Department of Education awards $139M contract to Nelnet Servicing LLC for student financial aid servicing

Contract Overview

Contract Amount: $139,250,989 ($139.3M)

Contractor: Nelnet Servicing LLC

Awarding Agency: Department of Education

Start Date: 2018-09-01

End Date: 2019-08-31

Contract Duration: 364 days

Daily Burn Rate: $382.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: IGF::CT::IGF CRITICAL FUNCTION BASE AWARD: 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 6/17/2014 TO 6/16/2019. TASK ORDER: 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 09/01/2018 TO 08/31/2019. MODIFICATION: THE PURPOSE OF THIS MODIFICATION IS TO CREATE A NEW TASK ORDER FOR CONTRACT ED-FSA-09-D-0013 WITH THE PERIOD OF PERFORMANCE: 9/01/2018 - 8/31/2019, AND PROVIDE FUNDING FOR TITLE IV AID SERVICING THROUGH APPROXIMATELY 12/31/2018.

Place of Performance

Location: LINCOLN, LANCASTER County, NEBRASKA, 68508

State: Nebraska Government Spending

Plain-Language Summary

Department of Education obligated $139.3 million to NELNET SERVICING LLC for work described as: IGF::CT::IGF CRITICAL FUNCTION BASE AWARD: 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 6/17/2014 TO 6/16/2019. TASK ORDER: SERVICING O… Key points: 1. Contract focuses on servicing Title IV student financial aid, a critical function for federal student loan programs. 2. The award was made under full and open competition, suggesting a competitive bidding process. 3. The contract duration is approximately one year, with a firm fixed-price structure. 4. Performance is concentrated in Nebraska, indicating a potential geographic concentration of services. 5. The contract is a delivery order under a larger contract vehicle, suggesting it's part of a broader framework.

Value Assessment

Rating: fair

The contract value of approximately $139 million for one year of student financial aid servicing appears to be within a reasonable range for such a critical federal function. Benchmarking against similar large-scale student loan servicing contracts is challenging due to the specialized nature of the services and varying contract scopes. However, the firm fixed-price structure suggests that the government has negotiated a set price for the services, which can provide cost certainty. Further analysis would require comparing the specific deliverables and performance metrics against other contracts for similar services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely solicited and evaluated. The number of bidders is not specified, but this procurement method generally fosters price discovery and encourages competitive pricing. The agency's decision to use full and open competition suggests confidence in the market's ability to provide qualified contractors for student financial aid servicing.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically leads to more competitive pricing and potentially better service quality due to market pressures.

Public Impact

Students and educational institutions relying on federal financial aid programs are the primary beneficiaries. The contract ensures the continued servicing of Title IV student financial aid, including loan disbursements, repayment processing, and customer support. Services are likely managed nationally, though the contractor's operational base is in Nebraska. The contract supports jobs within the student loan servicing industry, particularly in the contractor's operational locations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in if this is a recurring need and competition narrows in the future.
Reliance on a single vendor for critical financial aid servicing could pose a risk if performance falters.

Positive Signals

Awarded through full and open competition, indicating a robust bidding process.
Firm fixed-price contract provides cost certainty for the government.
Contract addresses a critical government function related to education and financial aid.

Sector Analysis

The student loan servicing sector is a significant part of the broader financial services industry, particularly within government-contracted services. This contract falls under the 'Other Activities Related to Credit Intermediation' NAICS code. The federal government is a major player in student lending, and contracts for servicing these loans are substantial. The market involves specialized firms capable of managing complex loan portfolios, compliance, and borrower interactions. Spending in this area is driven by the volume of federal student loans outstanding.

Small Business Impact

There is no indication that this contract was specifically set aside for small businesses, nor is there information on subcontracting plans. Given the scale and nature of student financial aid servicing, it is likely that larger, specialized firms are the primary participants in such procurements. The absence of small business set-aside information suggests that the focus was on securing the most capable provider through open competition.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Education's program offices responsible for student financial assistance. Accountability measures are usually embedded within the contract's performance standards and reporting requirements. Transparency is facilitated through contract award databases, though detailed operational oversight specifics are often internal. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

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

Risk Flags

Performance Risk
Vendor Concentration Risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $139.3 million to NELNET SERVICING LLC. IGF::CT::IGF CRITICAL FUNCTION BASE AWARD: 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 6/17/2014 TO 6/16/2019. TASK ORDER: 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 09/01/2018 TO 08/31/2019. MODIFICATION: THE

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 $139.3 million.

What is the period of performance?

Start: 2018-09-01. End: 2019-08-31.

What is the historical spending pattern for student financial aid servicing by the Department of Education?

Historical spending on federal student financial aid servicing has been substantial and has evolved significantly over time, particularly with the shift towards direct federal lending. Prior to the consolidation of federal loan programs, the Department of Education contracted with numerous loan servicers to manage student loans originated by private lenders. Following the consolidation, the government directly manages a larger portfolio, but still relies on contractors for servicing functions. Spending fluctuates based on loan volume, program changes, and the number and size of servicing contracts awarded. For instance, significant contract awards have been made over the past decade to manage the vast portfolio of federal student loans, encompassing origination, repayment, default management, and customer service. Analyzing specific historical spending requires examining contract databases for similar servicing contracts over multiple fiscal years to identify trends in contract values and durations.

How does Nelnet Servicing LLC's track record compare to other major student loan servicers?

Nelnet Servicing LLC is one of the major players in the student loan servicing industry, managing a significant portion of federal student loans. Its track record includes extensive experience in handling complex loan portfolios, borrower communications, and compliance with federal regulations. Like other large servicers (e.g., MOHELA, Great Lakes), Nelnet has faced scrutiny and performance reviews related to borrower satisfaction, call center wait times, and the accuracy of information provided. The Department of Education regularly assesses servicer performance through various metrics and contract requirements. While specific comparative data on performance across all servicers is not always publicly detailed, Nelnet's continued selection for large federal contracts suggests a generally satisfactory performance record in meeting contractual obligations, though like all large servicers, it has likely encountered areas for improvement throughout its history.

What are the key performance indicators (KPIs) for federal student loan servicing contracts?

Key performance indicators (KPIs) for federal student loan servicing contracts are designed to ensure efficient and effective management of the student loan portfolio and positive borrower experiences. Common KPIs include borrower satisfaction rates, call center metrics (e.g., average speed of answer, abandonment rate), loan repayment rates, delinquency and default management effectiveness, accuracy of billing and account statements, and compliance with federal regulations and Department of Education directives. Servicers are typically required to meet specific targets for these KPIs, with performance often tied to incentive payments or penalties. The Department of Education monitors these metrics closely to ensure servicers are fulfilling their contractual obligations and supporting borrowers effectively through various stages of their loan lifecycle, from disbursement to repayment and potential forgiveness programs.

What is the potential impact of contract consolidation or expansion on the student loan servicing market?

Contract consolidation or expansion in the student loan servicing market can have significant impacts. Consolidation, where the Department of Education reduces the number of active servicing contracts or consolidates portfolios under fewer servicers, can lead to larger contract values for the remaining awardees. This can increase the market share and financial stability of those servicers but may reduce competition in future procurements. Conversely, contract expansion, where existing contracts are modified to cover larger loan volumes or additional services, also concentrates business with fewer entities. Such shifts can create economies of scale for the government and the selected servicers, potentially leading to cost efficiencies. However, it also concentrates risk, making the government more reliant on a smaller number of large servicers. For the market, consolidation can create barriers to entry for smaller or newer firms and may influence pricing dynamics due to reduced competitive pressure.

How does the firm fixed-price contract type influence risk allocation between the government and the contractor?

A firm fixed-price (FFP) contract type allocates the majority of the risk to the contractor. Under an FFP agreement, the contractor is obligated to perform the specified work for a predetermined price, regardless of their actual costs incurred. If the contractor's costs exceed the fixed price, they absorb the loss. Conversely, if their costs are lower than anticipated, they retain the profit. This structure provides the government with cost certainty, as the total price is known upfront and is not subject to upward adjustment due to contractor cost overruns. The primary risk for the government is that the contractor might cut corners on quality or service to protect their profit margin if costs escalate unexpectedly. Therefore, robust performance monitoring and clearly defined quality standards are crucial in FFP contracts to mitigate this risk.

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: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Nelnet, Inc. (UEI: 134960447)

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: $184,580,787

Exercised Options: $184,580,787

Current Obligation: $139,250,989

Actual Outlays: $523,625

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Parent Contract

Parent Award PIID: EDFSA09D0013

IDV Type: IDC

Timeline