Department of Education awards $37.5M for student financial aid servicing, extending services through late 2018

Contract Overview

Contract Amount: $37,492,453 ($37.5M)

Contractor: Higher Education Servicing Corp

Awarding Agency: Department of Education

Start Date: 2018-09-01

End Date: 2019-12-31

Contract Duration: 486 days

Daily Burn Rate: $77.1K/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-12-D-0005 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: ARLINGTON, TARRANT County, TEXAS, 76016

State: Texas Government Spending

Plain-Language Summary

Department of Education obligated $37.5 million to HIGHER EDUCATION SERVICING CORP 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 critical function of servicing Title IV student financial aid. 2. Awarded under full and open competition, indicating a broad market approach. 3. Performance period spans over a year, with a significant portion in 2019. 4. Task order structure suggests a need for ongoing, specialized financial services. 5. Firm Fixed Price contract type provides cost certainty for the government. 6. Contractor has a history of performing this specific type of service.

Value Assessment

Rating: good

The total award amount of $37.5 million for a period of approximately 15 months appears reasonable for the critical function of servicing Title IV student financial aid. Benchmarking against similar contracts for student loan servicing is challenging due to the specialized nature of this work and the specific legislative mandates. However, the firm fixed-price structure suggests that the government has negotiated a set cost for these services, which aids in budget predictability. The contract's value is tied to the essential administrative and operational support required for federal student aid programs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning that all responsible sources were permitted to submit a bid. The presence of four bids suggests a healthy level of interest and competition for this service. A competitive bidding process generally leads to better price discovery and ensures that the government receives services at a fair market value. The number of bidders indicates that the market for student financial aid servicing is accessible to multiple qualified entities.

Taxpayer Impact: Taxpayers benefit from a competitive process that drives down costs and ensures the most efficient use of federal funds for essential student aid administration.

Public Impact

Students and educational institutions benefit from the continued, reliable servicing of Title IV federal student financial aid programs. Ensures compliance with the Health Care and Education Reconciliation Act of 2010. Supports the operational continuity of federal student loan programs. The geographic impact is national, as Title IV aid serves students across the United States. Workforce implications include employment for individuals involved in financial aid administration and customer support.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in if contract renewal is not managed competitively.
Reliance on a single contractor for critical financial aid servicing could pose a risk if performance issues arise.
The specific legislative requirements may limit the pool of truly qualified bidders in the long term.

Positive Signals

Awarded through full and open competition, indicating a robust market.
Firm Fixed Price contract provides cost certainty and budget predictability.
Contractor has experience in servicing federal student financial aid.
The contract duration allows for stable program operations.

Sector Analysis

The contract falls within the financial services sector, specifically focusing on credit intermediation and related activities. The market for federal student loan servicing is a specialized niche, often dominated by a few large players due to regulatory complexity and scale requirements. This contract represents a portion of the broader federal spending on student financial aid administration, which is a significant component of the Department of Education's budget. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of government servicing contracts versus private sector lending.

Small Business Impact

There is no indication that this contract was specifically set aside for small businesses. Given the scale and specialized nature of federal student financial aid servicing, it is common for larger, established firms to be the primary bidders. Subcontracting opportunities for small businesses may exist within specific components of the servicing operations, but the prime contract is likely held by a larger entity. The impact on the small business ecosystem would be indirect, potentially through opportunities for specialized support services rather than direct prime contract awards.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Education's contracting officers and program managers. The contract's performance would be monitored against the terms and conditions outlined in the delivery order, including service level agreements and reporting requirements. Transparency is facilitated through the Federal Procurement Data System (FPDS), where contract awards are publicly reported. Inspector General jurisdiction would apply if any allegations of fraud, waste, or abuse arise concerning the contract's execution.

Related Government Programs

Federal Student Loan Programs
Higher Education Act of 1965
Department of Education Financial Management
Student Aid Administration
Credit Intermediation Services

Risk Flags

Potential for performance degradation if contractor resources are overstretched.
Cybersecurity risks associated with handling sensitive student financial data.
Dependence on a single vendor for a critical government function.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $37.5 million to HIGHER EDUCATION SERVICING CORP. 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 HIGHER EDUCATION SERVICING CORP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $37.5 million.

What is the period of performance?

Start: 2018-09-01. End: 2019-12-31.

What is the track record of Higher Education Servicing Corp with federal contracts, particularly in student financial aid?

Higher Education Servicing Corp (HESC) has a history of involvement in federal student financial aid programs. While specific details on all their federal contracts require deeper database searches, their role in servicing Title IV aid indicates prior experience and qualification. The fact that they were awarded this contract, especially under full and open competition, suggests they met the government's requirements and demonstrated capability. Further analysis would involve examining their past performance ratings, any previous contract disputes, and the scope of their prior federal engagements to fully assess their track record.

How does the $37.5 million award compare to historical spending on student financial aid servicing by the Department of Education?

The $37.5 million award for approximately 15 months of service represents a significant but not necessarily anomalous expenditure for federal student financial aid servicing. The Department of Education manages vast sums for student aid, and servicing contracts are essential for its operation. Historical spending can fluctuate based on program volume, legislative changes, and the number and duration of active contracts. To provide a precise comparison, one would need to analyze annual spending reports for student loan servicing over several fiscal years, identifying similar task orders or base contracts to establish a trend and determine if this award is within the expected range.

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

The primary risks associated with relying on a single contractor for critical student financial aid servicing include operational disruptions if the contractor experiences performance failures, financial instability, or cybersecurity breaches. A lack of competition for future contract renewals could also lead to increased costs or reduced service quality over time. Furthermore, a single point of failure could jeopardize the timely disbursement and management of federal student aid, impacting millions of students and educational institutions. Robust oversight, clear performance metrics, and contingency planning are crucial to mitigate these risks.

How effective is the current servicing model in ensuring compliance with the Health Care and Education Reconciliation Act of 2010?

The effectiveness of the current servicing model in ensuring compliance with the Health Care and Education Reconciliation Act of 2010 is directly tied to the contractor's adherence to the specific requirements outlined in the contract and relevant legislation. The award itself, referencing Section 2212 of the Act, indicates that the contractor is expected to perform these compliant services. Effectiveness would be measured through audits, performance reviews, and the absence of compliance-related issues or penalties. The Department of Education's oversight mechanisms are designed to ensure that the contractor meets these legal obligations throughout the contract period.

What are the implications of this contract for the broader student loan servicing market and competition?

This contract, awarded under full and open competition, suggests that the student loan servicing market, while specialized, remains competitive enough to attract multiple bidders for significant government contracts. The Department of Education's approach to competition influences market dynamics by signaling its willingness to engage with various qualified providers. The existence of four bidders indicates a degree of market health. However, the long-term implications depend on how frequently such contracts are competed and whether barriers to entry for new, capable firms can be managed to foster sustained competition and innovation in the sector.

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

Address: 4381 W GREEN OAKS BLVD STE 200, ARLINGTON, TX, 76016

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

Financial Breakdown

Contract Ceiling: $44,339,492

Exercised Options: $44,339,492

Current Obligation: $37,492,453

Actual Outlays: $5,722,046

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: EDFSA12D0005

IDV Type: IDC

Timeline