Department of Education's $141M student aid servicing contract awarded to Navient Corporation

Contract Overview

Contract Amount: $141,164,210 ($141.2M)

Contractor: Navient Corporation

Awarding Agency: Department of Education

Start Date: 2015-09-01

End Date: 2016-12-31

Contract Duration: 487 days

Daily Burn Rate: $289.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: IGF::CT::IGF / CRITICAL FUNCTION IDIQ: SERVICING OF TITLE IV STUDENT FINANCIAL AID. TASK ORDER: SERVICING OF TITLE IV STUDENT FINANCIAL AID, FROM 9/1/2015 THROUGH 8/31/2016. PROVIDES FUNDING FOR TITLE IV AID SERVICING THROUGH APPROXIMATELY 12/31/2015. PROVIDES FUNDING FOR THE DELINQUENCY REDUCTION COMPENSATION PROGRAM, IN A NOT-TO-EXCEED AMOUNT OF $500,000 PER QUARTER AND $2,000,000 ANNUALLY.

Place of Performance

Location: WILMINGTON, NEW CASTLE County, DELAWARE, 19801

State: Delaware Government Spending

Plain-Language Summary

Department of Education obligated $141.2 million to NAVIENT CORPORATION for work described as: IGF::CT::IGF / CRITICAL FUNCTION IDIQ: SERVICING OF TITLE IV STUDENT FINANCIAL AID. TASK ORDER: SERVICING OF TITLE IV STUDENT FINANCIAL AID, FROM 9/1/2015 THROUGH 8/31/2016. PROVIDES FUNDING FOR TITLE IV AID SERVICING THROUGH APPROXIMATELY 12/31/2015. PROVIDES FUNDING FOR THE DEL… Key points: 1. Contract focuses on servicing Title IV student financial aid, including a delinquency reduction program. 2. The contract was awarded under full and open competition, indicating a competitive bidding process. 3. Performance period spans from September 2015 to December 2016, with specific funding allocations. 4. The contract type is Fixed Price with Economic Price Adjustment, allowing for cost fluctuations. 5. Navient Corporation is the sole awardee for this specific task order. 6. The contract value is substantial, reflecting the scale of federal student aid administration.

Value Assessment

Rating: fair

The contract value of $141 million for student financial aid servicing over approximately 15 months appears to be within a reasonable range for a federal contract of this scope. Benchmarking against similar large-scale student loan servicing contracts would provide a clearer picture of value for money. The fixed-price with economic price adjustment structure suggests an attempt to control costs while accounting for potential market shifts. However, without detailed cost breakdowns or comparisons to private sector servicing costs, a definitive value assessment is challenging.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting that multiple bidders had the opportunity to submit proposals. The presence of four bids indicates a degree of market interest and competition. A competitive process generally leads to better price discovery and potentially more favorable terms for the government. The specific number of bidders (4) provides a baseline for assessing the intensity of the competition.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it drives down prices and encourages innovation among contractors, ensuring the government receives the best possible value for its investment in student aid servicing.

Public Impact

Benefits millions of students and borrowers by ensuring the proper servicing of their federal financial aid. Facilitates the administration of Title IV federal student financial aid programs. Supports the Delinquency Reduction Compensation Program, aiming to improve student loan repayment rates. Impacts the financial services sector involved in student loan management. Ensures continuity of essential student financial aid services for educational institutions and students.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to the economic price adjustment clause if market conditions fluctuate significantly.
Reliance on a single contractor (Navient) for this critical function, raising concerns about vendor lock-in and future competition.
The complexity of student loan servicing can lead to administrative errors impacting borrowers.

Positive Signals

Awarded through full and open competition, suggesting a robust selection process.
Includes a specific program to address loan delinquency, indicating a focus on borrower success.
The contract duration and funding provide stability for essential student aid services.

Sector Analysis

The federal student loan servicing market is a significant segment within the broader financial services industry. Contracts like this are crucial for the Department of Education to manage the vast portfolio of federal student loans. The market involves specialized companies with expertise in loan administration, repayment, and delinquency management. Benchmarking against other large federal contracts for similar financial services would be necessary for a comprehensive sector analysis.

Small Business Impact

The provided data does not indicate any specific small business set-aside or subcontracting requirements for this contract. Therefore, the direct impact on small businesses is not evident from this information. Further analysis would be needed to determine if small businesses were involved as subcontractors or if there were opportunities missed for small business participation.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Education's program offices responsible for student financial assistance. Inspector General audits and performance reviews are standard mechanisms to ensure accountability and transparency. The contract's fixed-price nature with economic price adjustment requires careful monitoring of cost changes to ensure fairness and prevent unwarranted price increases.

Related Government Programs

Federal Student Loan Program
Title IV Student Financial Aid
Student Loan Servicing Contracts
Department of Education Financial Management

Risk Flags

Contractor Performance Concerns
Potential for Cost Overruns
Data Security Risks
Borrower Complaint Volume

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $141.2 million to NAVIENT CORPORATION. IGF::CT::IGF / CRITICAL FUNCTION IDIQ: SERVICING OF TITLE IV STUDENT FINANCIAL AID. TASK ORDER: SERVICING OF TITLE IV STUDENT FINANCIAL AID, FROM 9/1/2015 THROUGH 8/31/2016. PROVIDES FUNDING FOR TITLE IV AID SERVICING THROUGH APPROXIMATELY 12/31/2015. PROVIDES FUNDING FOR THE DELINQUENCY REDUCTION COMPENSATION PROGRAM, IN A NOT-TO-EXCEED AMOUNT OF $500,000 PER QUARTER AND $2,000,000 ANNUALLY.

Who is the contractor on this award?

The obligated recipient is NAVIENT CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $141.2 million.

What is the period of performance?

Start: 2015-09-01. End: 2016-12-31.

What is Navient Corporation's track record in servicing federal student loans prior to and during this contract period?

Navient Corporation has a long history of servicing federal and private student loans, having spun off from Sallie Mae in 2014. Prior to and during the period of this contract (2015-2016), Navient was one of the largest servicers of federal student loans. The company managed loan origination, repayment, and customer service for millions of borrowers. However, Navient has also faced scrutiny and legal challenges related to its servicing practices, including allegations of steering borrowers into forbearance, misapplying payments, and providing inadequate customer service. These issues have led to investigations by state attorneys general and the Consumer Financial Protection Bureau (CFPB), resulting in significant settlements and consent decrees. Understanding these broader performance issues is crucial when evaluating the effectiveness and value of specific contracts awarded to Navient during this period.

How does the per-student servicing cost under this contract compare to industry benchmarks?

Determining the precise per-student servicing cost under this $141 million contract for the specified period (approximately 15 months) is challenging without knowing the exact number of student accounts serviced. However, industry benchmarks for federal student loan servicing costs can vary significantly based on the complexity of the portfolio (e.g., direct loans vs. FFELP loans, delinquency rates) and the specific services provided. Historically, per-student servicing costs for federal loans have been estimated to range from $10 to $30 annually, depending on the servicer and the services rendered. Given the contract's total value and duration, the implied annual cost would need to be calculated against the number of active accounts managed to make a meaningful comparison. Without that specific volume data, a direct benchmark comparison remains speculative.

What were the primary risks associated with this contract, and how were they mitigated?

Key risks associated with this contract likely included operational risks such as data security breaches, errors in loan processing or billing, and failure to meet performance metrics related to borrower communication and delinquency management. There were also financial risks, such as the potential for cost overruns due to the economic price adjustment clause, and risks related to contractor performance and compliance with federal regulations. Mitigation strategies would typically involve robust contract oversight by the Department of Education, including performance monitoring, regular reporting requirements, audits, and clear penalties for non-compliance. The fixed-price nature of the contract, despite the economic adjustment, also aimed to provide some cost certainty. Furthermore, the competitive award process itself served as a risk mitigation tool by selecting a contractor deemed capable of meeting the requirements.

How effective was the Delinquency Reduction Compensation Program funded under this contract?

The effectiveness of the Delinquency Reduction Compensation Program funded under this contract is not directly quantifiable from the provided data. This program was allocated a not-to-exceed amount of $500,000 per quarter and $2,000,000 annually. Such programs are typically designed to incentivize servicers to proactively engage with borrowers who are at risk of delinquency or default, offering solutions like repayment plans or deferments. The success of such a program depends on its specific design, implementation by the servicer (Navient), and the overall economic conditions affecting borrowers. Without specific performance metrics, outcome data (e.g., reduction in delinquency rates attributable to the program), or independent evaluations, assessing its effectiveness remains difficult.

What was the historical spending pattern for Title IV student financial aid servicing by the Department of Education leading up to this contract?

Prior to this $141 million contract awarded in 2015, the Department of Education had a long-standing practice of contracting out the servicing of federal student loans. Spending in this area has historically been substantial, reflecting the large volume of federal student loan debt. The transition from the FFELP program (which relied heavily on private lenders and servicers) to the Direct Loan Program, and subsequent legislative changes, influenced spending patterns. Annual spending on loan servicing contracts has fluctuated over the years, influenced by factors such as loan volume, borrower default rates, and changes in servicing requirements. This $141 million task order represents a significant, but not unprecedented, level of expenditure for a specific servicing period within the broader context of federal student aid administration.

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: 4

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

Evaluated Preference: NONE

Contractor Details

Address: 123 S JUSTISON ST STE 300, WILMINGTON, DE, 19801

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $141,164,210

Exercised Options: $141,164,210

Current Obligation: $141,164,210

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Parent Contract

Parent Award PIID: EDFSA09D0015

IDV Type: IDC

Timeline