Department of Education awards $176M for student financial aid servicing, with a focus on delinquency reduction

Contract Overview

Contract Amount: $176,066,424 ($176.1M)

Contractor: Great Lakes Educational Loan Services, Inc

Awarding Agency: Department of Education

Start Date: 2016-09-01

End Date: 2017-09-25

Contract Duration: 389 days

Daily Burn Rate: $452.6K/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). TASK ORDER DESCRIPTION: SERVICING OF TITLE IV STUDENT FINANCIAL AID, FROM 9/1/2016 THROUGH 8/31/2017. PROVIDES FUNDING FOR TITLE IV AID SERVICING, THROUGH APPROXIMATELY 12/31/2016. PROVIDES FUNDING FOR THE DELINQUENCY REDUCTION COMPENSATION PROGRAM, IN A NOT-TO-EXCEED AMOUNT OF $500,000 PER QUARTER AND $2,000,000 ANNUALLY.

Place of Performance

Location: ANN ARBOR, WASHTENAW County, MICHIGAN, 48108

State: Michigan Government Spending

Plain-Language Summary

Department of Education obligated $176.1 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). TASK ORDER DESCRIPTION: SERVICING OF TITLE IV STUDENT FINANCIAL… Key points: 1. Contract focuses on essential student financial aid servicing, a critical government function. 2. The contract includes specific funding for a delinquency reduction compensation program. 3. Awarded through full and open competition, suggesting a competitive bidding process. 4. The fixed-price contract with economic price adjustment aims to manage cost fluctuations. 5. The contractor has a significant role in managing federal student loan programs. 6. The contract duration is over a year, indicating a substantial operational commitment.

Value Assessment

Rating: good

The award amount of $176,066,424.47 for student financial aid servicing appears to be within a reasonable range for a contract of this scope and duration. Benchmarking against similar large-scale federal contracts for financial aid administration and loan servicing suggests that the overall value is competitive. The fixed-price with economic price adjustment structure helps mitigate risks associated with market volatility for the government while allowing for adjustments based on defined economic factors.

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 had the opportunity to submit proposals. The presence of four bidders suggests a healthy level of competition for this significant federal contract. This competitive environment is generally expected to drive more favorable pricing and service offerings for the government.

Taxpayer Impact: Full and open competition typically leads to better value for taxpayers by ensuring that the government receives the most competitive pricing and best overall solution available in the market.

Public Impact

Benefits millions of students and borrowers by ensuring the proper servicing of their federal financial aid. Delivers essential services for the administration and management of Title IV student financial aid programs. Supports the government's efforts to reduce student loan delinquency through a dedicated compensation program. Impacts the financial education and loan repayment landscape for a significant portion of the U.S. student population. The contractor's operations likely involve a substantial workforce dedicated to loan servicing and customer support.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to economic price adjustment clauses if inflation is higher than anticipated.
Reliance on a single contractor for critical financial aid servicing could pose a risk if performance issues arise.
The complexity of student financial aid regulations may lead to challenges in maintaining full compliance.
Ensuring equitable service delivery across diverse student populations requires continuous monitoring.

Positive Signals

Awarded through full and open competition, indicating a robust selection process.
The contract includes a specific program to address and reduce student loan delinquency, a key policy objective.
The contractor is a long-standing entity in the student loan servicing industry, suggesting experience and established infrastructure.
The fixed-price nature, with adjustments, provides a degree of cost certainty for the government.
The contract duration allows for stable service delivery and program continuity.

Sector Analysis

The federal student financial aid servicing sector is a critical component of the U.S. higher education system, involving the administration of billions of dollars in federal loans. This contract falls within the broader financial services and credit intermediation industry. Comparable spending in this sector involves large-scale contracts for loan origination, servicing, and default management, often awarded through competitive processes to specialized financial institutions. The market is characterized by a few large, experienced players capable of handling the immense volume and regulatory complexity.

Small Business Impact

This contract was not specifically set aside for small businesses, and the prime contractor, Great Lakes Educational Loan Services, Inc., is a large entity. There is no explicit information provided regarding subcontracting plans for small businesses within this award. The focus is on a large-scale, specialized service delivery, which may limit direct subcontracting opportunities for smaller firms unless they provide niche support services.

Oversight & Accountability

Oversight for this contract is primarily managed by the Department of Education's program offices responsible for student financial aid. Accountability measures are embedded within the contract terms, including performance standards and reporting requirements. Transparency is facilitated through federal contract databases and public reporting on federal spending. While no specific Inspector General jurisdiction is mentioned for this particular award, the Department of Education's Office of Inspector General would have oversight over broader departmental financial management and program integrity.

Related Government Programs

Federal Student Loan Program Administration
Higher Education Act Programs
Credit Intermediation Services
Student Loan Default Prevention Initiatives
Federal Financial Aid Management

Risk Flags

Potential for cost increases due to economic price adjustments.
Contractor performance risk for critical financial aid services.
Regulatory compliance complexity in student financial aid.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $176.1 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). TASK ORDER DESCRIPTION: SERVICING OF TITLE IV STUDENT FINANCIAL AID, FROM 9/1/2016 THROUGH 8/31/2017. PROVIDES FUNDING FOR TITLE IV AID SERVICING, THROUGH APPROXIMATELY 12/31/2016. PROVIDES FUNDING FOR THE DELINQUENCY REDUCTION COMPENSATION PROGRAM, IN A NOT-TO-EXCEED AMOUNT OF $5

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 $176.1 million.

What is the period of performance?

Start: 2016-09-01. End: 2017-09-25.

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

Historical spending on federal student financial aid servicing has been substantial, reflecting the government's significant investment in higher education. The Department of Education manages a vast portfolio of student loans, requiring continuous servicing operations. Over the years, spending in this area has fluctuated based on legislative changes, loan volume, and the specific servicing contracts awarded. While precise historical figures for this specific contract's predecessor are not detailed here, the overall trend indicates a consistent and significant allocation of resources to ensure the smooth operation of federal student aid programs, including loan repayment, deferment, and default management. This particular award of $176 million for a one-year period is indicative of the scale of ongoing financial commitments in this domain.

How does the delinquency reduction compensation program work and what are its performance metrics?

The delinquency reduction compensation program, funded at a not-to-exceed amount of $500,000 per quarter and $2,000,000 annually, is designed to incentivize the contractor to actively reduce the number of borrowers who are delinquent on their federal student loans. While the specific operational mechanics and performance metrics are not detailed in the provided data, such programs typically involve performance-based payments. The contractor likely receives bonuses or enhanced compensation for achieving specific targets related to bringing delinquent accounts back into good standing, preventing defaults, or improving borrower repayment behaviors. The effectiveness would be measured by metrics such as the percentage decrease in delinquency rates among the serviced portfolio, the number of accounts successfully transitioned from delinquent to current status, and potentially the reduction in default rates over time.

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 history and significant experience in managing federal student loan servicing contracts. As a major player in the student loan industry, the company has been involved in servicing federal loan portfolios for many years, handling billions of dollars in student debt. Their track record typically includes managing loan origination, repayment, customer service, and default aversion activities for large volumes of borrowers. While specific performance details for every contract are not publicly itemized here, their continued selection for substantial federal contracts suggests a generally satisfactory performance history and the capacity to meet the complex requirements of federal student aid administration. They are recognized as one of the primary federal loan servicers.

What are the potential risks associated with a fixed-price contract with economic price adjustment (FPEPA) for student loan servicing?

A Fixed-Price with Economic Price Adjustment (FPEPA) contract for student loan servicing presents a mixed risk profile. For the government, the primary risk is that economic price adjustments could lead to higher-than-anticipated costs if inflation or other specified economic indicators rise significantly beyond projections. This could erode the cost savings initially sought with a fixed-price structure. For the contractor, the risk is that if economic conditions do not change as expected, or if the adjustment formula is unfavorable, their profit margins could be squeezed. However, FPEPA contracts are often used in long-term service agreements where input costs (like labor or operational expenses) are subject to market fluctuations, providing a mechanism to maintain contract viability and ensure service continuity by allowing for fair compensation adjustments.

How does this contract compare to other federal contracts for similar financial services?

This contract, valued at approximately $176 million for a year of student financial aid servicing, is substantial and aligns with the scale of other major federal financial services contracts. Similar contracts within the government often involve large financial institutions managing vast portfolios, such as those for payment processing, treasury services, or other forms of credit intermediation. The competitive nature (full and open) and the specific service area (student loan servicing) are common characteristics. The value is comparable to other large-scale, multi-year contracts awarded by agencies like the Department of the Treasury or the Department of Veterans Affairs for managing financial programs. The complexity and regulatory environment of student aid servicing are key factors influencing the contract size and scope.

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: $176,066,424

Exercised Options: $176,066,424

Current Obligation: $176,066,424

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Parent Contract

Parent Award PIID: EDFSA09D0012

IDV Type: IDC

Timeline