financial decisions, some of which may lead to financial distress such as loan delinquency or default. FSA has taken steps to increase borrower awareness of some loan terms and conditions. However, all communication issues may not be fully resolved.³⁰¹303 In response to some of thesesuch concerns, Congress has on occasion directed FSA to perform customer outreach.³⁰²

304 Providing complete and accurate information to customers arguably addresses some of the HEA-specified purposes of FSA as a PBO: "to improve service to students and other participants in the student financial assistance programs authorized under title IV, including making those programs more understandable to students and their parents."³⁰³305 It also arguably aligns with FSA's strategic goal of "improv[ing] quality of service for customers across the entire student aid life cycle." Under the five metricsto "improve customer service and outcomes for students and borrowers." Under the indicators FSA has identified as measures of its performance under this goal, FSA has seemingly generally succeeded in fulfilling this goal in recent years (see Table 4). However, concerns over communications with customers remain.³⁰⁴

2). However, FSA did not meet any of the performance indicator targets under an apparently related objective to "provide accurate, seamless, easy, and customized interactions through the student aid lifecycle" in FY2024. FSA attributed its failure to meet these targets primarily to the FAFSA rollout associated with its implementation of the FAFSA Simplification Act.³⁰⁶ Discussion of Issues in Transparency and the PBO Structure

Some have suggested that FSA's independence and leadership by non-political appointees enable it to be unresponsive to requests for information from Congress, political and career staff within ED, and outside stakeholders. They point out that the COO is accountable to the Secretary on the basis of measurable organizational and individual performance goals, arguably rendering removal by the Secretary or the President more difficult politically.³⁰⁵307 With better access to information, it is argued, researchers and policymakers could more readily judge policies and federal investments.³⁰⁶308 However, other factors, such as compliance with other federal statutes (e.g., ED's interpretation of its responsibilities under the Privacy Act of 1974), may hinder FSA's responsiveness to information requests.

Increasing access to Title IV program performance and operations information might detract from or improve the effectiveness of the PBO's business-like design features. Sharing such information generally entails the ongoing development of information-sharing policies and procedures. Staff hours would be needed to carry out functions associated with the dissemination process, which could result in reduced economy and efficiency in addressing the PBO's statutory purposes—which do not explicitly include data sharing. Furthermore, it could increase scrutiny and evaluation of the agency's operational processes rather than the results by which PBO performance is to be measured. On the other hand, the sharing of such information could improve the ability of stakeholders to assess the results of FSA's work, perhaps using different measures of performance, and hence address accountability for results beyond the specific targets identified by FSA.

Stakeholder Accountability

Congressional proponents of using the PBO model for the delivery of federal student financial assistance expected it would harness private-sector-like incentives to drive FSA improvements. Among the aims of using this model was to "improve the level of service to program participants." As stated in a 1998 committee report of PBO-related legislation,

The Committee … believes the creation of a PBO will result in a more efficient, effective, less expensive and less bureaucratic financial aid delivery system. The end result should be a system that is easy for students and parents to use and one that ensures that students have the information they need to select the education that is best for them—all while ensuring that the taxpayer funds are being used efficiently and effectively.³⁰⁹

Some observers, such as GAO, have scrutinized FSA's informational communications with IHEs and students and found them lacking. For example, GAO found that FSA failed to provide IHEs and students adequate and timely information during the implementation of the FAFSA Simplification Act. GAO's post-hoc review attributed the problems, in part, to short deadlines, FAFSA overhaul delays, and erroneous assumptions about the level of support that would be needed by students and IHEs during the rollout and consequently inadequate communication resources (e.g., call center employees). GAO did not attribute these shortcomings to a failure of the PBO model. Under the performance-based model, accountability for poor performance—whatever the reasons—is the mechanism intended to drive organizational improvement. Following the troubled FAFSA rollout, the FSA COO stepped down. It is unclear the degree to which his departure was related to the FAFSA rollout.³¹⁰

Concerns about accountability relate to whether FSA is fulfilling its statutory mandate to consult with such stakeholders³⁰⁷311 in developing performance plans and annual reports and whether FSA is leveraging information garnered from stakeholder interactions to make improvements. They also relate to whether FSA is sufficiently responsive to customer needs. Consideration might be given to whether improvement of performance agreements and measures and more meaningful use of stakeholder feedback may streamline operations at FSA and/or improve customer service to students and other aid participants—two statutorily specified purposes of establishing FSA as a PBO. Criticisms in this area raise questions about the effectiveness of the PBO's statutory performance planning and measurement mechanisms. Consideration might be given to amending these provisions.

At least one stakeholder organization, representing student aid administrators, has reported that while FSA may reach out to stakeholders for input Previously, NASFAA reported that FSA engagement with stakeholders in developing its performance plans and annual reports, the engagement may be may have been only perfunctory in nature and may not providehave provided stakeholders a meaningful opportunity to provide potentially useful feedback to FSA to enable it to fulfill its functions.³⁰⁸ The same stakeholder organization.³¹² NASFAA has also asserted that performance metrics developed by FSA and ED arewere vague or inappropriate.³⁰⁹ GAO has raised concerns regarding how FSA communicates with aid recipients and whether it leverages information from customer interactions to make program improvements.³¹⁰

The extent to which FSA engages with and leverages information from student aid recipients and organizations who represent them may affect students and their families313 Since that time, NASFAA reported some apparent improvements, with FSA incorporating several of its recommendations in its FY2020-2024 strategic plan.³¹⁴ Additionally, ED's IG has found that the goals, objectives, and majority of performance indicators included in the FY2020-FY2024 plan were effective. Nonetheless, the IG also found that FSA did not have documented processes to ensure that each strategic plan was ready and available at the beginning of the performance period covered by the plan, which could lead to FSA officials and employees not fully understanding expectations for the performance period.³¹⁵ When FSA does not fully engage with and leverage information from student aid recipients and organizations who represent them, students and their families may be adversely affected. They may be limited in their ability to shop around for postsecondary financial assistance, as Title IV student aid makes up approximately half of the financial assistance available to postsecondary students.³¹¹

316 Moreover, student loan borrowers often have even fewer options regarding choosing loan products to finance their postsecondary education, as private. Private lenders are often unwilling to provide loans to individuals who may have limited creditworthiness, whereas Title IV student loans are generally made without regard to creditworthiness. In those instances where private education loans are made, they often do not contain the same favorable terms and conditions (e.g., availability of loan forgiveness programs and favorable interest rates) as Title IV student loans.³¹²317 It might be argued that because FSA has no comparable competitors, it may have less motivation to seek or respond to customer feedback to improve services.

Arguably Notwithstanding improvement in stakeholder accountability during the past few years, the criticisms of FSA discussed above expose a potential flaw in the PBO model as implemented under the HEA. The ED Secretary and the FSA COO have a joint responsibility to set (in consultation with stakeholders) and measure organizational performance.³¹³318 They each have an incentive (as leaders of ED and FSA, respectively) to show continuous improvement in FSA performance. This incentive might affect the degree to which stakeholder input is incorporated into the process as well as the specificity and nature of the goals and measures adopted. Vague goals and measures with seeminglyand perfunctory stakeholder feedback processes could mask performance problems that might exist.

Some potential changes in this area could maintain FSA as a PBO but also modify statutory provisions related to accountability and stakeholder input. Improvement of performance agreements and measures would seemingly be in line with the PBO model's results orientation. For example, Congress might more specifically identify in statute the domains and metrics to be used in establishing annual performance plans and evaluating agency performance. Such provisions have been enacted in other contexts, such as the performance accountability system that was established by the Workforce Innovation and Opportunity Act.³¹⁴319 Similarly, more meaningful incorporation of certain types of stakeholder feedback into the performance plan and evaluation process would seemingly be consistent with the PBO model. Potential approaches to emphasizing the importance of stakeholder input during this planning and assessment might include specifying in statute a more formal input process. For example, Congress has directed state agencies to solicit written comments from the public and to respond to such comments in writing when establishing career and technical education performance standards.³¹⁵

Appendix A. Selected Bibliography

Appendix B. Selected Acronyms Used in This Report

CRS requested that the U.S. Department of Education review portions of this report that describe operations and administrative practices for accuracy. Specifically, 320 Appendix. Selected Acronyms Used in This Report