Department of Education awarded Nelnet Servicing LLC $95.5M for student financial aid servicing in 2013

Contract Overview

Contract Amount: $95,485,407 ($95.5M)

Contractor: Nelnet Servicing LLC

Awarding Agency: Department of Education

Start Date: 2013-01-01

End Date: 2013-12-31

Contract Duration: 364 days

Daily Burn Rate: $262.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: IGF::CT::IGF CRITICAL FUNCTION - TASK ORDER 0006 PROVIDES SERVICING OF TITLE IV STUDENT FINANCIAL AID IN ACCORDANCE WITH SECTION 2212 OF THE HEALTH CARE AND EDUCATION RECONCILIATION ACT OF 2010 (PUB.L.111-152, 124 STAT. 1029)FOR THE PERIOD OF JANUARY 01, 2013 TO DECEMBER 31, 2013.

Place of Performance

Location: LINCOLN, LANCASTER County, NEBRASKA, 68508

State: Nebraska Government Spending

Plain-Language Summary

Department of Education obligated $95.5 million to NELNET SERVICING LLC for work described as: IGF::CT::IGF CRITICAL FUNCTION - TASK ORDER 0006 PROVIDES SERVICING OF TITLE IV STUDENT FINANCIAL AID IN ACCORDANCE WITH SECTION 2212 OF THE HEALTH CARE AND EDUCATION RECONCILIATION ACT OF 2010 (PUB.L.111-152, 124 STAT. 1029)FOR THE PERIOD OF JANUARY 01, 2013 TO DECEMBER 31, 201… Key points: 1. The contract focused on servicing Title IV student financial aid, a critical function for federal student loan programs. 2. This task order was awarded under full and open competition, suggesting a competitive bidding process. 3. The contract type, Fixed Price with Economic Price Adjustment, aims to manage cost fluctuations over the performance period. 4. The duration of the contract was approximately one year, indicating a short-term operational need. 5. The award value of $95.5 million for a single year of servicing highlights the significant scale of federal student loan administration. 6. The North American Industry Classification System (NAICS) code 522390 points to activities related to credit intermediation.

Value Assessment

Rating: fair

The award of $95.5 million for one year of student financial aid servicing represents a substantial investment. Benchmarking this specific task order's value is challenging without comparable data for similar servicing contracts from the same period. However, the fixed-price nature with economic price adjustment suggests an attempt to control costs while accounting for potential market shifts. The overall value proposition depends on the efficiency and effectiveness of the servicing provided by Nelnet.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders had the opportunity to submit proposals. The presence of 5 bidders suggests a reasonably competitive environment for this type of service. A competitive process is generally expected to drive down prices and encourage innovation, leading to better value for the government.

Taxpayer Impact: Taxpayers benefit from a competitive process as it is intended to secure the most cost-effective solution for essential government services like student loan servicing.

Public Impact

Students and educational institutions benefit from the uninterrupted servicing of Title IV federal financial aid programs. The contract ensures the continued operation of critical functions related to student loans, including disbursement, repayment, and customer service. The geographic impact is national, as federal student financial aid programs serve students across the United States. The workforce implications involve personnel at Nelnet Servicing LLC dedicated to managing and processing student financial aid.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to economic price adjustment clauses if market conditions fluctuate significantly.
Reliance on a single contractor for a critical function could pose risks if performance issues arise.
The fixed-price nature might limit flexibility in adapting to unforeseen changes in servicing requirements.

Positive Signals

Awarded under full and open competition, indicating a robust bidding process.
The contract addresses a core government function, ensuring continuity of student financial aid services.
The use of economic price adjustment aims to mitigate risks associated with inflation or other economic factors.

Sector Analysis

The federal student financial aid servicing sector is a significant part of the broader financial services industry. This contract falls under credit intermediation, specifically focusing on the administration of government-backed student loans. The market for loan servicing is substantial, with various private and public entities involved. Benchmarking this contract's value requires comparison against other large-scale federal or private student loan servicing agreements, considering the scope of services and the volume of loans managed.

Small Business Impact

There is no indication from the provided data that this contract included small business set-asides or specific subcontracting requirements for small businesses. The focus appears to be on securing the most capable provider for a large-scale federal function, which may favor larger, established companies. Further analysis would be needed to determine if subcontracting opportunities were available to small businesses within the scope of this award.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Education's program offices responsible for student financial aid. Accountability measures would be defined in the contract's terms and conditions, likely including performance metrics and reporting requirements. Transparency is generally maintained through contract award databases, though specific operational details might be proprietary. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Federal Student Loan Servicing
Title IV Student Financial Aid Programs
Department of Education Contracts
Credit Intermediation Services

Risk Flags

Potential for cost escalation due to EPA clause.
Reliance on a single provider for critical function.
Data security and privacy concerns inherent in financial data management.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $95.5 million to NELNET SERVICING LLC. IGF::CT::IGF CRITICAL FUNCTION - TASK ORDER 0006 PROVIDES SERVICING OF TITLE IV STUDENT FINANCIAL AID IN ACCORDANCE WITH SECTION 2212 OF THE HEALTH CARE AND EDUCATION RECONCILIATION ACT OF 2010 (PUB.L.111-152, 124 STAT. 1029)FOR THE PERIOD OF JANUARY 01, 2013 TO DECEMBER 31, 2013.

Who is the contractor on this award?

The obligated recipient is NELNET SERVICING LLC.

Which agency awarded this contract?

Awarding agency: Department of Education (Department of Education).

What is the total obligated amount?

The obligated amount is $95.5 million.

What is the period of performance?

Start: 2013-01-01. End: 2013-12-31.

What was the contractor's track record prior to this award?

Information regarding Nelnet Servicing LLC's specific track record prior to this January 2013 contract award is not detailed in the provided data. However, Nelnet is a well-established entity in the student loan servicing industry. Its history with federal student loan programs would be a key factor in the Department of Education's decision-making process during the full and open competition. A thorough review would typically involve assessing past performance on similar contracts, financial stability, and compliance records. The fact that they were awarded this significant task order suggests a positive assessment of their capabilities by the contracting agency.

How does the $95.5 million award compare to other federal student loan servicing contracts?

The $95.5 million award for one year of servicing Title IV student financial aid is a substantial figure, reflecting the scale of the federal student loan portfolio. To provide a precise comparison, one would need to analyze other federal student loan servicing contracts awarded around the same period (2013) or in subsequent years. Factors such as the number of loans serviced, the types of services provided (e.g., origination, repayment, default management), and the contract duration would be crucial for a meaningful benchmark. Without direct comparative data, it's difficult to definitively state if this represents high or low value, but it indicates a significant operational expenditure for the Department of Education.

What are the primary risks associated with this type of contract?

The primary risks associated with this contract include performance risk, where Nelnet Servicing LLC might fail to meet the required service levels, impacting student borrowers and the Department of Education's objectives. There's also financial risk, particularly concerning the economic price adjustment (EPA) clause; if economic factors escalate rapidly, the cost to the government could exceed initial projections. Operational risks, such as data security breaches or system failures, are also significant given the sensitive nature of financial data. Finally, there's a risk of contractor dependency, where the government becomes reliant on a single entity for a critical function, potentially limiting future flexibility or leverage.

How effective was the servicing provided under this contract?

The provided data does not include metrics on the effectiveness of the servicing provided by Nelnet Servicing LLC under this specific task order. Effectiveness would typically be measured by key performance indicators (KPIs) such as borrower satisfaction rates, timeliness of loan disbursements and repayment processing, accuracy of account information, and success rates in managing loan defaults. The Department of Education would have internal mechanisms to monitor these KPIs throughout the contract period. A comprehensive assessment of effectiveness would require access to performance reports, audit findings, and feedback from stakeholders.

What were historical spending patterns for student loan servicing by the Department of Education?

Historical spending patterns for student loan servicing by the Department of Education have generally been substantial, reflecting the size and complexity of the federal student loan programs. Prior to and following 2013, the Department has contracted with multiple servicers to manage its vast portfolio. Spending fluctuates based on factors like the volume of loans in repayment, changes in federal policy, and the number and size of contracts awarded. The $95.5 million for this 2013 task order is indicative of the significant, ongoing investment required to administer these programs effectively. Analyzing multi-year spending trends would reveal patterns in contract consolidation, shifts in servicing models, and overall budget allocations for loan administration.

What is the significance of the 'Other Activities Related to Credit Intermediation' NAICS code?

The NAICS code 522390, 'Other Activities Related to Credit Intermediation,' signifies that the primary business activity of the contractor, Nelnet Servicing LLC, in this context, is related to facilitating credit transactions but doesn't fit neatly into more specific categories like banking or mortgage lending. For student loan servicing, this code is appropriate because it encompasses the administrative and operational functions involved in managing loans, including processing payments, managing borrower accounts, and providing customer support. It highlights that the contract's purpose is to support the flow of credit, specifically federal student financial aid, through expert intermediation services.

Industry Classification

NAICS: Finance and Insurance › Activities Related to Credit Intermediation › Other Activities Related to Credit Intermediation

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 5

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Address: 121 S 13TH ST STE 201, LINCOLN, NE, 68508

Business Categories: Category Business, Limited Liability Corporation, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $95,485,407

Exercised Options: $95,485,407

Current Obligation: $95,485,407

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Parent Contract

Parent Award PIID: EDFSA09D0013

IDV Type: IDC

Timeline