Department of Education's $71.8M contract for student loan servicing awarded to Nelnet Servicing LLC

Contract Overview

Contract Amount: $71,815,929 ($71.8M)

Contractor: Nelnet Servicing LLC

Awarding Agency: Department of Education

Start Date: 2014-01-01

End Date: 2014-08-31

Contract Duration: 242 days

Daily Burn Rate: $296.8K/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 TASK ORDER 0012 - SERVICING OF TITLE IV AID

Place of Performance

Location: LINCOLN, LANCASTER County, NEBRASKA, 68508

State: Nebraska Government Spending

Plain-Language Summary

Department of Education obligated $71.8 million to NELNET SERVICING LLC for work described as: IGF::CT::IGF / CRITICAL FUNCTION TASK ORDER 0012 - SERVICING OF TITLE IV AID Key points: 1. Contract value represents a significant investment in student loan administration. 2. Full and open competition suggests a potentially competitive pricing environment. 3. Fixed-price contract with economic price adjustment introduces some cost variability. 4. Contract duration of 242 days indicates a short-term servicing need. 5. Awarded by the Department of Education, highlighting its role in federal student aid. 6. The North American Industry Classification System (NAICS) code 522390 points to 'Other Activities Related to Credit Intermediation'.

Value Assessment

Rating: fair

The contract value of $71.8 million for a 242-day period for student loan servicing appears substantial. Benchmarking against similar, longer-term federal student loan servicing contracts would be necessary for a precise value-for-money assessment. However, given the fixed-price nature with economic price adjustments, the agency has some control over costs, but potential inflation could impact the final expenditure. The number of bids received (4) provides a limited basis for comparison.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit a bid. Four bids were received, suggesting a moderate level of competition for this servicing task order. While four bidders is not a large number, it does provide some basis for price discovery and indicates that multiple entities were interested and capable of performing the required services.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a competitive environment that can lead to more favorable pricing and better service quality. The presence of four bidders suggests that taxpayer funds were likely used efficiently in this instance.

Public Impact

Benefits federal student loan borrowers by ensuring continued servicing of their loans. Delivers essential administrative services for Title IV federal student aid programs. Geographic impact is national, covering all borrowers serviced under this contract. Workforce implications are primarily within the contractor's organization, Nelnet Servicing LLC.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to economic price adjustment clause.
Limited competition (4 bidders) may not have driven the absolute lowest price.
Short contract duration might lead to inefficiencies in transition or setup.

Positive Signals

Awarded through full and open competition, promoting fairness.
Contractor has a track record in student loan servicing.
Clear definition of services for Title IV aid.

Sector Analysis

The student loan servicing sector is a critical component of the financial services industry, particularly within the government's role in higher education finance. This contract falls under 'Other Activities Related to Credit Intermediation,' a broad category that encompasses various financial services. The market for federal student loan servicing is dominated by a few large, experienced companies, and contracts are often awarded through competitive bidding processes to manage the vast portfolio of federal student loans.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications for small businesses stemming from a small business set-aside. The primary contractor, Nelnet Servicing LLC, is a large entity, and its subcontracting practices would need to be assessed separately if applicable to this specific task order.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Education's contracting officers and program managers. They are responsible for monitoring performance, ensuring compliance with contract terms, and managing any modifications or disputes. Transparency is generally maintained through contract databases like FPDS, where award details are publicly accessible. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

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

Risk Flags

Economic Price Adjustment Clause
Moderate Competition Level
Short Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $71.8 million to NELNET SERVICING LLC. IGF::CT::IGF / CRITICAL FUNCTION TASK ORDER 0012 - SERVICING OF TITLE IV AID

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 $71.8 million.

What is the period of performance?

Start: 2014-01-01. End: 2014-08-31.

What is the historical spending pattern for Nelnet Servicing LLC with the Department of Education for similar loan servicing contracts?

Analyzing historical spending with Nelnet Servicing LLC for similar loan servicing contracts with the Department of Education is crucial for understanding the contractor's track record and the government's reliance on their services. While this specific task order is for $71.8 million over 242 days, a broader review of past awards to Nelnet would reveal the scale and duration of their previous engagements. This includes examining the total value of contracts awarded, the specific services rendered (e.g., origination, servicing, default management), and the performance history associated with those contracts. Understanding if Nelnet has consistently received large-value contracts for loan servicing suggests a level of established trust and capability, but also warrants scrutiny to ensure competitive pricing and effective service delivery over time. Comparing current contract terms and pricing to historical ones can highlight trends in cost efficiency and service scope.

How does the per-unit cost of servicing compare to other federal student loan servicing contracts?

A detailed comparison of the per-unit cost for servicing federal student loans under this contract against other federal contracts is essential for assessing value for money. This would involve calculating the cost per loan serviced, per payment processed, or per borrower interaction, depending on the contract's specific metrics. Benchmarking against contracts awarded to other large servicers like MOHELA or Maximus, or even against Nelnet's own previous contracts, would provide context. Factors such as the complexity of loan types, the age of the loan portfolio, and the specific services required (e.g., default aversion, repayment plan management) can influence per-unit costs. If this contract's per-unit costs are significantly higher than comparable contracts without a clear justification (like enhanced services or a more challenging portfolio), it could indicate potential inefficiencies or less competitive pricing.

What are the key performance indicators (KPIs) for this contract and how has Nelnet performed against them historically?

Key Performance Indicators (KPIs) for federal student loan servicing contracts typically include metrics such as borrower satisfaction rates, timeliness of payment processing, accuracy of account information, default prevention success rates, and compliance with federal regulations. For this specific task order, the Department of Education would have defined specific KPIs in the contract. Analyzing Nelnet's historical performance against these or similar KPIs on prior contracts is vital. Consistent achievement of high performance ratings suggests reliability and effectiveness. Conversely, a history of missed targets or performance issues could indicate a higher risk for this contract, potentially impacting borrower experience and the government's financial stewardship. Access to performance reports or contractually mandated quality assurance reviews would be necessary for a thorough assessment.

What is the risk profile associated with Nelnet Servicing LLC as a contractor for critical financial services?

The risk profile associated with Nelnet Servicing LLC for critical financial services like federal student loan servicing involves several dimensions. Financially, their stability and capacity to handle large volumes of transactions are paramount. Operationally, risks include system vulnerabilities, data security breaches, and the ability to scale services effectively. Performance risks involve meeting stringent federal requirements, maintaining high borrower satisfaction, and achieving default reduction targets. Reputational risks, stemming from past controversies or negative borrower experiences, also play a role. The Department of Education likely conducted a thorough vetting process, but ongoing monitoring is crucial. Assessing past performance data, any past findings by Inspectors General, and the company's overall compliance record provides a comprehensive view of their risk profile.

How has the Department of Education's overall spending on student loan servicing evolved over the past five years, and where does this contract fit in?

Examining the Department of Education's overall spending on student loan servicing over the past five years provides essential context for this specific contract. This trend analysis would reveal whether spending has increased, decreased, or remained stable, potentially influenced by factors like student enrollment, loan default rates, and shifts in servicing models (e.g., consolidation of contracts, privatization efforts). Understanding this broader spending landscape helps determine if this $71.8 million award is typical, an outlier, or part of a strategic shift. It also allows for an assessment of how this contract aligns with the Department's broader objectives for managing the federal student loan portfolio efficiently and effectively. Comparing the value and duration of this contract to the average or median contract values within that five-year period would highlight its relative significance.

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: 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: $71,815,929

Exercised Options: $71,815,929

Current Obligation: $71,815,929

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Parent Contract

Parent Award PIID: EDFSA09D0013

IDV Type: IDC

Timeline