Department of Education awarded $178M for student financial aid servicing, with a 4-year duration

Contract Overview

Contract Amount: $177,944,785 ($177.9M)

Contractor: Great Lakes Educational Loan Services, Inc

Awarding Agency: Department of Education

Start Date: 2017-09-01

End Date: 2018-08-31

Contract Duration: 364 days

Daily Burn Rate: $488.9K/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 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 6/17/2009 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 9/01/2017 TO 8/31/2018.

Place of Performance

Location: MADISON, DANE County, WISCONSIN, 53704

State: Wisconsin Government Spending

Plain-Language Summary

Department of Education obligated $177.9 million to GREAT LAKES EDUCATIONAL LOAN SERVICES, INC 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 6/17/2009 TO 6/16/2019. TASK ORDER: SERVICING O… Key points: 1. The contract focuses on essential student financial aid servicing, a critical function for educational access. 2. Awarded through full and open competition, suggesting a robust market for these services. 3. The contract duration of 364 days for the task order is relatively short for a large servicing contract. 4. The fixed-price with economic price adjustment (FPEPA) contract type aims to balance cost control with market fluctuations. 5. The contractor, Great Lakes Educational Loan Services, Inc., has a significant role in managing federal student aid. 6. The contract value of $177.9M over its period indicates substantial operational scale. 7. The base award period was significantly longer (2009-2019) than the task order period (2017-2018).

Value Assessment

Rating: good

The contract value of $177.9 million for a one-year period represents a significant investment in student financial aid servicing. Benchmarking this against similar large-scale federal student loan servicing contracts is challenging without more granular data on the specific services provided and the volume of loans managed. However, the fixed-price with economic price adjustment structure suggests an attempt to achieve value by mitigating risks associated with fluctuating operational costs while ensuring service continuity. The relatively high number of bids (4) in the competition phase could indicate competitive pricing, but a detailed cost analysis would be needed to confirm true value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that the Department of Education solicited bids from all responsible sources. The presence of 4 bidders suggests a healthy level of competition for this significant federal contract. A competitive bidding process generally leads to better price discovery and can incentivize contractors to offer more favorable terms and efficient service delivery to win the award. The agency's decision to use full and open competition implies confidence in the market's ability to provide qualified vendors for this critical function.

Taxpayer Impact: Taxpayers benefit from full and open competition as it typically drives down costs through market forces. This process ensures that the government is not locked into a single provider, potentially leading to more efficient use of public funds for student financial aid administration.

Public Impact

Students and families relying on federal financial aid programs benefit from the uninterrupted servicing of loans. The contract supports the Department of Education's mission to ensure access to higher education through financial assistance. The services delivered are crucial for loan origination, repayment, and borrower support. The geographic impact is nationwide, affecting student loan borrowers across the United States. The contract supports jobs within the student loan servicing industry, contributing to the financial services sector workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The short duration of the task order (364 days) compared to the base award period (10 years) raises questions about contract continuity and potential for frequent re-competition, which can be administratively burdensome.
The fixed-price with economic price adjustment (FPEPA) contract type, while managing risk, can sometimes lead to higher costs if economic adjustments are not carefully monitored.
The specific performance metrics and service level agreements are not detailed, making it difficult to assess the contractor's performance rigorously.
The reliance on a single contractor for such a critical function, even with competition, carries inherent risks if the contractor faces operational challenges.

Positive Signals

Awarded through full and open competition, indicating a competitive market and potential for good value.
The contractor, Great Lakes Educational Loan Services, Inc., is a known entity in student loan servicing, suggesting experience and established processes.
The contract supports a vital government function (student financial aid) that directly impacts educational access for millions.
The fixed-price with economic price adjustment structure provides some cost certainty while allowing for necessary adjustments.

Sector Analysis

The student loan servicing sector is a critical component of the broader financial services industry, specifically supporting federal and private education lending. This contract falls under 'Other Activities Related to Credit Intermediation,' reflecting its role in managing the lifecycle of student loans. The market for federal student loan servicing is substantial, with significant government spending allocated annually to ensure the smooth operation of these programs. Comparable spending benchmarks would involve analyzing the total federal outlays for student loan servicing contracts across different agencies and over various fiscal years.

Small Business Impact

There is no indication from the provided data that this contract included specific small business set-asides or subcontracting requirements. As a large contract awarded through full and open competition, the primary focus was likely on securing the most capable and cost-effective vendor for the core service. Further analysis would be needed to determine if any subcontracting opportunities were pursued by the prime contractor, potentially involving small businesses in specialized support roles.

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 contractor performance, ensuring compliance with contract terms, and managing any modifications or disputes. The Inspector General's office for the Department of Education would have jurisdiction to investigate potential fraud, waste, or abuse related to this contract. Transparency is generally maintained through contract databases like FPDS, which provide basic award information, but detailed performance reports are often internal.

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

Contract Duration Mismatch
Potential for Increased Costs with FPEPA
Lack of Detailed Performance Metrics
Single Contractor Dependency Risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $177.9 million to GREAT LAKES EDUCATIONAL LOAN SERVICES, INC. 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 6/17/2009 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 9/01/2017 TO 8/31/2018.

Who is the contractor on this award?

The obligated recipient is GREAT LAKES EDUCATIONAL LOAN SERVICES, INC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $177.9 million.

What is the period of performance?

Start: 2017-09-01. End: 2018-08-31.

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

Analyzing the historical spending on student financial aid servicing by the Department of Education reveals a consistent and substantial allocation of resources. Over the last decade, the Department has contracted billions of dollars for loan servicing operations, reflecting the sheer volume of federal student loans in repayment. Spending has fluctuated based on legislative changes, the volume of new loans, and the consolidation or restructuring of servicing contracts. For instance, periods of increased federal student loan origination or shifts in repayment policies can lead to higher servicing costs. The trend generally shows a significant, ongoing investment to manage the complex lifecycle of student debt, ensuring borrowers can access repayment options and the government can recoup its investments in higher education.

How does the per-unit cost of servicing student loans under this contract compare to industry benchmarks?

Determining the precise per-unit cost for servicing student loans under this specific Department of Education contract is challenging without access to granular data on the number of loans serviced, the types of services rendered (e.g., origination, repayment, default management), and the specific performance metrics achieved. Federal student loan servicing contracts are typically large and complex, often involving millions of borrowers and trillions of dollars in outstanding debt. Industry benchmarks for loan servicing costs can vary widely based on loan portfolio size, delinquency rates, technology used, and regulatory compliance requirements. While the total award of $177.9 million over approximately one year suggests a significant operational scale, a direct per-unit comparison would require detailed cost breakdowns and a clear definition of 'unit' (e.g., per loan, per borrower, per transaction) to be meaningful against external market data.

What is the track record of Great Lakes Educational Loan Services, Inc. in managing federal student aid contracts?

Great Lakes Educational Loan Services, Inc. has a long-standing and significant track record in managing federal student aid programs. As a major player in the student loan servicing industry, the company has historically held numerous large federal contracts with the Department of Education. Their experience spans decades, involving the servicing of millions of student loans and managing billions of dollars in federal education debt. This includes handling loan origination, repayment processing, customer service for borrowers, and managing default prevention programs. While specific performance details for every contract are not publicly available, their continued selection for substantial federal contracts indicates a perceived ability to meet the complex requirements and scale demanded by the Department of Education's mission.

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

Relying on a single contractor for critical functions like student financial aid servicing introduces several key risks. Firstly, there's the risk of operational disruption; if the contractor experiences financial instability, system failures, cybersecurity breaches, or labor disputes, it could severely impact millions of student borrowers, leading to payment processing errors, loss of borrower data, or inability to access repayment options. Secondly, a lack of competition can reduce the incentive for the contractor to innovate or maintain optimal efficiency and pricing over time, potentially leading to higher costs for the government and taxpayers. Thirdly, there's a risk of vendor lock-in, making it difficult and costly to transition to a new provider if performance issues arise or strategic needs change. Finally, a single point of failure increases the overall vulnerability of the federal student aid system.

How has the Department of Education's approach to student loan servicing evolved over time, and how does this contract fit into that evolution?

The Department of Education's approach to student loan servicing has undergone significant evolution, moving from a system heavily reliant on private lenders and guaranty agencies to a more centralized model managed directly by the Department. Initially, the Federal Family Education Loan Program (FFELP) involved numerous private lenders. Following the consolidation of FFELP into the Direct Loan Program, the Department took on a more direct role, managing loan servicing through large contracts with a limited number of specialized servicing companies. This contract, awarded to Great Lakes Educational Loan Services, Inc., represents a part of this strategy to utilize large-scale, competitively awarded contracts for efficient and effective servicing of the massive federal student loan portfolio. The trend has been towards consolidating servicing functions to achieve economies of scale and improve oversight, though this also concentrates 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: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

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

Address: 2401 INTERNATIONAL LN, MADISON, WI, 53704

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

Financial Breakdown

Contract Ceiling: $217,709,746

Exercised Options: $217,709,746

Current Obligation: $177,944,785

Actual Outlays: $35,688

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Parent Contract

Parent Award PIID: EDFSA09D0012

IDV Type: IDC

Timeline