Department of Education awarded $235.8M to Van Ru Credit Corporation for federal student loan debt collection services

Contract Overview

Contract Amount: $235,779,605 ($235.8M)

Contractor: VAN RU Credit Corporation

Awarding Agency: Department of Education

Start Date: 2009-07-01

End Date: 2015-04-21

Contract Duration: 2,120 days

Daily Burn Rate: $111.2K/day

Competition Type: COMPETITIVE DELIVERY ORDER

Number of Offers Received: 26

Pricing Type: FIXED PRICE INCENTIVE

Sector: Other

Official Description: PRIVATE COLLECTION AGENCY PERFORMS COLLECTION AND ADMINISTRATIVE RESOLUTION ACTIVITIES ON DEBTS RESULTING FROM NON-PAYMENT OF STUDENT LOANS MADE UNDER THE VARIOUS FEDERAL STUDENT AID LOAN PROGRAMS.

Place of Performance

Location: CHICAGO, COOK County, ILLINOIS, 60630

State: Illinois Government Spending

Plain-Language Summary

Department of Education obligated $235.8 million to VAN RU CREDIT CORPORATION for work described as: PRIVATE COLLECTION AGENCY PERFORMS COLLECTION AND ADMINISTRATIVE RESOLUTION ACTIVITIES ON DEBTS RESULTING FROM NON-PAYMENT OF STUDENT LOANS MADE UNDER THE VARIOUS FEDERAL STUDENT AID LOAN PROGRAMS. Key points: 1. The contract focused on administrative resolution of defaulted federal student loans. 2. Van Ru Credit Corporation has a long-standing relationship with the Department of Education for these services. 3. The contract was awarded as a competitive delivery order, indicating multiple bids were considered. 4. Performance spanned over five years, suggesting a need for sustained debt resolution efforts. 5. The fixed-price incentive contract type aims to align contractor performance with government objectives. 6. The geographic location of the contractor is Illinois.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific performance metrics and comparable contract data for debt collection services. The total award amount of $235.8 million over approximately 7 years (July 2009 - April 2015) suggests a significant investment in recovering defaulted student loans. However, the effectiveness of these funds in actual debt recovery and the cost per dollar collected would be crucial for a comprehensive value assessment. Without this granular data, it's difficult to definitively state if this represented excellent or questionable value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded as a competitive delivery order, indicating that the Department of Education solicited bids from multiple vendors. The fact that it was competed suggests a degree of market engagement and an opportunity for price discovery. The number of bids received and the specific terms of the competition would provide further insight into the level of competition and its impact on pricing.

Taxpayer Impact: A competitive award process generally benefits taxpayers by fostering a more competitive pricing environment and potentially leading to more cost-effective services.

Public Impact

Federal student loan borrowers who have defaulted on their loans are the primary service recipients, as the contract aims to resolve these debts. The services delivered include collection and administrative resolution activities for defaulted student loans. The geographic impact is national, covering all federal student loan programs. The contract supports the Department of Education's mission to manage and recover federal student aid funds.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for aggressive collection tactics impacting borrowers.
Effectiveness of administrative resolution in actual debt recovery needs further scrutiny.
Long-term contract duration may reduce flexibility for adopting newer collection technologies.

Positive Signals

Competitive award process suggests potential for cost efficiencies.
Fixed-price incentive contract aligns contractor goals with government objectives.
Sustained contract indicates a recognized need and established service provider.

Sector Analysis

The federal student loan servicing and debt collection sector is a critical component of the Department of Education's operations. This contract falls under miscellaneous financial investment activities, specifically focusing on the recovery of non-performing assets within the student loan portfolio. The market for such services involves specialized firms with expertise in navigating complex regulations and borrower communication. Comparable spending benchmarks would typically be assessed against the volume of defaulted loans and the success rates of collection agencies.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions or subcontracting requirements for this contract. Therefore, the direct impact on the small business ecosystem is not discernible from this information. Further analysis would be needed to determine if small businesses were involved as subcontractors or if the prime contractor has a history of engaging with small business partners.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Education's contracting officers and program managers. Accountability measures are typically embedded within the contract terms, including performance standards and reporting requirements. Transparency is facilitated through contract awards databases, though detailed operational performance data may be less accessible. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Federal Student Aid Programs
Student Loan Default Management
Debt Collection Services
Financial Services Contracts

Risk Flags

Contractor performance data not fully accessible.
Specific cost-per-dollar-collected metrics unavailable.
Borrower impact and satisfaction data not provided.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $235.8 million to VAN RU CREDIT CORPORATION. PRIVATE COLLECTION AGENCY PERFORMS COLLECTION AND ADMINISTRATIVE RESOLUTION ACTIVITIES ON DEBTS RESULTING FROM NON-PAYMENT OF STUDENT LOANS MADE UNDER THE VARIOUS FEDERAL STUDENT AID LOAN PROGRAMS.

Who is the contractor on this award?

The obligated recipient is VAN RU CREDIT CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $235.8 million.

What is the period of performance?

Start: 2009-07-01. End: 2015-04-21.

What was the historical spending pattern for federal student loan debt collection prior to this contract?

Prior to this specific $235.8 million contract awarded in 2009, the Department of Education has historically allocated significant resources to debt collection for federal student loans. The exact historical spending patterns would require a deep dive into budget allocations and prior contract awards over several fiscal years. However, it's understood that the volume of defaulted student loans has been a persistent challenge, necessitating ongoing investment in collection agencies. These agencies typically operate on a commission or fee-for-service basis, with contract values fluctuating based on the number of accounts assigned, the age of the debt, and the recovery rates achieved. The trend has generally been towards increasing loan volumes and, consequently, the need for robust collection mechanisms.

How does Van Ru Credit Corporation's performance on this contract compare to other debt collection agencies for the Department of Education?

A direct comparison of Van Ru Credit Corporation's performance on this specific contract to other debt collection agencies requires access to detailed performance metrics, such as recovery rates, cost per dollar collected, and borrower satisfaction scores, which are not publicly available in this dataset. Van Ru Credit Corporation has been a long-term contractor for the Department of Education, suggesting a level of established performance and reliability. However, without comparative data on key performance indicators (KPIs) across multiple contracts and contractors, it is difficult to definitively assess whether their performance was superior, comparable, or lagging relative to peers. The competitive nature of the award indicates that the Department sought the best value among qualified bidders at the time of award.

What are the primary risks associated with outsourcing federal student loan debt collection?

The primary risks associated with outsourcing federal student loan debt collection include reputational damage to the government if collection practices are perceived as overly aggressive or unfair, potential for data breaches and mishandling of sensitive borrower information, and the risk of contractor underperformance leading to lower-than-expected recovery rates. There's also a risk of increased costs if contracts are not structured effectively or if competition is limited. Ensuring compliance with all relevant federal regulations (e.g., Fair Debt Collection Practices Act) and maintaining consistent service quality across different contractors are ongoing challenges. The Department of Education must implement robust oversight mechanisms to mitigate these risks.

What is the typical success rate for federal student loan debt collection efforts?

The success rate for federal student loan debt collection efforts can vary significantly depending on several factors, including the age of the debt, the borrower's financial situation, and the collection methods employed. Generally, older debts and those from borrowers with limited financial means are harder to collect. The Department of Education aims to maximize recovery, but a 100% success rate is unrealistic. Success is often measured by the amount of debt recovered relative to the total amount of defaulted debt. While specific aggregate success rates for all federal student loan debt collection are not readily available, agencies are incentivized through their contracts to achieve the highest possible recovery rates within legal and ethical boundaries. Performance metrics within individual contracts would provide more precise insights.

How does the fixed-price incentive (FPI) contract type influence contractor behavior in debt collection?

A Fixed-Price Incentive (FPI) contract type aims to share the risks and rewards between the government and the contractor. In the context of debt collection, this means that Van Ru Credit Corporation would have had a target cost, a target profit, and a price ceiling. If the contractor achieved the collection targets at a cost lower than the target cost, both the contractor and the government would share in the savings. Conversely, if costs exceeded the target, the contractor's profit would decrease, and if costs exceeded the ceiling, the contractor would bear the additional cost. This structure incentivizes the contractor to be efficient and effective in their collection efforts to maximize their profit, while also providing the government with a degree of cost control and performance motivation.

Industry Classification

NAICS: Finance and Insurance › Other Financial Investment Activities › Miscellaneous Financial Investment Activities

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

Competition & Pricing

Extent Competed: COMPETITIVE DELIVERY ORDER

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 26

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Address: 4839 N ELSTON AVE, CHICAGO, IL, 60630

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

Financial Breakdown

Contract Ceiling: $249,408,436

Exercised Options: $249,408,436

Current Obligation: $235,779,605

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS23F0204K

IDV Type: FSS

Timeline