Department of Education awards $195.7M for student financial aid servicing, extending critical functions

Contract Overview

Contract Amount: $195,672,260 ($195.7M)

Contractor: Pennslyvania Higher Education Assistance Agency

Awarding Agency: Department of Education

Start Date: 2018-09-01

End Date: 2019-08-31

Contract Duration: 364 days

Daily Burn Rate: $537.6K/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-0014 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: HARRISBURG, DAUPHIN County, PENNSYLVANIA, 17102

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Education obligated $195.7 million to PENNSLYVANIA HIGHER EDUCATION ASSISTANCE AGENCY 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 ensures continued servicing of Title IV student financial aid, a critical government function. 2. The contract was awarded under full and open competition, suggesting a competitive bidding process. 3. Performance period spans one year, indicating a need for ongoing, specialized services. 4. The firm-fixed-price contract type helps manage cost certainty for the government. 5. This award represents a significant investment in the administration of federal student aid programs.

Value Assessment

Rating: good

The awarded amount of $195.7 million for a one-year period for student financial aid servicing appears to be within a reasonable range for such a critical and large-scale government function. Benchmarking against similar contracts for student loan servicing or financial aid administration would provide a more precise value-for-money assessment. However, given the scope and regulatory requirements of Title IV aid, the pricing is likely competitive due to the full and open competition.

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 invited to submit proposals. The level of competition is a positive sign for price discovery and ensures that the Department of Education can select the most capable and cost-effective provider. The number of bidders (4) suggests a healthy level of interest and competition for this essential service.

Taxpayer Impact: Full and open competition generally leads to better pricing for taxpayers by fostering a competitive environment among potential contractors.

Public Impact

Students receiving federal financial aid benefit from the uninterrupted servicing of their loans and aid programs. The contract supports the Department of Education's mission to facilitate access to higher education. The services provided are national in scope, impacting students across the United States. This contract supports jobs within the financial services and administrative sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in if transition to a new servicer is complex or costly.
Reliance on a single contractor for a critical function could pose a risk if performance falters.

Positive Signals

Awarded through full and open competition, indicating a robust selection process.
Firm-fixed-price contract type provides cost predictability.
The contractor has a history of servicing federal student financial aid.

Sector Analysis

The federal student financial aid servicing sector is a crucial part of the broader financial services industry, specifically focused on managing government-backed student loans and grants. This contract falls under the administrative and support services for credit intermediation. The market size for such services is substantial, driven by the vast federal student loan portfolio. Comparable spending benchmarks would involve looking at other large-scale contract awards for loan servicing or financial management by government agencies.

Small Business Impact

The data indicates this contract was not set aside for small businesses, nor does it explicitly mention subcontracting plans for small businesses. The primary contractor, Pennsylvania Higher Education Assistance Agency, is a state-level entity, and its role in subcontracting would need further investigation to determine the impact on the small business ecosystem. Typically, large federal contracts offer opportunities for small businesses through subcontracting, but this specific award's details on that front are not provided.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Education's contracting officers and program managers. The Inspector General's office for the Department of Education would have jurisdiction to investigate any potential fraud, waste, or abuse related to the contract's performance and financial management. Transparency is generally maintained through contract award databases and reporting requirements, though specific performance metrics and oversight reports may not always be publicly accessible.

Related Government Programs

Federal Student Loan Programs
Higher Education Act of 1965
Department of Education Financial Management Systems
Student Aid Internet Gateway (SAIG)

Risk Flags

Contract Duration
Vendor Performance History
Data Security and Privacy
System Integration Complexity

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $195.7 million to PENNSLYVANIA HIGHER EDUCATION ASSISTANCE AGENCY. 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 PENNSLYVANIA HIGHER EDUCATION ASSISTANCE AGENCY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $195.7 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 consistent, reflecting the ongoing need to manage a multi-trillion dollar portfolio of federal student loans. The Department of Education contracts with various entities, including state agencies and private companies, to perform loan servicing functions such as billing, payment processing, customer service, and default management. Spending fluctuates based on contract awards, renewals, and the specific services required. For instance, prior to the current contract, there would have been other contracts in place for similar services, potentially with different award amounts and durations. Analyzing past contract awards for loan servicing provides context for the current $195.7 million award, helping to assess if it represents an increase, decrease, or stable level of investment in this critical area.

How does the performance of the Pennsylvania Higher Education Assistance Agency (PHEAA) compare to other federal student loan servicers?

Assessing the performance of PHEAA relative to other federal student loan servicers requires access to specific performance metrics and quality assurance data, which are not publicly detailed in this award notice. Generally, federal student loan servicers are evaluated on criteria such as borrower satisfaction, default prevention rates, operational efficiency, compliance with regulations, and timely processing of payments and inquiries. PHEAA, as a long-standing entity in student aid, has experience in this domain. However, direct comparisons would necessitate reviewing official performance reports, audit findings, and potentially borrower feedback data from the Department of Education. Without this granular data, a definitive comparison is challenging, but the renewal of contracts suggests a baseline level of satisfactory performance.

What are the key risks associated with relying on a single contractor for critical financial aid servicing?

Relying on a single contractor for critical financial aid servicing presents several key risks. Firstly, there's the risk of vendor failure, where the contractor might experience financial instability, operational disruptions (e.g., system outages, data breaches), or a decline in service quality, which could directly impact millions of student borrowers. Secondly, a lack of competition after the initial award can lead to complacency and potentially higher costs in future contract renewals, as the incumbent may have a significant advantage. Thirdly, a single point of failure can complicate disaster recovery and business continuity planning for the government. The Department of Education mitigates these risks through robust contract oversight, performance monitoring, and contingency planning, but the inherent dependency remains a concern.

What is the typical duration and value of contracts for federal student financial aid servicing?

Contracts for federal student financial aid servicing typically have durations ranging from one to five years, often with options for extensions. The value of these contracts can vary significantly based on the scope of services, the number of borrowers managed, and the specific functions included (e.g., origination, servicing, default management). Large-scale servicing contracts, like the one awarded to PHEAA for approximately $195.7 million over one year, are common for managing the vast federal student loan portfolio. Smaller contracts might exist for specialized functions or specific loan segments. The Department of Education often uses a mix of contract types and durations to ensure flexibility and manage risk within its student aid programs.

How does the Health Care and Education Reconciliation Act of 2010 influence the need for this contract?

The Health Care and Education Reconciliation Act of 2010 (HCERA) significantly impacted federal student financial aid by consolidating federal student loan programs under the Department of Education and ending the guaranteed student loan program. This consolidation meant the federal government took over the direct origination and servicing of most federal student loans. Section 2212 of HCERA specifically addresses the servicing of Title IV student financial aid. Consequently, the need for contracts like the one awarded to PHEAA is a direct result of this legislative mandate to ensure efficient and effective servicing of these federally managed student aid programs, covering aspects from disbursement to repayment and default management.

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: Commonwealth of Pennsylvania (UEI: 003027539)

Address: 1200 NORTH SEVENTH STREET, HARRISBURG, PA, 17102

Business Categories: Category Business, Government, U.S. National Government, Not Designated a Small Business, U.S. Regional/State Government

Financial Breakdown

Contract Ceiling: $247,807,817

Exercised Options: $247,807,817

Current Obligation: $195,672,260

Actual Outlays: $204,781

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Parent Contract

Parent Award PIID: EDFSA09D0014

IDV Type: IDC

Timeline