    [Joint House and Senate Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

           FEDERAL STUDENT AID: PERFORMANCE - BASED ORGANIZATION REVIEW

    =======================================================================

                                 JOINT HEARING

                                   BEFORE THE

                     SUBCOMMITTEE ON GOVERNMENT OPERATIONS

                                     OF THE

                             COMMITTEE ON OVERSIGHT
                             AND GOVERNMENT REFORM

                                    AND THE

             SUBCOMMITTEE ON HIGHER EDUCATION ON WORKFORCE TRAINING

                                     OF THE

                    COMMITTEE ON EDUCATION AND THE WORKFORCE

                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               NOVEMBER 18, 2015

                                   __________

                               Serial No. 114-85

                 (Committee on Oversight and Goverment Reform)

                                   __________

                               Serial No. 114-34

                   (Committee on Education and the Workforce)

    Printed for the use of the Committee on Oversight and Government Reform

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

             Available via the World Wide Web: http://www.fdsys.gov
                          http://www.house.gov/reform
                          http://edworkforce.house.gov

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                  COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                         JASON CHAFFETZ, Utah, Chairman
    JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland,
    MICHAEL R. TURNER, Ohio                  Ranking Minority Member
    JOHN J. DUNCAN, Jr., Tennessee       CAROLYN B. MALONEY, New York
    JIM JORDAN, Ohio                     ELEANOR HOLMES NORTON, District of
    TIM WALBERG, Michigan                    Columbia
    JUSTIN AMASH, Michigan               WM. LACY CLAY, Missouri
    PAUL A. GOSAR, Arizona               STEPHEN F. LYNCH, Massachusetts
    SCOTT DesJARLAIS, Tennessee          JIM COOPER, Tennessee
    TREY GOWDY, South Carolina           GERALD E. CONNOLLY, Virginia
    BLAKE FARENTHOLD, Texas              MATT CARTWRIGHT, Pennsylvania
    CYNTHIA M. LUMMIS, Wyoming           TAMMY DUCKWORTH, Illinois
    THOMAS MASSIE, Kentucky              ROBIN L. KELLY, Illinois
    MARK MEADOWS, North Carolina         BRENDA L. LAWRENCE, Michigan
    RON DeSANTIS, Florida                TED LIEU, California
    MICK MULVANEY, South Carolina        BONNIE WATSON COLEMAN, New Jersey
    KEN BUCK, Colorado                   STACEY E. PLASKETT, Virgin Islands
    MARK WALKER, North Carolina          MARK DeSAULNIER, California
    ROD BLUM, Iowa                       BRENDAN F. BOYLE, Pennsylvania
    JODY B. HICE, Georgia                PETER WELCH, Vermont
    STEVE RUSSELL, Oklahoma              MICHELLE LUJAN GRISHAM, New Mexico
    EARL L. ``BUDDY'' CARTER, Georgia
    GLENN GROTHMAN, Wisconsin
    WILL HURD, Texas
    GARY J. PALMER, Alabama

                        Sean McLaughlin, Staff Director
                     David Rapallo, Minority Staff Director
        Katie Bailey, Government Operations Subcommittee Staff Director
                        Sharon Casey, Deputy Chief Clerk

                                     ------

                     Subcommittee on Government Operations

                     MARK MEADOWS, North Carolina, Chairman
    JIM JORDAN, Ohio                     GERALD E. CONNOLLY, Virginia,
    TIM WALBERG, Michigan, Vice Chair        Ranking Minority Member
    TREY GOWDY, South Carolina           CAROLYN B. MALONEY, New York
    THOMAS MASSIE, Kentucky              ELEANOR HOLMES NORTON, District of
    MICK MULVANEY, South Carolina            Columbia
    KEN BUCK, Colorado                   WM. LACY CLAY, Missouri
    EARL L. ``BUDDY'' CARTER, Georgia    STACEY E. PLASKETT, Virgin Islands
    GLENN GROTHMAN, Wisconsin            STEPHEN F. LYNCH, Massachusetts
                    COMMITTEE ON EDUCATION AND THE WORKFORCE

                        JOHN KLINE, Minnesota, Chairman

    Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott,
    Virginia Foxx, North Carolina            Virginia
    Duncan Hunter, California              Ranking Member
    David P. Roe, Tennessee              Ruben Hinojosa, Texas
    Glenn Thompson, Pennsylvania         Susan A. Davis, California
    Tim Walberg, Michigan                Raul M. Grijalva, Arizona
    Matt Salmon, Arizona                 Joe Courtney, Connecticut
    Brett Guthrie, Kentucky              Marcia L. Fudge, Ohio
    Todd Rokita, Indiana                 Jared Polis, Colorado
    Lou Barletta, Pennsylvania           Gregorio Kilili Camacho Sablan,
    Joseph J. Heck, Nevada                 Northern Mariana Islands
    Luke Messer, Indiana                 Frederica S. Wilson, Florida
    Bradley Byrne, Alabama               Suzanne Bonamici, Oregon
    David Brat, Virginia                 Mark Pocan, Wisconsin
    Buddy Carter, Georgia                Mark Takano, California
    Michael D. Bishop, Michigan          Hakeem S. Jeffries, New York
    Glenn Grothman, Wisconsin            Katherine M. Clark, Massachusetts
    Steve Russell, Oklahoma              Alma S. Adams, North Carolina
    Carlos Curbelo, Florida              Mark DeSaulnier, California
    Elise Stefanik, New York
    Rick Allen, Georgia

                        Juliane Sullivan, Staff Director
                     Denise Forte, Minority Staff Director
               Jennifer Lynne Prescott, Professional Staff Member
                      Alissa A. Strawcutter, Deputy Clerk
                                     ------

            SUBCOMMITTEE ON HIGHER EDUCATION AND WORKFORCE TRAINING

                   VIRGINIA FOXX, North Carolina, Chairwoman

    David P. Roe, Tennessee              Ruben Hinojosa, Texas
    Matt Salmon, Arizona                   Ranking Minority Member
    Brett Guthrie, Kentucky              Hakeem S. Jeffries, New York
    Lou Barletta, Pennsylvania           Alma S. Adams, North Carolina
    Joseph J. Heck, Nevada               Mark DeSaulnier, California
    Luke Messer, Indiana                 Susan A. Davis, California
    Bradley Byrne, Alabama               Raul M. Grijalva, Arizona
    Carlos Curbelo, Florida              Joe Courtney, Connecticut
    Elise Stefanik, New York             Jared Polis, Colorado
    Rick Allen, Georgia

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on November 18, 2015................................     1

                                   WITNESSES

    Mr. James Runcie, Chief Operating Officer, U.S. Department of
      Education
        Oral Statement...............................................     8
        Written Statement............................................    10
    Ms. Melissa Emrey-Arras, Director, Education, Workforce, and
      Income Security, U.S. Government Accountability Office
        Oral Statement...............................................    20
        Written Statement............................................    22
    The Hon. Kathleen Tighe, Inspector General, U.S. Department of
      Education
        Oral Statement...............................................    43
        Written Statement............................................    45
    Mr. Ben Miller, Senior Director, Postsecondary Education, Center
      for American Progress
        Oral Statement...............................................    60
        Written Statement............................................    62
    Mr. Justin Draeger, President, National Association of Student
      Financial Aid Administrators
        Oral Statement...............................................    71
        Written Statement............................................    73

                                    APPENDIX

    Chairman Meadows Statement.......................................   124
    Ranking Member Connolly Statement................................   128
    Chairwoman Foxx Statement........................................   130
    Ranking Member Hinojosa Statement................................   132
    RESPONSE from Mr. Runcie to Questions for the Record.............   138
    RESPONSE from Ms. Emrey-Arras to Questions for the Record........   200
    RESPONSE from Inspector General Tighe to Questions for the Record   202
    RESPONSE from Mr. Draeger to Questions for the Record............   206

           FEDERAL STUDENT AID: PERFORMANCE-BASED ORGANIZATION REVIEW

                                  ----------

                          Wednesday, November 18, 2015

                      House of Representatives,
                 Subcommittee on Government Operations,
      Committee on Oversight and Government Reform, joint with
            the Subcommittee on Higher Education and Workforce
            Training, Committee on Education and the Workforce,
                                                       Washington, D.C.
        The subcommittees met, pursuant to call, at 9:06 a.m., in
    Room 2154, Rayburn House Office Building, Hon. Mark Meadows
    [chairman of the Subcommittee on Government Operations]
    presiding.
        Present from the Subcommittee on Government Operations:
    Representatives Meadows, Jordan, Walberg, Mulvaney, Buck,
    Carter, Chaffetz, Connolly, Maloney, Clay, Plaskett.
        Present from the Subcommittee on Higher Education and
    Workforce Training: Representatives Foxx, Guthrie, Messer,
    Curbelo, Stefanik, Allen, Kline, Scott, Hinojosa, Jeffries,
    Adams, DeSaulnier, and Courtney.
        Mr. Meadows. The Subcommittee on Government Operations of
    the Committee on Oversight and Government Reform and the
    Subcommittee on Higher Education and Workforce Training of the
    Committee on Education and the Workforce will come to order.
        And, without objection, the chair is authorized to declare
    a recess at any time.
        Today, we gather to review the Federal Government's first
    performance-based organization, the Office of Federal Student
    Aid.
        In 1998, amendments to the Higher Education Act transformed
    FSA into a Federal experiment, one that many don't realize is
    still ongoing. Driving this transformation was an idea that
    innovation would foster by bringing private-sector talent into
    the government, giving that talent independence from the parent
    agency, providing generous compensation, and then holding that
    talent accountable.
        Today's goal is simple. We are going to evaluate FSA's
    performance since it was granted these responsibilities and
    flexibilities.
        There is no doubt that FSA is tasked with a far greater
    responsibility today than ever could have been imagined or
    anticipated in 1998. The Federal Student Aid system is vast,
    complex, and growing.
        In 1998, the Free Application of Federal Student Aid was
    just being put on the World Wide Web. Today, FSA processes over
    22 million applications annually, and 99 percent of those
    applications are processed electronically.
        In 1998, 3.8 million Pell grants were awarded annually,
    costing $6.7 billion. Today, it is 8.3 million Pell grants that
    are awarded by FSA annually, costing close to $32 billion.
        In 1998, FSA owned and managed $45 billion in Direct Loans
    outstanding principals, and the other $150 billion was funded
    and owned by a public-private partnership in the FFEL program.
    Today, FSA owns and manages a staggering amount of $1.18
    trillion in Federal assets.
        Now, while FSA's responsibility has increased dramatically,
    there has not been an increase in accountability. Let's be
    clear: Congress has not done its part. We created this thing,
    and then walked away. Congress has only called the FSA's Chief
    Operating Officer, the owner of the PBO, to testify three times
    since 2010. This entire enterprise was set up for oversight,
    but in the halls of Congress we need to do better.
        Now, while I acknowledge Congress has to do its part, let
    me be clear: FSA is failing to live up to its side of the deal,
    as well. One only needs to consider the inspector general's
    recent ``Management Challenges'' report for evidence that FSA
    is failing to deliver. Each challenge the IG flagged this time
    around was raised in last year's report, as well.
        And these are not insignificant challenges but mission-
    critical areas that FSA must manage effectively. These areas
    include: improper payment reporting, oversight and monitoring,
    and IT system development and implementation, of which we heard
    in this very room yesterday some of the challenges there. And
    I'm concerned that FSA made significant progress to be removed
    from the GAO's high-risk list in 2005, but now it's
    backsliding.
        And I'm doubly concerned about the culture being fostered
    by FSA. We will hear from school stakeholders today that the
    working relationship with FSA has become so strenuous that it
    is having an adverse effect on, ultimately, those people that
    they should be serving: the students.
        During the committee's hearing yesterday, the Department
    received an F--an F--for its failure to effectively secure the
    personal information of millions of students across the
    country. Today, I suspect Washington may receive an F for
    allowing the Office of Federal Student Aid to expand into
    higher education. I'm not convinced it's been a healthy
    endeavor for students, parents, or taxpayers.
        But I look forward to hearing from our witnesses today and
    now turn to the ranking member, the gentlewoman from New York,
    Mrs. Maloney, for her opening statement.
        Mrs. Maloney. Thank you so very much, Mr. Chairman, for
    calling this important hearing.
        As I understand it, the goal of today's hearing is to
    examine the Office of Federal Student Aid within the Department
    of Education. FSA is what is known as a, and ''performance-
    based organization.'' These entities have greater independence
    from the other agencies, more flexible hiring authority, and
    additional contracting flexibility. And they generally are more
    siloed from the rest of the other agencies.
        Some have suggested that this was a Clinton administration
    decision. In fact, the Clinton administration proposed this
    concept for the Department of Commerce, but it was Congress
    that created FSA within the Department of Education as a
    performance-based organization in 1998.
        The primary sponsors in the House of Representatives of the
    legislation creating it as a performance-based organization
    were Representative Buck McKeon, Representative William Clay,
    Rep. William Goodling, and Rep. Dale Kildee.
        During the markup of the legislation in committee, Buck
    McKeon and said this:``For the first time, the day-to-day
    management of our student aid programs will be in the hands of
    someone with real-world experience in financial services. This
    individual will be given the hiring and contracting flexibility
    necessary to get results and will be paid based on performance.
    For the first time, the Department's student aid assistance
    will be run like a business, adopting the best practices from
    the private sector and focusing on bottom-line results.''
        Rep. McKeon's legislation passed the House with a broad
    bipartisan vote of 414 to 4. In fact, every Member of Congress
    who is here today and was serving when this legislation was
    passed voted for it.
        The reason was simple. A few years earlier, the Government
    Accountability Office had added student loans to its high-risk
    list of programs that are especially vulnerable to waste,
    fraud, abuse, and mismanagement. As GAO stated at the time, the
    program had, ''generally succeeded in providing access to money
    for education,'' end quote, but was, and I quote, ``less
    successful in protecting the taxpayers' financial interests.''
        And as a result of significant work over the next few
    years, by 2005 GAO was able to remove student financial aid
    programs from its high-risk list, citing, ''sustained
    improvements to address its financial management and internal
    control weaknesses.'' That was great news.
        I want to be clear that I agree that Congress should
    examine whether it still makes sense today, 18 years later, to
    keep FSA as a performance-based organization. As Rep. Connolly
    said at yesterday's hearing, we may want to consider bringing
    the Department up to date, particularly in the area of IT and
    data contracts. That is something I hope we can explore today.
        I also feel very strongly that we have to examine the
    actions of the student loan servicers. In August, the Consumer
    Financial Protection Bureau notified Navient, one of the
    Nation's biggest student loan servicers, that after a 2-year
    investigation it had enough evidence to indicate the company
    violated consumer protection laws and was considering taking
    legal action against the company for its late-fee practices,
    among other potential abuses.
        A year earlier, in 2014, Navient had to pay $60 million to
    compensate tens of thousands of military servicemembers as part
    of a settlement with the Department of Justice for a,
    ``nationwide pattern of violating the Servicemembers Civil
    Relief Act.''
        Navient also entered into a settlement with the Federal
    Deposit Insurance Corporation for, ``deceptive and unfair acts
    and practices.'' These included, and I quote, ``allocating
    underpayments in a manner that maximizes late fees incurred by
    consumers.''
        Unfortunately, we do not have Navient or any other
    servicers here today. I hope we will have the opportunity to
    question them at a future hearing.
        Finally, while this hearing today and our hearing yesterday
    are important, the much more urgent priority for students in
    this country is addressing the exploding cost of college and
    the crippling debt students face when they graduate and enter
    the workforce.
        The Center on Budget and Policy Priorities issued a report
    recently warning that 47 States are now, ``spending less per
    student in the 2014-2015 school year than they did at the start
    of the recession.'' In fact, the average State has cut spending
    by 20 percent per student compared to the 2007 and 2008 school
    year. As a result, GAO reports that, ``By fiscal year 2012,
    tuition had overtaken State funding as a source of revenue for
    public colleges.''
        This is a national emergency. The Obama administration and
    Democrats in Congress have tried to make significant
    improvements. For example, we successfully converted student
    loans to the Direct Loan Program, saving tens of billions of
    dollars. The administration has made other proposals, but many
    require statutory changes, so it is up to us here in Congress
    to act.
        The most critical higher education challenge confronting
    our Nation is how students will pay for the ever-increasing
    cost of college. I hope we can focus at least some of today's
    discussion on this issue, and I hope we will hold another
    hearing in the near future to address this critical challenge.
        Again, I thank you for focusing on one of the most
    important issues in our country, the education of our young
    people.
        Thank you, and I yield back.
        Mr. Meadows. I thank the gentlelady.
        I now welcome and recognize the chairman of the
    Subcommittee on Higher Education and Workforce Training of the
    Committee on Education and the Workforce, the gentlelady from
    North Carolina, Dr. Foxx, for her opening statement.
        Ms. Foxx. Thank you, Mr. Meadows.
        Good morning, everyone, and welcome to this joint hearing.
    The title of the committees are too long.
        I thank Chairman Meadows for working with our committee on
    an issue that is critical to serving the best interests of
    students, families, and taxpayers. I'm a firm believer that
    collaborative efforts such as this are what most often produce
    the practical solutions the American people deserve.
        We all know that the current Federal financial system is
    broken. That deserves repeating. We all know that the current
    Federal financial aid system is broken. National student loan
    debt is at an all-time high, and a complex patchwork of grant,
    loan, and repayment programs has become so difficult to
    navigate that it often discourages individuals from pursuing a
    higher education.
        Students, families, and taxpayers deserve better. That's
    why simplifying and improving student aid remains a leading
    priority as Congress continues its work to strengthen higher
    education. Addressing the challenges within the Federal
    financial aid system is an important part of that effort and
    one we have discussed extensively in our subcommittee.
        But that's not why we are here today. Instead, we are here
    to examine the agency tasked with managing the system, the
    Office of Federal Student Aid, or FSA. That agency is
    responsible for administering every Federal loan, grant, work-
    study, and repayment program under Title IV of the Higher
    Education Act. In other words, FSA is in charge of delivering
    billions of taxpayer dollars to millions of eligible students,
    as well as managing more than a trillion dollars of outstanding
    student loan debt.
        Additionally, the agency is expected to provide guidance
    about financial aid policies to thousands of colleges and
    universities and has the authority to revoke an institution's
    ability to participate in the aid programs should they not
    comply with that guidance. Needless to say, FSA plays an
    enormous role in the higher education system and has the
    ability to help or disrupt the lives of students.
        In the 1990s, the Government Accountability Office
    designated FSA as a, ``high-risk agency with longstanding
    management problems,'' To improve the efficiency and
    effectiveness of FSA and to mitigate the mishandling of limited
    resources moving forward, Congress in 1998 converted the agency
    to a performance-based organization that would have to meet
    specific objectives under the Higher Education Act.
        Nearly two decades and trillions of dollars later, many
    would argue FSA is not achieving the intended results. It's our
    job to find out why and identify opportunities for reform to
    ensure taxpayer dollars are well-spent and students are well-
    served.
        Numerous reports reveal FSA is rife with inefficiencies
    that have led to a lack of communication with students,
    institutions, and loan servicers; improper payments; inaccurate
    reporting of data; failure to ensure borrowers are aware of the
    repayment options available to them; mismanagement of
    contractors and vendors; poor customer service--and I could go
    on, but we only have a limited time.
        After the last comprehensive review of the agency in 2008,
    the Department of Education's Office of Inspector General found
    FSA has failed to meet its responsibility as a performance-
    based organization, such as developing a 5-year performance
    plan with external stakeholders and establishing annual
    performance reviews for the agency's top executives.
        Due to these and other failures, the inspector general
    noted that FSA, ``has been unable to realize the expected
    benefits of the initiatives and has hindered its progress in
    meeting the requirements of the Higher Ed Act.''
        This is about more than checking boxes. When FSA fails to
    fulfill its responsibility, it jeopardizes hardworking
    taxpayers' money intended to help students. We need to demand
    better. As Congress works to strengthen higher education, we
    must ensure the Office of Federal Student Aid is serving the
    best interest of students, families, and taxpayers.
        I look forward to hearing from our witnesses about how to
    achieve just that. Thank you for joining us today.
        And thank you again, Chairman Meadows, for working with us
    on this important hearing.
        Before I concluded my opening remarks, I do want to
    recognize our colleague Congressman Hinojosa, who announced
    last week his decision not to seek reelection after serving
    nearly 20 years in Congress. As the ranking member of the
    Subcommittee on Higher Education and Workforce, Mr. Hinojosa
    has been an ardent champion for students, families, and
    workers. Mr. Hinojosa is to be commended for his service to our
    country, and I wish him and his family all the best in the
    years ahead.
        I yield back.
        Mr. Meadows. I thank the chairwoman for her eloquent words,
    and now recognizing the gentleman of which we owe a debt of
    gratitude to, the ranking member of the Subcommittee on Higher
    Education and the Workforce, the gentleman from Texas, for his
    opening statement.
        Mr. Hinojosa. Thank you, Chairman Meadows and especially
    Chairwoman Foxx, for your very kind and generous remarks. I
    really appreciate everything you said, and we will visit on
    that.
        I also want to thank Ranking Member Maloney for holding
    this important hearing.
        Today's joint committee hearing will examine the Office of
    Federal Student Aid as a performance-based organization and the
    management and administration of these programs. And I want to
    welcome our distinguished panel of witnesses for joining us
    this morning to share their views on how the Federal Government
    can continue to best serve our students.
        As we have heard this morning, the Office of Federal
    Student Aid, known as FSA, became a PBO as part of the 1998
    reauthorization of the Higher Education Act and was the first
    PBO established by Congress to manage the operational functions
    supporting financial aid programs. This model was crucial for
    the Department of Education to provide necessary services to
    our students and to ensure efficiency and accountability.
        While the focus of today's joint hearing is on FSA's
    performance as a PBO, some of my colleagues may attempt to
    discredit FSA, the Federal Student Aid, and its work in
    successfully transitioning to the Direct Loan Program. In my
    view, the Department's move to direct lending in 2010 continues
    to provide students with a streamlined loan origination system,
    and it provides the Department with better oversight against
    fraud, waste, and abuse.
        Ladies and gentlemen, I must underscore that, while there
    is always room for improvement, I understand that FSA has been
    working to address areas of improvement for quite some time.
    And I want to emphasize three points which contributed to
    address the need to improve accessibility and affordability of
    higher education.
        First, we must remember that FSA is the largest provider of
    financial aid for students in the United States. In 2015, FSA
    delivered approximately $128 billion in federal student aid to
    nearly 12 million students at 6,100 institutions of higher
    education, amounts that had never been reached before in our
    country's history.
        Secondly, I'm also aware that FSA has worked diligently to
    ensure students are receiving their financial aid funds in a
    timely manner so that they can pay for their education and be
    ready on the first day of classes.
        Thirdly, FSA is responsible for managing programs that ease
    the burden of student loan debt for borrowers. FSA plays a
    vitally important role in helping borrowers repay their student
    loans through income-driven repayment plans.
        At the same time, I must express my concerns regarding
    student loan servicers. Several investigations and reports,
    including a report issued by the Consumer Financial Protection
    Bureau, have found that Federal student loan servicers have not
    provided appropriate services and guidance and protections to
    borrowers.
        So, with this in mind, I applaud the Obama administration
    for taking steps to make college more affordable for students
    and families by issuing a StudentAid Bill of Rights to give
    every borrower the right to an affordable repayment plan.
    Furthermore, every borrower has the right to quality customer
    service, reliable information, and fair treatment.
        Along those same lines, the Departments of Education, the
    Treasury, and Consumer Financial Protection Bureau issued
    ``Joint Statement of Principles on Student Loan Servicing'' in
    September of this year. This is a positive step in the right
    direction. I wish to remind my colleagues that every student,
    regardless of their socioeconomic status, has an equal
    opportunity to both secondary education and access to financial
    aid.
        As you are aware, tuition costs and student loan debt have
    risen exponentially, surpassing the $1.2 trillion that
    Chairwoman Foxx mentioned. We must do all that we can to help
    borrowers repay their debt.
        With that, I look forward to hearing from our distinguished
    guests on these matters, and I yield back.
        Mr. Meadows. I thank the gentleman.
        I will hold the record open for 5 legislative days for any
    members who wish to provide and submit a written statement.
        Mr. Meadows. We will now recognize our panel of witnesses.
        I'm pleased to welcome Mr. James Runcie, who currently
    serves as the Chief Operating Officer at the U.S. Department of
    Education. Mr. Runcie served as the Deputy Chief Operating
    Officer of FSA from 2010 to 2011 and Acting Chief Operating
    Officer of the Department of Education until his full
    appointment in 2012.
        Welcome.
        I welcome Ms. Melissa Emrey-Arras--is that correct? All
    right. She serves as the Director of Education, Workforce, and
    Income Security at the Government Accountability Office. She
    oversees national studies on both K-through-12 and higher
    education issues.
        I welcome back Ms. Kathleen Tighe, who currently serves as
    the Inspector General at the U.S. Department of Education. Ms.
    Tighe also chairs the Council of Inspector Generals on
    Integrity and Efficiency and in 2011 was appointed by President
    Obama to the Recovery Accountability and Transparency Board and
    the Government Accountability and Transparency Board.
        Welcome.
        I welcome Mr. Ben Miller, who currently serves as the
    senior director of postsecondary education at the Center for
    American Progress. Mr. Miller previously served as the director
    for higher education at New America as well as a senior policy
    advisor in the Office of Planning, Evaluation, and Policy
    Development at the Department.
        And I also welcome Mr. Justin Draeger, who currently serves
    as the president and CEO of the National Association of Student
    Financial Aid Administrators. In this capacity, he serves as
    the primary voice of the NASFAA and the liaison between the
    3,000 financial aid offices and Congress and the Federal
    Government.
        Welcome to you all, and thank you for being here.
        Pursuant to Oversight and Government Reform Committee
    rules, all witnesses will be sworn in before they testify. So
    I'd ask that you please rise and raise your right hand.
        Do you solemnly swear or affirm that the testimony that
    you're about to give will be the truth, the whole truth, and
    nothing but the truth?
        Thank you. Please be seated.
        Let the record reflect that all witnesses answered in the
    affirmative.
        And in order to allow time for discussion, we would
    appreciate if you would please limit your oral testimony to 5
    minutes. However, your entire written statement will be made
    part of the record.
        Mr. Runcie, you are recognized for 5 minutes.

                           WITNESS STATEMENTS

                       STATEMENT OF JAMES RUNCIE

        Mr. Runcie. Thank you, Chairman Meadows, Chairwoman Foxx
    and Ranking Members Maloney and Hinojosa and members of the
    committee, for the opportunity to discuss Federal Student Aid
    as a PBO. My name is James Runcie, and I serve as FSA's Chief
    Operating Officer.
        FSA is the largest source of federal student aid for
    postsecondary education in the U.S. During fiscal year 2015, we
    delivered more than $127 billion in aid to more than 13 million
    students attending approximately 6,100 postsecondary
    institutions. During this time, we processed nearly 20 million
    FAFSAs. Our loan portfolio is currently more than $1.2
    trillion, with 42 million individual recipients and 193 million
    loans.
        We use a public-private partnership that leverages almost
    1,300 Federal employees and more than 12,000 contracted
    employees.
        Since FSA became a PBO, we have had numerous successes in
    transforming the delivery of student aid. FSA has responded to
    rapidly changing landscapes in the delivery of federal student
    aid.
        To accommodate growth and mitigate risk, FSA contracted
    with four private-sector servicers, who levy their commercial
    practices to expedite the delivery of services. As a result of
    the capital markets' decline in 2008, we injected $112 billion
    into the markets, ensuring that every student that depended on
    federal student aid received it.
        We updated our systems, increased capacity, and provided
    training to thousands of financial aid professionals at
    thousands of schools to move to 100-percent direct lending. And
    we entered into agreements with not-for-profit loan servicers.
    We successfully implemented 11 NFPs, and we did all of these
    things with no negative impact to students and families.
        The PBO contracting flexibilities allow us to structure
    contracts in a way that include performance requirements and
    protections for students and borrowers. Spurred in part by the
    PBO legislation and landmark procurement laws passed by
    Congress, FSA has been a government leader in delivering its
    mission through the adoption of commercial solutions and
    systems.
        This year, FSA achieved $150 million in cost avoidance
    through successful contract negotiations. We have saved $105
    million since 2009, thanks to the culture of accountability
    established by the PBO. We are proud to have earned 14
    consecutive annual clean financial statement audit opinions.
        While we have strengthened our financial position, we also
    have strengthened our program compliance process to ensure the
    proper administration of federal student aid funds. We have
    increased efforts to detect fraud in the FAFSA, and we have
    significantly reduced the time to complete the online
    application--more than 1 hour in 2009--to less than 24 minutes
    in 2015.
        The FAFSA is but one integrated application among many in
    our complex operating environment. In 2015, we documented and
    assessed more than 2,600 internal controls across 36 business
    processes. We found that 96 percent of these controls are
    designed and operate effectively. The remaining 4 percent had
    immaterial deficiencies, for which we have established
    corrective actions.
        Within the last several years, we have effectively launched
    and implemented major modifications to our operating
    environment due to legislative, regulatory, and policy changes.
    Examples include but certainly are not limited to the IRS Data
    Retrieval Tool, new income-driven repayment plans, the 150-
    percent Direct Subsidized Loan limit, and a comprehensive
    enterprise data warehouse.
        Through the recent Cyber Sprint, FSA has made significant
    progress in implementing additional protections to customer
    data. In addition, implementation of CyberArk at our Virtual
    Data Center, completed last month, has remediated many of our
    audit access control findings.
        The need for Federal aid will continue to grow, and FSA
    must continue to adapt. We must be in a position to continue
    responding to rapid regulatory market changes, to recruit and
    retain specialized talent, to negotiate commercial contracting,
    and to provide the most effective program compliance in order
    to continue to fulfill our mission.
        Taking full advantage of each authority granted as a PBO
    was a critical element to our mission success. The employees
    that I represent at FSA are focused on the future of the
    organization--a future that includes the early availability of
    the FAFSA in October 2016; implementing prior-prior; repay and
    servicing improvements; launching a new student complaint
    system; expanding our oversight capacity; and increasing
    security of our systems.
        I appreciate the opportunity to provide the committee with
    an overview and welcome any questions that you may have today.
    Thank you.
        [prepared statement of Mr. Runcie follows:]

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        Mr. Meadows. Thank you, Mr. Runcie.
        Ms. Emrey-Arras, you are recognized for 5 minutes.

                    STATEMENT OF MELISSA EMREY-ARRAS

        Ms. Emrey-Arras. Thank you. I am pleased to be here today
    to discuss the results of our work examining FSA's efforts to
    monitor and oversee the Direct Loan Program.
        FSA administers the Direct Loan Program and oversees the
    performance of contractors supporting this program. These
    contractors include loan servicers responsible for billing and
    other services, as well as companies managing the Department's
    defaulted loan information system.
        To address longstanding management weaknesses, the Higher
    Education Act was amended to establish FSA as the first PBO. A
    PBO is intended to transform the delivery of public services by
    committing to achieving specific, measurable goals with targets
    for improvement in exchange for being provided with more
    flexibility to manage its operations.
        Accordingly, FSA's strategic plan includes several goals
    focused on monitoring contractors and serving the needs of
    borrowers. However, recent questions have been raised about
    FSA's management of the Direct Loan Program, including its
    oversight of contractors.
        In March 2014, we found that FSA's limited planning and
    oversight of its IT contractor prevented Education from
    providing timely benefits to borrowers who completed loan
    rehabilitation. Loan rehabilitation allows borrowers who make
    nine on-time monthly payments in 10 months to have a default
    removed from their credit reports. However, no rehabilitations
    were processed from October 2011 until April 2012 due to issues
    with FSA's IT system, and FSA officials said they needed until
    January of 2013 to clear the resulting backlog.
        My statement today provides additional findings from our
    recently completed work on FSA's management of the Direct Loan
    Program and will focus on how well FSA, one, provides
    instructions and guidance to Direct Loan servicers, and, two,
    monitors and documents calls between Direct Loan borrowers and
    servicers.
        In terms of FSA's instructions and guidance, we found that
    FSA's communications to loan servicers are sometimes lacking,
    resulting in inconsistent services to borrowers. Six of the
    seven servicers we interviewed reported various issues
    resulting from absent, unclear, and inconsistent guidance and
    instructions.
        For example, one servicer said there were no instructions
    for how to apply over- or underpayments to borrower accounts.
    If a borrower has multiple loans, some servicers spread an
    overpayment amount evenly across the loans, while other
    servicers target the higher-interest loans first.
        Furthermore, FSA is not consistently sharing all
    clarifications on Direct Loan Program instructions with all
    servicers. Accordingly, we are recommending today that FSA
    review and improve how it provides instruction and guidance to
    servicers.
        In terms of FSA's call-monitoring process, we found that
    FSA's monitoring has methodological weaknesses and is poorly
    documented. For example, we found that FSA monitors far fewer
    outbound calls than inbound calls, even though one servicer
    told us that it makes 60 times more outbound calls than inbound
    calls, and that outbound calls are made to borrowers who are
    often delinquent and at risk of default.
        Also, the methodology for selecting calls for review is not
    well-defined, and it relies on servicers to implement, with no
    verification from FSA to ensure its integrity. Accordingly, we
    are recommending today that FSA implement a more rigorous
    methodology for monitoring calls.
        In addition, we found weaknesses in how FSA documents the
    results of its call monitoring. For example, some recent
    monitored calls did not consistently track errors over time. In
    addition, the monthly summary reports only capture errors if
    four or more occur in the same call. If a servicer fails to
    answer all of the borrower's questions but does not compound
    this problem with three additional errors, the report does not
    capture this information. Accordingly, we are recommending
    today that FSA improve documentation of its call monitoring.
        FSA faces challenges in the Direct Loan Program that affect
    its ability to function effectively as a PBO. If FSA fails to
    strengthen its instructions and guidance to servicers and
    improve call monitoring, differences between servicers will
    persist that could financially hurt borrowers or risk the
    integrity of the program.
        Thank you. This concludes my statement.
        [Prepared statement of Ms. Emrey-Arras follows:]

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        Mr. Meadows. Thank you.
        Inspector General Tighe, you are recognized for 5 minutes.

                  STATEMENT OF THE HON. KATHLEEN TIGHE

        Ms. Tighe. Thank you all for inviting me here today to
    discuss the work of the Office of Inspector General involving
    the U.S. Department of Education's Office of Federal Student
    Aid as a performance-based organization.
        As many of you know, the Federal Student Aid programs have
    long been a major focus of our audit and investigative work, as
    these programs are large, complex, and susceptible to fraud and
    abuse. We look to promote efficiency and effectiveness in FSA
    programs and operations and, in doing so, help to protect
    America's students from harm and help safeguard the taxpayers'
    investment in higher education.
        As already noted during this hearing, FSA delivered about
    $130 billion in student aid this year to 13 million students
    and managed an outstanding loan portfolio that has grown to
    $1.2 trillion. This makes FSA one of the largest financial
    institutions in the country.
        As a PBO, FSA is responsible for managing both the
    oversight and administrative functions that support these
    programs. In 2008, we determined that FSA was not completely
    fulfilling its responsibilities as a PBO in the areas of
    systems integration, cost reduction, and planning and
    reporting. The work we have performed since 2008 has focused in
    significant part on areas within FSA's oversight and
    administrative responsibilities.
        That work continues to identify problems in FSA's oversight
    of program participants. For example, our 2015 audit found
    weaknesses in FSA's process for performing program reviews,
    including that staff did not adequately document fiscal testing
    for timely disbursements or determine whether schools had
    implemented Direct Loan quality assurance systems, and there
    was limited evidence of supervisory reviews, all of which may
    leave FSA with limited assurance that program reviews are
    appropriately identifying and reporting instances of
    noncompliance.
        Another 2015 audit found that FSA's followup process for
    OIG's external audits was not always effective because audits
    were not always closed timely and FSA did not always maintain
    appropriate documentation to show that corrective actions were
    completed. Not ensuring corrective actions are taken as quickly
    as possible allows deficiencies to continue to exist, and the
    risk remains that related programs were not effectively managed
    and that taxpayer funds are not being used as intended.
        FSA, as a PBO, also has the responsibility for managing the
    administrative functions of the Title IV programs. Recent OIG
    work has identified weaknesses in this area. For example,
    results from our recent improper payments audits found that FSA
    has not taken full advantage of the Improper Payments
    Elimination and Recovery Act to identify and reduce improper
    payments in the Pell grant and Direct Loan Programs. We have
    identified issues with FSA's improper payment methodologies
    that render its improper-payment estimates for these programs
    inaccurate, incomplete, and unreliable.
        OIG worked conducted over the last several years has also
    identified weaknesses in FSA's contract management--an area of
    concern, as FSA relies heavily on contractor support to
    accomplish the purposes of the PBO.
        We have seen weaknesses in FSA's monitoring of its debt
    management system, its contracts with the Title IV servicers,
    and its contracts with private collection agencies. We have
    identified issues such as not ensuring contract milestones were
    met, lack of proper invoice validation, the failure to confirm
    the adequacy of deliverables, and the failure to ensure
    adequate IT security of contractor-operated systems.
        Without improved contractor monitoring, FSA has limited
    assurance that it is receiving the products and services it is
    paying for, impacting both students' and taxpayers' interests.
        My written testimony provides more detailed information on
    these findings as well as other examples of our recent work
    that shows that FSA needs to improve its oversight and
    management so as to ensure Title IV programs are serving the
    interests of students.
        For the next reauthorization of the Higher Education Act,
    Congress may want to consider adding specific requirements for
    oversight and contract management to the purposes and functions
    of the PBO and require FSA's performance plans to establish
    measurable goals and objectives in these areas.
        My office is committed to working with FSA, the Department,
    and Congress to address the areas of risk within the Federal
    Student Aid programs to reduce fraud and abuse.
        Thank you very much.
        [Prepared statement of Ms. Tighe follows:]

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        Mr. Meadows. Thank you, Inspector General. And thank you
    for your insightful report.
        Mr. Miller, you are recognized for 5 minutes.

                        STATEMENT OF BEN MILLER

        Mr. Miller. Good morning. Thank you, Chairman Meadows,
    Chairwoman Foxx, Ranking Member Maloney and Ranking Member
    Hinojosa and members of the committee, for having me today.
        This month marks the 50th anniversary of the Higher
    Education Act, landmark legislation that has made our country
    stronger by allowing millions of low- and middle-income
    Americans to access and afford college.
        But, today, the growing price of college threatens to
    undermine the goals of the Higher Education Act. State
    disinvestment keeps driving public tuition higher, no longer
    can part-time work afford tuition bills, and family incomes
    have stagnated. As a result, Federal student loans are now the
    norm for people in college. Today, over 40 million Americans
    owe a collective $1.18 trillion in Federal student loans.
    Seventy percent of bachelor's-degree graduates borrow for
    college.
        Under current law, the Federal Student Aid office, or FSA,
    cannot fix the underlying conditions that leads students to
    borrow. But a strong, effective, and efficient FSA is still
    important for students. It can help them apply for aid easily,
    get dollars to them when they need it, guide them through the
    repayment process, and protect them from bad actors lurking
    throughout the system.
        In the last several years, FSA has done a lot to meet these
    goals. It has made applying for aid simpler and faster by using
    skip logic on questions and allowing for the easy importation
    of tax data. Next fall, it will implement a policy change known
    as prior-prior-year that helps families apply for aid sooner
    and better plan for college costs. This idea has bipartisan,
    bicameral support. FSA has also implemented repayment options
    that allow borrowers to make affordable payments based upon
    their income.
        Perhaps the greatest sign of FSA's recent successes was the
    2010 transition following legislation that required all Federal
    loans be issued by the Department of Education. FSA worked with
    thousands of institutions to make this change in just 3 months,
    and students saw no interruption in their flow of aid dollars.
    This change also saved taxpayers money by no longer having to
    pay expensive subsidies and guarantees to lenders, in exchange
    for offering an undifferentiated product whose terms were set
    by Congress.
        These are all important developments that have helped the
    government's benefits work better for the students who receive
    them. They show FSA's strong commitment to getting dollars to
    students quickly and on time. And they show the importance of
    having an agency structure with clear goals for efficiency and
    effectiveness.
        Still, there are places where Federal Student Aid can be
    strengthened, possibly through changes to its structure. For
    one, FSA and Congress must determine how to better use
    oversight tools and accountability metrics to protect students
    from institutions that take advantage of them.
        Yesterday's announcement that 85,000 former Corinthian
    students may be eligible for loan discharges and Monday's
    nearly $100 million settlement between the Federal Government
    and the Education Management Corporation show the importance of
    early action to weed out bad colleges. The government alleged
    EDMC improperly compensated recruiters in an operation where it
    sought anyone with ``a Pell and a pulse,'' yet the company
    still received billions in Federal aid over the last several
    years.
        Second, FSA should demand its contractors better serve
    students. Today, it contracts with four companies that service
    the majority of student loans and is required to work with
    several others through a congressional earmark. In the mid-
    2000s, the inspector general found that three of the four main
    servicers and several of the earmarked ones had improperly
    billed the government millions of dollars for inflated loan
    subsidies. One of them also settled a claim by the U.S.
    Department of Justice for overcharging servicemembers.
        These are servicers whose prior behavior suggests the need
    for significant scrutiny to protect students and taxpayers.
    Fortunately, the move to direct lending and the fact that these
    individuals are all contractors means that FSA can address
    these challenges through changes much more easily than it could
    in the old bank-based system.
        Finally, the public and policymakers need additional
    performance data about institutions, servicers, and the loan
    portfolio. In particular, greater information about loan
    delinquency by institution, outcomes for borrowers in
    forbearance, and what happened to borrowers before they
    defaulted would help guide policy changes that better serve
    students. A greater use of data for risk analysis could also
    lead to new pricing structures for servicers and collectors
    that reward them for helping the most vulnerable borrowers.
        But strengthening FSA cannot be our only strategy for
    addressing affordability. We must act to address the underlying
    structural problems that drive up price and debt. We must
    tackle State disinvestment and encourage colleges to improve
    and spend sensibly. Doing so is the best way to ensure the
    Higher Education Act continues to meet its goals for the next
    50 years.
        Thank you again for having me today, and I look forward to
    your questions.
        [Prepared statement of Mr. Miller follows:]

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        Mr. Meadows. Thank you, Mr. Miller.
        Mr. Draeger, you are recognized for 5 minutes.

                      STATEMENT OF JUSTIN DRAEGER

        Mr. Draeger. Chairman Meadows and Chairwoman Foxx, Ranking
    Members Maloney and Hinojosa, thank you for inviting me to
    testify today.
        Collectively, NASFAA's 3,000 member schools serve 90
    percent of all undergraduates in this country. And the issues I
    will describe today are not isolated incidents. One out of
    every three schools has reported to NASFAA significant
    operational shortfalls with FSA that, unfortunately, have only
    worsened in recent years.
        As institutions, we view ourselves as partners with FSA,
    and we celebrate their successes, particularly in regards to
    simplifying the financial aid form and improving their
    counseling tools. But these successes notwithstanding, FSA is
    consistently falling short in other areas, particularly in
    their partnerships with institutions, and that has detrimental
    effects on students.
        In our written remarks, we have included several examples
    of this lack of partnership, including one where FSA took
    unilateral action last year without consulting schools that
    resulted in some students being mistakenly placed into student
    loan repayment while they were actually still in school.
        Now, schools are reluctant to complain about this
    disservice because FSA ultimately holds all the cards in terms
    of a school being able to offer financial aid funds to
    students. The underlying perception to our members is that you
    keep your complaints to a minimum or you risk a Federal program
    review. And this feeds into a second major issue with FSA, its
    lack of accountability to partners or the public.
        The most pervasive problems at FSA--and this has been
    reported by over a thousand schools in each of your districts,
    serving 6.5 million students--are long delays in program
    participation agreement changes, long delays in closing out
    program reviews, delayed guidance in relation to deadlines that
    institutions have to meet, and even publishing simple
    benchmarks about how long it should take to get responses on
    compliance issues.
        These issues have been going on for years. In fact, in
    2012, we provided input to FSA about how they could improve
    their service to partners. Yet, still today, FSA's strategic
    plans continue to lack appropriate performance metrics that
    could be used to measure progress on these issues.
        Of the many examples that we have provided in our written
    testimony, the most recent example that can be found that
    highlights these issues is in FSA's implementation of gainful
    employment reporting. And for those of you who might be
    unfamiliar, the Department recently defined what it means to be
    gainfully employed, which is a statutory criteria schools have
    to meet in order to offer financial aid for certificate
    programs.
        The entire rollout process can be described as nothing less
    than a time-consuming debacle that took already-limited time
    away from counseling students.
        In response to schools' complaints about this process, FSA
    officials are quick to point out that schools had 9 months to
    meet this massive data reporting requirement, which, quite
    frankly, is intellectually dishonest. We have provided a
    timeline in my written testimony, also available here in the
    room, that shows that FSA didn't even begin issuing operational
    guidance until 3 months after the final regulations were
    published.
        Then, in the space of 5 months, leading right up to the
    deadline, FSA issued roughly 300 pages of additional
    implementation guidance, the bulk of which included a technical
    reference guide--all of it being issued and updated right up to
    the reporting deadline. Then, as that reporting deadline came
    and went, FSA continued to issue guidance on compliance.
        And here's where it gets truly disturbing. At the same time
    that ED was continuing to issue guidance to schools, they began
    sending a series of threatening letters to all types of
    schools--4-year public, private, community colleges, and
    proprietaries--threatening them with administrative
    incapability findings, a term that basically means that
    students at those schools could lose financial aid.
        Now, FSA claims that schools showed a shocking lack of
    compliance, without even considering the idea that it was
    perhaps their own rollout and timing that contributed to the
    bulk of these problems. As it turns out, most of these schools
    were not out of compliance. They simply had data reporting
    errors that produced conflicting results at FSA.
        Eventually, 10 weeks after these deadlines and after two
    threatening letters, FSA finally released a tool that schools
    could actually use to determine whether all the data conflicts
    had been resolved.
        And, of course, how does this ultimately affect students?
    Well, one financial aid administrator in Ohio summarized it
    best when she said, ``GE reporting has been an incredibly
    frustrating experience--an experience in wasted time that could
    have been more productively spent helping our students and
    families.''
        Despite these examples that we have cited here and as best
    as we can tell, FSA continues, through self-assessment, to give
    itself high marks, pay healthy bonuses, and avert
    responsibility for these persistent issues. Now, we really do
    see FSA as a partner, but partnership is not a one-way street.
    We have provided several recommendations on ways that we hope
    we can address these issues.
        And despite FSA's many successes and despite my belief that
    their staff are as dedicated to students as any financial aid
    administrator in this country, I also believe we will continue
    to have these problems until there are meaningful cultural and
    structural changes at this agency.
        Thank you.
        [prepared statement of Mr. Draeger follows:]

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        Ms. Foxx. [Presiding.] Thank you, Mr. Draeger.
        And, again, thanks to all of our witnesses who are here
    today.
        I would now like to recognize Mr. Allen for 5 minutes for
    questions.
        Mr. Allen. Thank you, Madam Chairman.
        And thank you, panel, for being here today to talk about
    this very important work that you do. I mean, $1.18 trillion
    outstanding in debt, serving 41 million borrowers, that's a big
    job. And, certainly, we need to look at this very, very
    carefully to see if we are getting the results that we want out
    of this program.
        One of the things that I hear in my district is that there
    are lots of jobs, very good-paying jobs available. And I have
    been amazed, at my short time here in Congress and on this
    Educational and Workforce Committee, that there is such a
    disconnect between the business community or manufacturing or
    the job creators and those in the education business. And
    somehow we've got to bring those together, because we've got
    students that are getting an education without the idea of
    perhaps what they are going to do and how they are going to pay
    this money back.
        With that, Mr. Runcie, I'd like to start out with my first
    question. The bipartisan budget agreement just signed into law
    allows the Federal Government and its contractors to use
    predictive dialing to reach borrowers on their cell phones in
    order to help them avoid or get out of default.
        Can you discuss the administration's views on how this
    technology will aid FSA's efforts to assist these struggling
    borrowers?
        Mr. Runcie. Sure.
        You know, part of the difficulty of making sure that
    students do not go into default or late-stage delinquency is
    being able to reach them. You know, that is sometimes the
    biggest impediment to making sure that they can get the tools
    and the resources they need to address some of their default
    management, you know, issues.
        And so that is a tool that would be helpful in order to
    increase some of the efficiencies around reaching out and
    getting these students and borrowers to act. We've got income-
    based repayment, we've got lots of tools that they can use that
    we've rolled out over the last couple of years. And the ability
    to reach them so that they're aware of these through something
    like TCPA would be tremendously helpful.
        Obviously, you know, that's going to take some time to
    implement, and it's going through a process now, but we stand
    ready to use that type of technology to address those issues.
        Mr. Allen. So, in other words, the administration is in
    favor of using this method to get in touch with the students in
    accordance with the bipartisan budget agreement?
        Mr. Runcie. I'm just saying that it would--I believe so,
    but, just from an operational standpoint, it would help
    outcomes.
        Mr. Allen. Okay. Thank you, sir.
        Ms. Emrey-Arras, like I said, we're 41 million borrowers,
    $1.18 trillion. And the GAO found that the FSA is lacking,
    resulting in inconsistent and ineffective programs for
    borrowers.
        How has the lack of guidance and communication affected
    servicers' ability to assist our borrowers?
        Ms. Emrey-Arras. Basically, servicers treat borrowers
    differently. So you could have the same borrower with the same
    financial circumstances, and they might get completely
    different advice, depending on which servicer they contact.
        This is because Education has not provided consistent
    instructions and guidance to servicers on how to apply payments
    like underpayments and overpayments, how to deal with different
    types of income documentation, and the like. So there is really
    missing instruction that could really help ensure consistency
    and serve borrowers.
        Mr. Allen. Has the FSA been diligent in oversight of this
    issue?
        Ms. Emrey-Arras. We believe that FSA could do more. For
    example, servicers we spoke with said it would be very helpful
    to have a manual, which would be just very simple in terms of
    what the instructions are for implementing the program to make
    sure that there is consistency.
        So that is something that we have put out there as part of
    our recommendation to provide guidance, that FSA consider
    having a basic operations manual for servicers.
        Mr. Allen. Uh-huh. As the chair of our hearing said this
    morning, Congress obviously needs to step it up. What can
    Congress do?
        Ms. Emrey-Arras. Well, we haven't made any recommendations
    to Congress in this testimony. I will defer to others on that
    point.
        Mr. Allen. Okay. All right.
        Well, I'm just about out of time, so I'll yield back the
    balance of my time.
        Ms. Foxx. Thank you, Mr. Allen.
        Mr. Hinojosa, you are recognized for 5 minutes.
        Mr. Hinojosa. Thank you, Madam Chair.
        My first question is to Mr. Runcie.
        I understand that many borrowers are unaware of the Federal
    Government's income-driven repayment plans. What is the FSA
    doing to increase awareness about income-driven repayment plans
    that I mentioned?
        Mr. Runcie. There are a number of things that, you know,
    we're doing, but what I want to emphasize is the rate of growth
    in the takeup in income-based repayment. It's been phenomenal.
    So a significant percentage of the portfolio and a growing
    percent is now using income-based repayment.
        A lot of that has to do with we've had targeted email
    campaigns. We've changed the incentive structure for our
    servicers. We've created Web sites with information about
    income-based repayment. We've worked with Treasury and Intuit
    in terms of mechanisms and activities that create awareness
    around these programs.
        So we've done a lot, but, more importantly, the outcomes
    are evidencing that the outreach and the awareness that we're
    putting out there is making a difference.
        Mr. Hinojosa. I'll be back to you.
        Mr. Ben Miller, as you know, student loan debt stands at
    the $1.2 trillion that has been repeated over and over again.
    In your expert opinion, what steps has the Obama administration
    taken to expand accessibility and affordability in higher ed?
        Mr. Miller. So there's been a number of important steps.
        And, I mean, obviously, the best form of student loan debt
    is no student loan debt. And this is something where the Obama
    administration has done a lot, especially beginning with the
    Recovery Act, where it invests in a lot of additional money in
    Federal Pell grants to help the lowest-income students.
        It then followed that up in 2010 with additional money for
    Pell grants by ending the bank-based loan system, which
    allowed, I believe, about $36 billion to go to Pell grants.
        The result is that, before this administration came in, the
    Pell grant had been a largely stagnant maximum award. It has
    now gone up by a little bit over $1,000, which has meant a lot
    for low-income students.
        In addition, several of the income-driven repayment plans
    that have already been discussed have been important for
    helping borrowers manage their debt so that, now, basically any
    borrower who enters repayment knows that they will be able to
    cap their loan payments at about 10 percent of their
    discretionary income. If they engage in public service, they'll
    be able to get forgiveness after 10 years, and, otherwise,
    they'll be able to get forgiveness after between 20 and 25
    years.
        Mr. Hinojosa. I agree with you. Those are very good things
    that occurred. I was chairman of the committee, and so I agree
    with you, because we were addressing what the presidents of
    universities and the chancellors of university systems told us
    needed to be done.
        My third question is to Mr. Runcie.
        Several investigations have found that Federal student loan
    servicers whose contracts are managed by OSS may not be
    providing appropriate services. In September this year, 2015,
    the CFPB published a 150-page report detailing those servicers'
    issues and policy recommendations to fix the management of loan
    servicing.
        What is FSA doing to ensure that those servicers are using
    due diligence in managing their portfolio?
        Mr. Runcie. Yeah, and I believe the CFPB report also
    included information around sort of private loan servicers, as
    well.
        But, you know, FSA has--in October of 2014, we came out
    with a new incentive structure and pricing model that we
    provided to all of the servicers, the TIVAS as well as the
    NFPs. And the structure of those contracts and the way the
    pricing is, it puts a tremendous amount of economic value on
    keeping students in repayment----
        Mr. Hinojosa. Excuse me. Time is running out. Can members
    of this committee, of the two committees, get copies of that
    latest instruction manual that you are discussing here?
        Mr. Runcie. Yes, we can provide the----
        Mr. Hinojosa. Well, let me say that, as time is running
    out, I want to say that this is amazing to me, a business as
    big as higher education, where we are talking about billions
    and trillions of dollars, that we don't have penalties for some
    of these that are violating the rules, like the one that just
    took bankruptcy and was shut down.
        What is the name of that organization, that university?
    Corinthian.
        Mr. Runcie. Yeah.
        Mr. Hinojosa. All of this to say that it seems to me that
    Congress should give instructions that the people who violate,
    as they are, should receive penalties that are to the
    individuals who are making those decisions. There should be
    fines and imprisonment. There has to be something that is going
    to stop this.
        It was back before 2010, and if I may quickly say, that we
    were seeing students getting student loans at 10 and 12 percent
    from banks and other groups, even from universities. New laws
    came in, as were pointed out, that we could make direct loans
    at 5 percent. And then, of course, the lobbyists came down on
    us real hard to stop doing that because their banks were not
    making all that money with guaranteed Federal loans.
        So we really need to really put in some time and come up
    with penalties that are going to stop that type of
    decisionmaking that was going on.
        I yield back.
        Ms. Foxx. Now, Mr. Meadows, you're recognized for 5
    minutes.
        Mr. Meadows. Thank you, Madam Chairman.
        Mr. Runcie, I'm going to come directly to you. The oral
    testimony Ms. Emrey-Arras and Ms. Tighe was kinder than perhaps
    the written testimony that I've seen. And so I'm going to come
    to you because my role is more oversight, not as much on the
    policy side of things.
        So how much do we pay out in improper payments every year?
        Mr. Runcie. Well, we have improper payment estimates. So we
    don't actually make payouts. Right? So, for instance, we have--
    --
        Mr. Meadows. But you have oversight. You're the COO. And so
    as we look at the improper payments, how much do the American
    taxpayers--can they recognize in terms of improper payments?
        Mr. Runcie. So improper payments there are two categories.
    There are direct loans and Pell.
        Mr. Meadows. Combined, what's the total?
        Mr. Runcie. The combined total is about $1.8 billion of
    estimated improper payments. That's done through sampling
    techniques, and we look at information and then extrapolate
    that it would be one point----
        Mr. Meadows. Well, I've only got 5 minutes. So let me
    interrupt you.
        If that's your official testimony, I guess my question is,
    is how do you know? Because you've changed the methodology,
    didn't you, Mr. Runcie, on how you evaluated improper payments?
        Mr. Runcie. That methodology was approved by OMB. So----
        Mr. Meadows. You changed it in fiscal year 2013.
        Mr. Runcie. That's right.
        Mr. Meadows. And then the improper payments amount doubled.
    Is that correct? That's the information I have----
        Mr. Runcie. We changed.
        Mr. Meadows. --from about $2 billion to about $4 billion?
        Mr. Runcie. No, it's about $2 billion. I'm not sure the
    timeframe that you're talking about, but the estimated improper
    payment----
        Mr. Meadows. How many times have you changed the way that
    you figure improper payments, Mr. Runcie?
        Mr. Runcie. Once since I've been at FSA. So we changed it--
    --
        Mr. Meadows. Well, I'm going to give you a chance to check
    with your folks behind you. Because I have information that
    would indicate you've changed it twice.
        Mr. Runcie. Okay. So what I'm saying is that when we change
    the improper payment methodology, it's based upon some analysis
    that we do. That analysis was--we had some disagreement in
    terms of the appropriateness of----
        Mr. Meadows. I'd say major disagreement. So let me go on a
    little bit further. So let me interrupt because I need to get
    to an answer here.
        Mr. Runcie. Okay.
        Mr. Meadows. Here's my concern. You have improper payments
    of about $2 billion under a scenario that you're--and I'm
    rounding off. You change the scenario after that same method of
    calculating it showed that you had $4 billion in improper
    payments, and you go retroactively to OMB and say: We want a
    new process to be able to evaluate that. Is that in general
    terms how it worked?
        Mr. Runcie. My understanding is OMB is the authority. They
    sign off on it. It is----
        Mr. Meadows. I agree.
        Mr. Runcie. And it is appropriate.
        Mr. Meadows. All right. So are you following OMB
    guidelines? Be careful how you answer.
        Mr. Runcie. OMB has approved the methodology that we use
    for----
        Mr. Meadows. Are you using their approved methodology?
        Mr. Runcie. That's what we used for 2015 and 2014.
        Mr. Meadows. Okay. So let me ask you this, then. Their
    methodology, from what I understand, would include a sample
    size of 300. And yet according to the information I have,
    you're only analyzing 79 cases, which is statistically not
    accurate. It's not even following what OMB has indicated. Are
    my numbers correct?
        Mr. Runcie. I don't have the numbers----
        Mr. Meadows. Ms. Tighe, are they correct?
        Ms. Tighe. FSA originally went to OMB with a sample size of
    about 311 reports. I believe they did get permission to, when
    they realized they weren't going to have that sample size, they
    went and got permission to use draft reports. But that dropped
    them to about 90 reports instead of 311.
        Mr. Meadows. Yeah. I show 79 plus 21, so--is the numbers
    that I show.
        So, Mr. Runcie, let me tell you why I'm troubled by this.
    Let's put it in education terms. It's like a student is going
    through and taking an SAT and we're getting certain trends. And
    then all of sudden we don't like the trends we see and we
    change the goalpost, we change the way that we do the
    methodology, so that the SAT scores look a little bit better.
    Would you not agree that that's what the Department of
    Education has done?
        Mr. Runcie. We're a performance-based organization. We have
    an obligation to continue to refine, innovate, and look at best
    practices.
        Mr. Meadows. All right. In the 24 seconds that I have left,
    at what point will you start to comply with the OMB guidance on
    how we're to have a sample size with 300? At what point are you
    going to do that?
        Mr. Runcie. The methodology that we use has been approved
    by OMB.
        Mr. Meadows. Okay. That's your testimony. All right. Here's
    what I would ask you to do is report back to this committee
    with OMB and see if they're in compliance. And I would ask the
    inspector general and GAO to see if they concur with your
    decision.
        And I appreciate the patience of the chair.
        Ms. Foxx. Thank you, Mr. Meadows.
        Ms. Plaskett, you're recognized for 5 minutes.
        Ms. Plaskett. I think----
        Ms. Foxx. We're alternating between Education and
    Oversight. So it is your time.
        Ms. Plaskett. Thank you. I don't want to, you know, mess up
    the protocol. Thank you so much.
        Ms. Tighe, yesterday at the Oversight and Government Reform
    Committee you testified that a company in Georgia, a
    subcontractor, refused to give your office access to
    information you needed. Is that correct? This was regarding a
    Federal Information Security Management Act?
        Ms. Tighe. That's correct.
        Ms. Plaskett. Okay. And you testified that the name of the
    company that refused to give you that access was TSYS. Is that
    correct?
        Ms. Tighe. That's correct, TSYS.
        Ms. Plaskett. And who's the prime contractor since that----
        Ms. Tighe. Accenture.
        Ms. Plaskett. This is a government contract paid for by
    taxpayer funds to a subcontractor?
        Ms. Tighe. Yes.
        Ms. Plaskett. And did you ask for TSYS, for a copy of the
    contract? And if so, did they give it to you?
        Ms. Tighe. Well, there's many layers of issues. We asked
    for--after we were--did not get the complete information we
    needed to audit the system that they were operating, we asked
    FSA for a copy of the contract between Accenture and TSYS. They
    suggested initially that we go directly to Accenture ourselves
    and get a copy of it. I personally thought it was FSA's
    responsibility because the subcontractor was operating their
    system and that they should go get a copy. They were not able
    to do that.
        Ms. Plaskett. But wouldn't--I mean, I know that you want to
    go talk about the Department. But this is a contractor and a
    subcontractor to the government.
        Ms. Tighe. Yes.
        Ms. Plaskett. And don't they have a responsibility to give
    you that information when you ask for it? That's a yes or a no.
    Do they have a responsibility to give you that information?
        Ms. Tighe. Yes.
        Ms. Plaskett. And so what is the mechanism that you have in
    place to ensure that they do that rather than going to the
    Department, but to get that information from the contractor?
        Ms. Tighe. Well, my mechanism when they don't supply
    information to me is to do a subpoena. I have----
        Ms. Plaskett. And have you done that?
        Ms. Tighe. I have not done that in this case yet, no.
        Ms. Plaskett. Do you plan on doing that?
        Ms. Tighe. For the contract, I don't know. We have
    contemplated--I mean, my biggest concern was not the contract
    itself. My biggest concern is the information that we needed to
    do our vulnerability assessment of the mainframe on which the
    common origination disbursement system rests in Columbus,
    Georgia, that we were not able to do because TSYS did not give
    us all the information we needed. That information I may yet
    subpoena.
        Ms. Plaskett. But, I mean, I have a fundamental problem
    with a contractor or subcontractor to the government, the
    United States Government, not giving the inspector general
    information when they're asking for it.
        Mr. Runcie, from the Department's perspective, don't your
    contractors and subcontractors have an obligation to give that
    information to the IG?
        Mr. Runcie. I believe so.
        Ms. Plaskett. And when do you think the subpoena power
    should be enforced to make sure that that happens?
        Mr. Runcie. That's not my call. But what I will say is that
    we tried everything that we could. I mean, I think we worked
    with the inspector general, OCIO. We got the prime, we got the
    subcontractor, we got our contracting officer. We had a number
    of people exert a maximum amount of effort to get them to
    provide the information that the inspector general wanted. And
    I was disappointed that we couldn't get that.
        Ms. Plaskett. So can the Department withhold funds from not
    just the subcontractor but primarily the contractor, Accenture,
    until it complies with the request of the inspector general?
        Mr. Runcie. Our contract is with Accenture. And if----
        Ms. Plaskett. Because they haven't given the information
    either. Have they? Accenture.
        Mr. Runcie. Well, it's not their information. It's the
    information that the subcontractor----
        Ms. Plaskett. Well, the contract itself. Right? Would be
    for Accenture.
        Mr. Runcie. Yes. But the contract--my understanding, based
    upon conversations with our contracting officer, is that is a
    commercial contract between Accenture and TSYS. We don't have
    the contractural right to get that contract.
        Ms. Plaskett. What do you say to that, Ms. Tighe?
        Ms. Tighe. I'd say that view is interesting in light of the
    fact that TSYS is in charge of operating one of most
    significant data systems that FSA has.
        Ms. Plaskett. Well, you know, I know that the chairman of
    Oversight and Government Reform, Mr. Chaffetz, yesterday talked
    about writing a letter to the subcontractor. I think that a
    letter also needs to probably be written to the contractor in
    this case.
        Ms. Tighe. I would agree.
        Ms. Plaskett. Okay. Thank you.
        I have no further questions. Thank you.
        Ms. Foxx. Thank you very much.
        Mr. Guthrie, you're recognized for 5 minutes.
        Mr. Guthrie. Thank you, Madam Chairwoman. I appreciate
    that. And I appreciate you all being here. This is a timely
    subject to me. I have one child that just left college, one in
    college, and one we just did a college tour, and you sit there,
    as they say, the cost of attendance. And you're saying: How do
    people do this? It is very difficult. And it's something that I
    know we're involved in doing.
        And so since you're kind of peers with my age group, I have
    a lot of--that's why I hear a lot of parents talk about the
    affordability of college. So it is on a lot of people's minds.
    A lot of that happens at the State level, I get it. But having
    an adequate and a good service program. And I can't go without
    pointing out, because I started talking about this in 2009, and
    I still say it again: $10 billion of Federal money that's paid
    by students back to the Federal Government. So the profit from
    operating the program goes to pay for the Affordable Care Act.
    So that's almost $1 billion a year goes to pay--so I just want
    to remind people that money that students pay for their
    colleges is diverted to the Affordable Care Act. So almost $10
    billion over 10 years. That's over 10 years.
        So, Mr. Runcie, I want to ask you a question. Throughout
    the GAO's testimony, there are numerous examples of FSA falling
    short in its management and oversight of servicing contracts. A
    major consequence of the oversight deficiencies is that
    borrowers in turn face inconsistent experiences in services.
    This is a far-reaching consequence that FSA, as a performance-
    based organization, is tasked with fixing. Keeping in mind that
    until these problems are rectified borrowers will continue to
    lack the kind of service required by FSA's PBO designation. And
    I have a few questions based on that.
        When will the clearer guidance to help servicers interpret
    income documentation be ready?
        Mr. Runcie. So, I just want to give you some context in
    terms of why there may be some differences between, you know,
    the servicers and how they, you know, treat specific incidents.
    Right? So we had to stand up the TIVAS, the four servicers, in
    a pretty short window. And we allowed them to use their
    commercial practices and their commercial, you know,
    operations. And because of that there are variations. And those
    servicers also provide those services to the FFEL program. So
    there were inconsistencies there from a servicing perspective.
    But in order for us to quickly ramp up to deal with the volume
    that we did, we had to leverage our commercial operations.
        There were differences in some of their practices. Those
    differences still exist. And we provided guidance and
    clarification for some of those. But ultimately we're entering
    into a recompete process that will start in January of 2016.
    And through that process we're going to be able to do some
    things like standardize common practices, have common branding,
    and to address some of those issues.
        Mr. Guthrie. Okay. So I understand that. And I understand
    how quick, because it all happened in the Affordable Care Act
    quickly. We had discussed it in this committee for a while, but
    it kind of just came into being because of the money needed to
    pay for the Affordable Care Act.
        So when will the--so I understand the problem. So when is
    it going to be fixed?
        Mr. Runcie. Well, first of all, some of this stuff has
    been--some of the things we can address we've addressed, like
    the capitalization of interest. Other things like over and
    underpayments that were mentioned before, we're working with
    CFPB. They're an organization that understands some of the
    issues around what the best practices in terms of dealing with
    that. So, you know, I don't have a specific timeframe. But I
    would say within 2016 certainly.
        Mr. Guthrie. Within 2016.
        Mr. Runcie. Yeah.
        Mr. Guthrie. And then also the servicers expressed for a
    common manual, I think we talked about it a little earlier with
    Ms. Tighe, similarly to those that exist with.
        Mr. Guthrie. FFEL in order to help solve consistency. Do
    you have plans to have a common manual? And when will that be
    ready.
        Mr. Runcie. Yeah. The common manual will be something that
    based upon our recompete strategy we'll be able to put
    together. However, the common manual that existed before, there
    were still differences between the way those servicers who used
    the common manual, you know, addressed borrower issues. So I
    think the platform that we're--the place we're looking to go is
    to be able to standardize a number of processes as we go
    through recompete process.
        Mr. Guthrie. Is there a date that you think----
        Mr. Runcie. Well, the recompete process is going to start
    2016, January 2016. That's our target. The contracts themselves
    wind down--the existing contracts today wind down in 2019. So
    there would be a transition period.
        Mr. Guthrie. Okay. I'm about to run out of time, but real
    quick, I have a bill that--we've seen, particularly Indiana
    University be extremely successful with financial accounting.
    So I have a bill, H.R. 3179. But my understanding in the law
    that currently requires financial counseling, but I think up to
    40 percent of the students interviewed said that they don't
    remember, recall, ever being financially counseled. So we know
    that financial counseling makes a difference. It does in the
    Indiana model anyway, and the Indiana University has been very
    successful. Is there a plan to fix that problem under the
    current law? We're trying to change the law, but is there a
    plan to fix where we are under the current law?
        Mr. Runcie. Yeah, I mean, you know, there are policy
    changes that can be made. But clearly we--our exit counseling--
    it does make a huge difference. I think the multiple's you're
    two times less likely to miss a payment if you go through
    counseling, at least our counseling that we have in place. And
    so we have a lot of the tools. You know, I'm not sure what the
    hit rate is in terms of, you know, people actually using those
    tools, but it is a requirement.
        Mr. Guthrie. Thank you. My time has expired.
        Ms. Foxx. The gentleman's time has expired.
        Mr. Scott, you're recognized for 5 minutes.
        Mr. Scott. Thank you, Madam Chair.
        Mr. Runcie, we've heard from a number of sources that the
    FAFSA form is so complicated that a significant number of
    people are not applying to college or not getting the aid to
    which they're entitled. They are a lot of suggestions in
    simplifying the form. One is using prior-prior year taxes. Have
    you adopted that?
        Mr. Runcie. Yes, Congressman Scott, we have a project
    timeline and a plan, and we've allocated resources to have
    prior-prior instituted by October of 2016. And that would be a
    tremendous opportunity to increase access and make it simpler
    and easier for people to complete the FAFSA.
        Mr. Scott. Another recommendation was to have easier access
    to Internal Revenue information. Have you adopted that policy?
        Mr. Runcie. Yes, I mean, we have--you know, the income--we
    have the DRT tool, which is a data retrieval tool that allows
    for automatic retrieval of the tax information right into your
    FAFSA form, as well as for income-based repayment for those
    repayment plans. You can also leverage the automatic IRS tools.
        Mr. Scott. So that's available now?
        Mr. Runcie. Yes, that is available now.
        Mr. Scott. What about if you are eligible for a means-
    tested program, are you using that recommendation?
        Mr. Runcie. I'm sorry, for what tested?
        Mr. Scott. Means-tested, like foods stamps or other kinds
    of income-based programs. If you're eligible for those programs
    that you would have a simplified FAFSA form?
        Mr. Runcie. I'm not sure on that. I'm going to have to come
    back to you on that, Congressman Scott.
        Mr. Scott. Are there any additional changes that you will
    be recommending that might need congressional action?
        Mr. Runcie. Not at this time. I think we're just really
    focused on making sure that we can hit the prior-prior and then
    move the FAFSA form from January to October. Historically the
    FAFSA form has been available in January. This is a tremendous
    change because while you're applying for school in the fall,
    you can now know how much you're eligible to get in terms of
    financial aid. That's going to make a lot of difference in
    terms of people having the understanding that they can actually
    be able to go to college. So that's a huge, huge step.
        Mr. Scott. We had a question about allocation of payments
    when a person has multiple loans. How were those allocated in
    terms of whether or not the payment goes to those loans with
    higher interest rates?
        Mr. Runcie. Yeah. So that's where there has been some
    flexibility. And that's the issue that we're working on with
    CFPB and other agencies who have expertise in terms of what
    would be the best practices for borrowers. So that is an issue
    that we're focused on and we're going to address, you know, as
    soon as we establish what the best practices are and make that
    commonplace across----
        Mr. Scott. Are there any efforts to participate in outreach
    to maximize the number of students applying for financial aid
    or to inform students of various repayment plans rather than
    just react to their applications?
        Mr. Runcie. Yeah. So we have targeted outreach campaigns.
    So we do emailing. We have a lot of social media, whether it's
    Twitter, you know, Facebook, YouTube. So we leverage that
    infrastructure to provide as much information about our
    repayment plans as possible.
        In terms of the front end, in terms of the takeup in FAFSA,
    we have a FAFSA completion project and a FAFSA completion tool
    that we've used to create more FAFSA filers, a greater
    percentage of high school seniors filing FAFSAs, which is an
    indication as to whether you will enroll in college.
        Mr. Scott. In terms of efficiency, are there any
    investments that you need to make in terms of equipment or
    software that would help you become more efficient that you
    don't have funding for?
        Mr. Runcie. You know, I think--well, we're in the process
    of establishing enterprise data warehouse, which is one of the
    things that we're trying to leverage, create an infrastructure
    where we can use more data to have more predictive analysis, as
    well as to look at how we can improve ourselves operationally.
    Also, from a program compliance standpoint, we would be able to
    leverage some of that data to, you know, find out where there's
    more risk. I think our issue is the entire infrastructure needs
    to grow, and in order to be able to grow the infrastructure and
    have the type of security, and some of the other things that we
    need, we're going to need additional resources.
        I saw the budget, the Senate and the House budget. I don't
    know if it's appropriate to bring that up, but with that
    shortfall, there may be certain things that we will not be able
    to deliver.
        Mr. Scott. If you could give us the details on what you
    could not deliver without the money, that'd be helpful.
        Mr. Runcie. Okay. Terrific. Thank you.
        Mr. Scott. Thank you, Mr. Chairman.
        Ms. Foxx. Thank you, Mr. Scott.
        Mr. Walberg, you're recognized for 5 minutes.
        Mr. Walberg. Thank you, Madam Chairman. Thank you to the
    panel for being here.
        Mr. Runcie, when was the last time FSA released a
    performance plan?
        Mr. Runcie. We released our strategic plan--I believe it
    was updated--I believe we released it--if it hasn't been
    released, it will be released within the next month.
        Mr. Walberg. Before that when was the last plan released?
        Mr. Runcie. We update our strategic plan every year. Every
    few years we have what we call a full strategic plan where we
    do an environmental scan. We solicit market information. We
    talk to----
        Mr. Walberg. But when was the last plan that was
    introduced? Because I understand it's supposed to be every 5
    years. Correct?
        Mr. Runcie. Yeah.
        Mr. Walberg. When was the last plan?
        Mr. Runcie. The last plan--I think we just issued one
    this--within the next month I think we're issuing a plan. And
    before that we issued a plan in 2012. In 2012. So in 2012 we
    issued a strategic----
        Mr. Walberg. It wasn't 2010? When it was supposed to be
    back in 2010, it wasn't released until 2012?
        Mr. Runcie. I know in 2012 we released a plan. I'll have to
    get you that information. I want to be precise. But----
        Mr. Walberg. I'd appreciate that.
        Who'd you consult with when creating these plans?
        Mr. Runcie. Well, what we do is we do a bunch of market
    research. We do environmental scans. And then there is a 30-day
    notice period where we send out the plans so stakeholders can
    provide comment on the plan. And that's why I'm a little bit
    confused. Because I know we sent a plan out, I believe,
    September of this year with a 30-day notice period so that we
    could get comments back on the plan. And we've done that
    historically and we've gotten comments. I don't believe this
    year we got a single comment.
        Mr. Walberg. Who would you normally consult with?
        Mr. Runcie. Stakeholders that represent, you know, student
    groups. So student associations, school associations the Hill.
    So we would send that out to those stakeholders.
        Mr. Walberg. Mr. Draeger, when did the FSA consult you
    about it's 2015 plan?
        Mr. Draeger. The last time that we were consulted by FSA
    was in 2012 where we highlighted for them the participation
    agreement delays, the delays in closing out program reviews,
    delays in guidance.
        Mr. Walberg. So that was 2012.
        Mr. Draeger. Correct.
        Mr. Walberg. Not presently for the 2015 plan?
        Mr. Draeger. We continue to raise the issue, but outside
    the context of an update to their plan.
        Mr. Walberg. In your experience, has FSA consistently
    consulted with schools, with leaders, with students, and other
    stakeholders prior to implementing a new plan?
        Mr. Draeger. That has not been our experience, and we have
    not heard from schools that have been consulted directly
    either.
        Mr. Walberg. Mr. Runcie, then, by statute you're required
    to consult interested parties prior to implementing a new plan.
    Did you consult NASFAA? And I guess would you say NASFAA's an
    interested party?
        Mr. Runcie. Well, my records, which I checked before I came
    here, indicate that we sent a notice to Justin Draeger, who is
    the head of NASFAA. So it was sent to him this year.
        Mr. Walberg. Well, we got a conflict here. So if you could
    supply us with accurate information as to that letter----
        Mr. Runcie. We will supply that to you.
        Mr. Walberg. We'd appreciate that because Justin is shaking
    his head saying he's never received that letter.
        Mr. Runcie. I understand that. And I will provide you the
    information.
        Mr. Walberg. Mr. Draeger, in your testimony you discuss how
    the working relationship between schools and FSA has become so
    strenuous that it's ultimately hurting students. Can you
    elaborate a bit more and discuss potential solutions?
        Mr. Draeger. Yeah. I think one of the starkest examples has
    been the delays in the Department of Education in getting to
    schools all sorts of guidance which we've highlighted in our GE
    reporting example. Closing out program reviews. We have an
    instance where a large public 4-year school submitted all
    documents for a program review in October 2012. It wasn't until
    May 2015 that they were ever informed that their documents were
    being reviewed.
        So we have significant timeframes where basically these
    program reviews aren't being closed out. It's perpetually
    hanging over the heads of these schools. And no entity, public
    or private, can operate with that level of uncertainty.
        Mr. Walberg. What recourse do they have if they're having
    problems in getting action from FSA. And I guess who can they
    appeal to as well?
        Mr. Draeger. Yeah. The structure of FSA is such that there
    really is no appeal for the school. FSA provides all the
    guidance. They do all the program reviews. They make the
    determination about who can and can't participate in the Title
    IV programs.
        Mr. Walberg. So it's a black hole. If it doesn't work for
    them, ultimately they have no recourse.
        Mr. Draeger. We're not familiar with any benchmarks that
    are published. There's no recourse beyond going back to the
    same entity that you've been trying to work with.
        Mr. Walberg. My time's expired. Thank you for your
    testimony.
        Mr. Runcie. So is it possible for me to address that with
    the----
        Ms. Foxx. I'm sorry, but the time is up.
        Mrs. Maloney.
        Mrs. Maloney. I first would like to give him the time to
    address this.
        Mr. Runcie. Thank you. I appreciate that.
        So there may be anecdotes, but what I have is a folder of
    facts. I have the statistics on the cycle time for all our
    program reviews, our recertification applications. And so I'll
    just give you an example of why that--it's important to look at
    the facts. Just let me just put it this way.
        So there was a 72 percent decrease in our cycle time, the
    days to conduct a program review, between 2011 and 2015. Last
    year the program review--we did 291 program reviews, and
    average processing time was 249 days. And as I mentioned, that
    was a significant reduction.
        If you look at the recertification applications which are
    another point of contact with the schools, those are down
    significantly as well over the years. If you look at the
    approval applications, double digit percent reductions in the
    response time.
        So when you're looking at a hundreds of actions, and if you
    look at the totality of it, there are about 2,000 interactions
    with the schools, all of those cycle times have been down
    significantly over the last 4 years. We can provide you with
    the information. So this anecdotal information about our
    performance is just not accurate.
        Mrs. Maloney. Thank you.
        First of all, I would like to be associated with the
    comments of Dr. Foxx in support of our friend Ruben Hinojosa,
    and express my gratitude for his leadership and friendship.
    We've had the opportunity to serve together on the Financial
    Services Committee where he served with great distinction as he
    did in the overall body for his district. We will miss you, and
    I'm sad you're leaving.
        I have a series of questions on the principles on student
    loan servicing. I understand others have expressed interest in
    it. And if I don't have a chance to finish, I'd like to place
    them in the record for a response later.
        Ms. Foxx. Without objection.
        Mrs. Maloney. Mr. Runcie, according to the Consumer
    Financial Protection Bureau, student loan debt is now at $1.2
    trillion, and is now second only to mortgage debt. It is now
    even higher than credit card debt, which is staggering. So this
    is really incredible to see this type of large consumer debt
    growing in our country.
        And earlier this year the Department of Education joined
    the CFPB and the Department of the Treasury in soliciting
    information about student loan servicing from public. And one
    key complaint raised by numerous respondents was, ``Servicers
    of both private and Federal student loans may not inform
    borrowers experiencing financial hardship about available
    alternative repayment plans.'' We need to address this, and end
    this, and make sure students know all their alternatives. And
    how does your office examine whether servicers are providing
    repayment information to borrowers that is complete, accurate,
    timely, and also includes alternatives?
        Mr. Runcie. Yeah. So and we have to--and, yeah, I agree
    with some of the findings that were mentioned today. We monitor
    calls. You know, but we could do that more efficiently, have
    more consequences around the call monitoring that we do.
        As I mentioned before, in October of 2014 we changed the
    structure so there's a tremendous incentive on the part of the
    servicers to make sure that they keep--they inform borrowers of
    all their repayment plans so that they could stay current on
    their obligations. That was--you know, so we're still in the
    process of seeing the impact of that pricing change. But we're
    committed to making sure that we adjust that model to make sure
    that we have the proper incentives in place so the servicers
    will provide all the information they can about their repayment
    plans.
        Separate from that, you know, we're doing our part in terms
    of our outreach, our communication, and, you know, leveraging
    our Web sites and so forth.
        Mrs. Maloney. Okay. How much of loan servicers'
    compensation is currently based on achieving specific customer
    service standards?
        Mr. Runcie. Well, we have surveys. So there's a customer
    survey that is a component that's used. And based upon how they
    perform when we blend the customer survey along with some of
    the other components, for instance, you know, the percentage of
    loans that are in current repayment and certain other
    attributes, we look at that, but we also look at the survey
    results to see how they're performing from a customer
    perspective. And that determines their allocation which
    determines their economics. So we do use that as a part of our
    model.
        Mrs. Maloney. Okay. Thank you. My time has expired. Thank
    you, and I place the rest of my questions into the record to be
    answered. Thank you.
        Ms. Foxx. Thank you, Mrs. Maloney.
        Ms. Stefanik, you're recognized for 5 minutes.
        Ms. Stefanik. Thank you, Madam Chair.
        I represent a number of higher education institutions in
    northern New York ranging from SUNY schools to community
    college to private colleges. And I've visited every single one
    of them. And one of the conversations that I frequently have
    with students is that student aid programs are complex and
    challenging for them to understand.
        And my question is for Mr. Runcie. One of the statutory
    purposes of the Federal student aid PBO is to make aid programs
    more understandable for students and their families. However,
    just last month GAO released a report that found many eligible
    borrowers aren't even aware of income-driven repayment plans,
    and therefore aren't able to make the decision to lower their
    payments and reduce the risk of defaulting on their loans.
        How are you addressing this failure, and how are you
    educating servicers to make sure they can accurately explain
    this maze of repayment options to borrowers so they can access
    the help they need to repay these loans?
        Mr. Runcie. Yes, I mean, so part of it is the overall
    complexity of student loan programs. So there are a lot of
    statutory programs. Certain things that we don't have control
    over. So it makes it much more difficult to make a decision
    about what the right repayment plan is.
        In terms of income-driven repayment, we put out a targeted
    campaign that yielded pretty impressive results. We are doing
    another targeted campaign once we come out with REPAY. REPAY is
    an income-driven program that's going to expand the available
    universe of people that can participate in income-based
    repayment by another five million.
        So on the heels of that, we're going to make sure that we
    send out a targeted email campaign. We've worked with other
    parties, as I mentioned before, Treasury, in terms of the
    income tax process. We've worked with Intuit in the past. So
    we're going to leverage partners and our own infrastructure and
    the servicers as well. Because, as I mentioned before, we
    changed the pricing model there.
        So there are lots of things that we have done and that we
    plan to do. But I think what's most important is that since we
    started taking these actions, you can see the significant
    increase in the adoption of income-based repayment. So while
    there may be some folks that aren't aware, our hope is that as
    we continue to roll out our communications plan and our
    information, we will strengthen the universe of people who
    aren't aware. But, you know, I think we're continuing to push
    on that, you know, on that front, and we've made some
    tremendous, I think, progress.
        Ms. Stefanik. Well, I agree with you. Students have to be
    made aware of this. And this is a generational crisis that we
    are facing here with historic amount of student debt. And as a
    Millennial myself this is pushing off our next generation of
    leaders from buying their first home, from being able to save
    for the future. So I suggest we fix this program so that our
    young people are able to make good decisions and not default on
    their student loans.
        My next question is for Mr. Draeger. In your testimony, you
    talked about the importance of accountability. And the lack of
    accountability, which is a key part of a PBO, tremendously
    erodes the good will between institutions and FSA. And you
    reference reporting requirements. Besides the gainful
    employment reporting disaster that you referenced in your
    testimony, have there been other instances where unclear
    guidance or poor communication made it challenging for schools
    to do their jobs?
        Mr. Draeger. There have been several examples where schools
    have tried to seek guidance from the Department of Education as
    deadlines loomed, whether it's with reporting requirements
    dealing with subsidized Stafford loan limitations which went
    into effect in the last year. The interesting--I'm also dealing
    in facts. We have 20 percent of our schools have reported
    operational shortfalls. That's a real number. Twenty percent
    representing six and a half million students where they cannot
    do their jobs because of the operational shortfalls that I've
    cited in my testimony.
        The accountability thing, to me, is most acute when you
    look at the Department's last annual report where they
    acknowledge that they failed to achieve 2 out of 13 of their
    strategic objectives dealing with customer service to schools,
    customer service to students.
        But then in the very next paragraph they detailed those
    failures as successes. They said, ``Given the volume of new
    requirements over the past year, the small reduction in these
    scores on this metric is an indication of the success of FSA's
    outreach and support efforts.'' The problem with self-
    assessment is even when the Department fails them, deem it a
    success.
        Ms. Stefanik. Thank you. I yield back.
        Ms. Foxx. Thank you.
        Dr. Adams, you're recognized for 5 minutes.
        Ms. Adams. Thank you, Madam Chair. And I want to thank the
    leadership of both subcommittees for this hearing. And I want
    to thank the witnesses as well.
        I spent 40 years in the classroom, Bennett College in
    Greensboro, so higher education is a tremendous interest of
    mine.
        So let me just piggyback on the last question about default
    and--because institutions are penalized as well, in addition to
    the students, and the things that they can do when they leave.
    So let me ask Ms. Emrey-Arras, do you believe that our
    institutions of higher education should play a role in better
    counseling students on these programs, or should it be up to
    Congress and the administration to increase the participation
    in the programs? And if so, what should they look like?
        Ms. Emrey-Arras. We haven't looked specifically at the role
    of schools. However, we have looked at the role of servicers
    and the Department in educating borrowers about repayment
    options. And while I agree with Mr. Runcie that the takeup rate
    has increased in terms of income-based repayment options, there
    is still a very wide gap between those that are eligible and
    those that, in fact, participate.
        And part of the challenge is that although there are in
    fact targeted campaigns, as Mr. Runcie mentioned, there is not
    an across-the-board notice to people when they enter repayment
    about these options. So that simply telling people when they
    start repaying what the options are is not happening across the
    board. And that needs to be done.
        Ms. Adams. Thank you.
        Mr. Runcie, if you could--what's your response to the
    institutions of higher education and their role?
        Mr. Runcie. Well, in terms of--so, yes. You know, the
    institutions, there is exit counseling and some institutions do
    a pretty fabulous job in terms of exit counseling where they
    make sure that the students understand the obligations and the
    consequences of defaulting.
        You know, we also obviously, you know, are involved from a
    servicing standpoint. We reach out and we provide information.
    If you look at the cohort default rates for all schools,
    whether they're proprietary schools or private schools or
    HVCUs, those cohort default rates have all dropped about 20
    percent within the last two cohorts, which is a tremendous,
    tremendous reduction.
        So whether it's the schools or the Department of Education,
    you know, there has been a noticeable impact in terms of the
    reduction in the cohort default rates.
        Ms. Adams. Okay. Sounds like both should be involved.
        But, Mr. Miller, since the 2008 economic downturn, many
    states have made significant cuts in funding for higher
    education. In North Carolina, our general assembly, and I was a
    part of that at one time, and our governor have made gutting
    higher education a regular activity. I didn't support that. But
    in my hometown of Greensboro, the University of North Carolina
    at Greensboro has eliminated, for example, 390 class sections
    or about six percent of its course offerings to offset a $4
    million budget cut. So can you speak to the effect of a State
    disinvestment on increased college tuition costs and greater
    student loan debt, especially for low-income students?
        Mr. Miller. Essentially what we're seeing in this country
    now is a great cost shift where it used to be that States
    viewed public higher education as a public good they should be
    subsidizing and making affordable for all students. That is
    increasingly not the case. Essentially what's happening is that
    institutions such as the one as you described, their cost of
    providing the education is not really growing, and they're
    probably keeping it level.
        Instead, all that's happening is the State is pulling money
    out and asking students to make up the difference themselves.
    And the effect of this essentially is you're making students
    borrow. And even worse, you're increasing the risk of trying
    college for low-income people.
        To get back to your question about default rates,
    essentially this is what we're seeing, that a lot of our
    defaults are coming from borrowers who try college for maybe a
    semester or two and they drop out. A study from the Association
    of Community College Trustees found that most borrowers in
    defaults from Iowa community colleges owed a little bit under
    $5,000. And so essentially what we've done is we've slashed
    State funding, raised tuition, made college almost like a
    lottery ticket for students, where if they graduate, they'll
    probably repay. And if they drop out, they will find themselves
    in dire financial straits.
        Ms. Adams. Oh. Okay.Thank you very much. I'm about out of
    time. Madam Chair I yield back.
        Ms. Foxx. Thank you.
        Mr. Carter, you're recognized for 5 minutes.
        Mr. Carter. Thank you, Madam Chair. And thank all of you
    for being here.
        Ms. Tighe, let me start with you if I could. You're the
    inspector general of the Department of Education. How many
    investigations do you conduct on FSA?
        Ms. Tighe. We do a number of investigations related to the
    programs and operations of FSA. But as far as FSA employees,
    not that many.
        Mr. Carter. Okay. And I'm more concerned about the
    operations than I am----
        Ms. Tighe. I don't have the numbers, and I can get back to
    you on specifics. But it's a good part. We do annually about
    250 to 300 investigations we have open. I imagine probably over
    half of those relate to FSA programs and operations. That's my
    guess, and I will be happy to give you specific numbers later.
        Mr. Carter. Okay. It's my understanding that there are four
    different areas that FSA is obligated to. Do you know if
    they're meeting their obligations in those four areas that are
    outlined in the statutes?
        Ms. Tighe. Well, I mean, we have, as I've testified,
    concerns, particularly over their management, their oversight
    of their--the various participants in their programs, and also
    in the management of their regular day-to-day activities. As
    far as the program participants where we see our greatest risk
    of fraud, one of areas we've highlighted in the last few years
    is our still growing problem of fraud rings. These are fake
    students who prey upon our distance education programs and
    particularly in our low-cost community colleges pretending to
    be students signing up for classes and getting disbursements of
    Federal student aid.
        We did a report to FSA a few years ago with a number of
    recommendations that FSA do some system enhancements and other
    things to address this problem. FSA has taken some steps, but
    we're still seeing the problem grow.
        Mr. Carter. Okay. What can we do? What can we do in this
    committee, what can we do in Congress, to help you with that?
        Ms. Tighe. I think one of the areas that actually is within
    your all's responsibility, one of the issues that drives the
    costs are the cost of attendance. I think there's a statutory
    requirements related to that. We need to be looking at the
    difference--is all the money that you need when you go to a
    brick and mortar school and you have to have room and board the
    same that you need if you already have a job and a house and
    you're doing an online program from home. Do you need the same
    amount of money disbursed to you? Because if we can reduce the
    amount of money that goes out that is not needed, first of all,
    you reduce the debt, but you also reduce the attractiveness of
    the programs for fraudsters.
        Mr. Carter. Okay. Mr. Runcie, let me ask you. It appears
    that a lot of the problems that we see in the student loan
    industry is being laid at--the blame is being laid on the
    servicers. But aren't you in charge of the servicers? I mean,
    don't you have direct responsibility for that?
        Mr. Runcie. Certainly I have and we have direct
    responsibility for that. But again, you know, what we're
    talking about are a number of findings, and they're issues that
    we continue to address and we've done--and I think throughout
    the course of this testimony I've highlighted some things that
    we've done to address that.
        Mr. Carter. But it seems to me all I'm seeing here is
    finger pointing. And, look, you know, this is a serious
    problem. Now, unlike my colleague, I'm not a Millennial, but
    I'm an employer. And I see students coming out--I'm a
    pharmacist. And I see pharmacy students coming out with
    $150,000, $200,000 in student debt. And I see them coming out
    and they tell me: Well, my goal is to have it paid off in 6
    years. Six years. And that's good if they can do that. But can
    you imagine? I mean, what are we doing? What are we doing to
    help with this situation?
        Mr. Runcie. Well, Congressman Carter, I think the overall
    statutory environment--you know, there are statutory limits.
    And some of those limits are high. We don't control some of the
    policies that allow for students to get the types of debt that
    they sometimes incur. What we've tried to do is through GE,
    CDRs, and other accountability metrics make sure that
    institutions don't prey upon students by loading them up with
    debt with no ability to get a job they couldn't manage those
    debts.
        Mr. Carter. And I understand that. But I'm a little bit
    frustrated by the finger pointing here, I'll tell you.
    Ultimately the responsibility lies with you guys, and you have
    to make sure that the servicers are doing their part.
        Mr. Runcie. Absolutely.
        Mr. Carter. Thank you, Madam Chair. I yield back.
        Ms. Foxx. Thank you, Mr. Carter.
        Mr. Clay, you're recognized for 5 minutes.
        Mr. Clay. Thank you, Madam Chair. And thank you all for
    being here today.
        This year President Obama issued an executive order that
    sets forth a student aid bill of rights. This included specific
    directives to agencies to increase protections for student loan
    borrowers.
        Mr. Runcie, can you briefly describe the specific rights
    the administration believes students should have.
        Mr. Runcie. Yes. So some of the principles, making sure
    that students have access to financial aid, that they are not
    harmed, and that, you know, we give them the tools to make sure
    that they can repay their obligations. Those are some of the
    general points. But under that there were certain specifics
    around making sure that there's common branding, that students
    can make complaints. So we're putting together a comprehensive
    complaint system so if students and borrowers have complaints
    we can log them, we can track them, and we can be responsive
    and use those to make sure that we make changes to benefit
    students and borrowers. So there's a litany of different things
    that are in there. A lot of those will be probably addressed as
    we go through our recompete process and through some of the
    outreach that we plan on doing.
        Another thing was sort of transparency and providing
    awareness. And, you know, we've already had some targeted email
    campaigns with notifications to students and borrowers. So
    we're looking to get more information out to them so that they
    can make better decisions.
        Mr. Clay. And the administration has also proposed critical
    improvements to Federal student aid that requires statutory
    changes. And that means it's up to Congress to act. For
    example, the administration has proposed eliminating the tax
    liability for certain discharged student debt.
        Mr. Runcie, can you tell us why this proposal is important?
        Mr. Runcie. Yeah. It's important because, you know, if we
    eliminate--depending on how much debt we're talking about, it
    could be a substantial burden, economic burden. So, you know,
    let's say, for instance, someone had a situation where they
    were falsely misled, took out loans, and eventually those loans
    were discharged. It would be very difficult to accept that
    someone would get a large tax bill, you know, after the fact.
        And so, you know, it's important so that we can actually
    produce a real make hold. It wouldn't be a real make hold if
    you had a large tax obligation at the end.
        Mr. Clay. And statutory changes are required to implement
    this proposal.
        Mr. Runcie. Yes. That's right.
        Mr. Clay. And Congress has not enacted these changes yet.
    Have they?
        Mr. Runcie. No. Not as far as I know.
        Mr. Clay. And the administration has also proposed
    statutory changes to create stronger protection for student and
    borrowers from the predatory practices of some student loan
    assistance companies. For example, some firms charge high fees
    for services that students can access for free from government
    Web sites. And, Mr. Runcie, Congress has not enacted these
    proposed changes to protect borrowers from such predatory
    practices. Has it?
        Mr. Runcie. No.
        Mr. Clay. And so we must act too and protect these
    borrowers from some of these practices. You know, and I listen
    to my colleague, Mr. Carter, talk about what you all are doing.
    But I also realize too that at the State level budgets are
    strained, State budgets are strained, which means less money
    for these colleges. And it also means that they have to raise
    fees in order to sustain.
        And does anyone on the panel have any opinions about the
    actual cost of going to school now and what maybe we can do to
    kind of tamp that down? Mr. Miller.
        Mr. Miller. Yeah, I mean, absolutely. That's the biggest
    problem is that by the time FSA gets to the borrower, they've
    already picked up the loan and the underlying conditions have
    already occurred to put them in a bad spot. I mean, I think our
    biggest problem is right now, the Federal Government is handing
    out a lot of dollars, and it's doing its part to help support
    higher education. It doesn't demand anything from States or
    institutions about what it does.
        And so it says it's okay to a State to say: We're going to
    slash all our money and charge a maximum Pell recipient, the
    lowest income person in college, thousands of dollars. There
    are single moms out there who might be walking away with
    $57,000 in loan debt because ther's nothing from the Federal
    Government to ask that schools and--I'm sorry. Schools,
    institutions, and States do their part. And it's a problem. The
    Federal Government cannot unilaterally achieve affordability.
        Mr. Clay. And the ultimate impact is that it puts college
    out of reach for low and moderate income students.
        Mr. Miller. Correct. It puts it out of reach and it also
    makes it much riskier for the people who try it and it doesn't
    work out.
        Mr. Clay. Thank you. I yield back, Madam Chair.
        Ms. Foxx. Thank you very much.
        Mr. Curbelo, you're recognized for 5 minutes.
        Mr. Curbelo. Thank you, Madam Chairman. And I thank both
    the committee chairmen and all the witnesses for this wonderful
    opportunity to discuss this important issue. I'll just say
    briefly before my questions that we must do more to make sure
    that young people have all of the information they need to make
    rational choices before taking out a loan, before making a
    decision on what their path in higher ed should be. I get calls
    and I have encounters all the time with young people who are
    frustrated by this system and who are, quite frankly, trapped
    in this system.
        Ms. Emrey-Arras, I want to ask you, your testimony mentions
    FSA has not clarified how services should apply overpayments
    and underpayments--servicers, overpayments and underpayments to
    student loan balances. And FSA is now working with CFPB to
    establish a consistent approach to disseminate to servicers.
    But last month CFPB released a report saying servicers are not
    appropriately applying underpayments. Where do you see FSA's
    responsibility for ensuring payments are applied correctly?
        Ms. Emrey-Arras. We believe that FSA needs to instruct
    servicers on how to officially apply underpayments and
    overpayments. They're operating in a vacuum right now. Some do
    it one way, some do it another way. And borrowers are treated
    differently. So we think the responsibility lies on FSA to come
    up with consistent guidance to have it be one single program.
        Mr. Curbelo. Mr. Runcie, would you like to respond to that?
        Mr. Runcie. I agree with that. And what we want to do is if
    we're going to make it uniform and create a standard, we want
    to make sure that we have best practices and the best
    information. So we're working to make sure we get it right when
    we put it out there.
        Mr. Curbelo. Thank you.
        And, Mr. Runcie, I want to ask you about heightened cash
    monitoring. Could you discuss briefly what the standards are
    for putting institutions under this type of a program, either
    HCM1 or HCM2. And also what institutions can do to be removed
    from this status once it's been applied by the Department?
        Mr. Runcie. Yeah. It varies. You know, they are put on for
    a number of reasons. But ultimately, you know, there's a issue
    that needs to be resolved or potentially, you know, students
    and the Federal taxpayer may need to be protected. So it gives
    us an additional level of monitoring so we could actually
    monitor enrollment and cash flows and things like that.
        Mr. Curbelo. But what specifically can trigger that
    decision to go into an HCM1 or an HCM2?
        Mr. Runcie. It could be some financial--for instance, maybe
    there's a delay with their financial statements. There's an
    issue with issuing their financial statements that would
    trigger, you know, putting them on, you know, heightened cash
    monitoring. It could be something in a program review that
    comes out that we, you know, about the way they deal with, you
    know, return of Title IV. It could be a number of different
    things. And once it's triggered, you know, there's a heightened
    cash monitoring.
        Mr. Curbelo. So it's probably fair to say that the
    Department has fairly broad discretion in terms of when to
    apply heightened cash management?
        Mr. Runcie. I think that's right.
        Mr. Curbelo. Okay. By the way, Mr. Runcie, I'm not sure if
    you're aware, but there's a education leader by your last name
    in South Florida who is very well regarded in that community.
        Mr. Runcie. I won't disassociate myself from my--he's my
    borrower.
        Mr. Curbelo. Thank you very much for being here today.
        Madam Chair, I yield back.
        Ms. Foxx. Thank you very much.
        Mr. Courtney, you're recognized for 5 minutes.
        Mr. Courtney. Thank you, Madam Chairman. And thank you to
    the witnesses.
        And Mr. Draeger, again, I always appreciate hearing your
    input. Your folks on the ground, you know, are really right
    there at the front trenches sort of dealing with this crisis of
    higher ed affordability. And the input, I think, is always
    really appreciated.
        I want to again just sort of underscore one point that you
    made which is that the FSA actually did a very good job in
    terms of implementing the direct student loan program. And I
    don't think that for those who maybe don't follow this stuff
    like a box score like some of us, I mean, that was a huge
    transformation of the student loan program where, again, we
    eliminated the loan origination wasteful spending that existed
    in the old system.
        And as Mr. Miller pointed out, the savings that was
    generated for that we were able to plow back into Pell to the
    tune of about I think it was $36 or $38 billion. And they
    actually did a pretty good job in terms of making that work.
    And, you know, I would just note that that didn't happen,
    though, just because of FSA. It's because Congress acted. We
    passed the Student Aid and Fiscal Responsibility Act as part of
    the budget reconciliation process with the Affordable Care Act.
    But we have to be a partner in terms of trying to help solve
    this problem. You know, the overhang of $1 trillion of student
    loan debt which is being carried by college graduates right now
    is something that Congress can actually do something.
        When you look at the interest rates, these legacy loans
    that were written 10 years ago, 15 years ago in terms of the
    private student loans and compare them to what's out there for
    consumer credit in terms of, you know, 30-year mortgages or
    credit cards, I mean, it's outrageous that people are still
    repaying loans at six, seven, eight, sometimes nine and ten
    percent in the low interest environment that we're in today.
        I just checked for SNCs this morning. The Treasury yield
    rate is 2.16 percent. So the government, is only paying 2.16
    percent to borrower. But it's still receiving--government, you
    know, loans, public loans, at a far higher interest rate.
        We have a bill, H.R. 1484, the Bank on Students Emergency
    Student Loan Act which would allow people to refinance down
    their high interest rate loans to 3.8 percent. We have 184--
    excuse me, 181 cosponsors in the House and yet the majority
    just refuses to move forward on this measure. And, yes, there
    will be a loss of revenue to the government in terms of
    allowing people to pay a lower rate of interest than what
    they're paying right now.
        But I would argue that the purpose of the Stafford Student
    Loan Program was not to generate revenue to the Federal
    Government. And, frankly, that's what the powers that be in the
    House are clinging to. And that's why this bill so far, in any
    case, has not moved forward.
        But CBO has told us that it will save conservatively about
    50 to $60 billion in repayment costs to people who are carrying
    these high interest loans.
        Mr. Courtney. And the Pew Research institute showed us the
    damage that's doing to America's society. People are delaying
    getting married. They are delaying having kids. They are
    delaying buying houses because they are carrying these high-
    interest rate rate loans which again, in every other sector of
    the economy, people can write down those kinds of rates. We do
    it with home mortgages. We do it with even credit cards. And
    yet, people are trapped in student loans. And Congress,
    frankly, has the key to open the door to fix that.
        So in any case, I'm going to get off my soapbox here a
    little bit because--again, I appreciate those comments on the
    direct student loan program.
        On gainful employment, I just want to make sure I
    understood. You seemed to suggest that after that back and
    forth which sounded pretty rough, that you sort of have found
    some equilibrium in terms of, you know, the reporting
    requirements?
        Mr. Draeger. Schools are finally--we're finally given a
    tool 10 weeks after the reporting deadline that allowed them to
    see whether there were any additional conflicting data. So
    after some of the back and forth with the Department, threats
    of administrative capability, schools were eventually given the
    tool to figure out whether they were in compliance.
        Mr. Courtney. Well, I'm glad to hear that. And again, I,
    you know, feel your pain because I know it was probably pretty
    onerous. But again, I would just sort of say from this side of
    the witness table, you know, when we are talking about Title IV
    which is I think $128 billion was the number that was tossed
    out there every year, I mean, frankly, I think the taxpayers
    should know that it is being used in a productive manner. And
    the gainful employment rules, in my opinion, are just, frankly,
    responsible governance in terms of saying that people who get
    benefit from this, which are some of these higher Ed
    institutions that are in the headlines today, they shouldn't be
    part of the program. And the only way we are going to learn
    that is by having measurements, accountability which the
    gainful employment program was designed to do.
        So, you know, I thank your members for their, you know,
    persistence in terms of working that issue through. And with
    that I yield back, Madam Chairman.
        Ms. Foxx. Thank you very much. Mr. Connelly, you are
    recognized.
        Mr. Connolly. Thank you, Madam Chairman. I thank you for
    being so gracious. Mr. Runcie, you are aware of the fact that
    we had a hearing yesterday on especially the deployment, or
    lack thereof, of IT in the Department of Education, especially
    with respect to student loans.
        Mr. Runcie. Yes, sir.
        Mr. Connolly. And part of Ms. Tighe's testimony involved
    the fact that some contractors, subcontractors with the
    Department did not allow her office access because they were
    afraid, given the fact that they had private clients as well as
    Department of Education clients, that the one could compromise
    the other. Well, okay, but we have got to be worried about the
    fact that a lot of our data involving the public sector is in
    their hands, and the IG has to have access to it, and frankly,
    so do you. Have you looked into that issue?
        Mr. Runcie. Yes, I was very much a part of that process. We
    did----
        Mr. Connolly. You don't mean by that preventing Ms. Tighe
    from action?
        Mr. Runcie. No, no, no. Facilitating----
        Mr. Connolly. Right, right.
        Mr. Runcie. Trying to facilitate the process. As a matter
    of fact, Ms. Tighe, myself, the Department, OCIO, the prime,
    subcontractor, our contracting officer, we put a maximum amount
    of effort and pressure on both the prime and the subcontractor
    to get access to the information that the Inspector General
    required.
        Ultimately, we didn't have a contractual mechanism to get,
    I guess in this particular instance, the contract between the
    prime and the sub. There were other issues too, in terms of the
    comprehensive nature of the user IDs that were provided or were
    not provided. So, you know, so at the end of the day, I was
    just as disappointed as I think the Inspector General was, but
    we didn't have a vehicle to make them provide us the
    information.
        Mr. Connolly. Well, let me just say, there needs to be a
    contractual vehicle. I'm sorry, Ms. Tighe.
        Ms. Tighe. Yes, I think the vehicle is a contractual
    vehicle that would allow audit access. I mean, the real part of
    the problem, maybe even more than our access, is the
    Department, or FSA has a contractor operating in a major system
    and it has absolutely no visibility into the IT security of
    that system. That's the problem.
        Mr. Connolly. I think that you're absolutely right, Ms.
    Tighe, and that's the problem, Mr. Runcie. God forbid, but the
    data on 58 million folks who have student loans or had student
    loans, let's, in theory, say in the hands of the private
    sector, and they don't allow us access to it, and that gets
    compromised, you know, that's more than an uncomfortable
    position for you and your colleagues. And so that's why this is
    important. It's not just something nice to do, or following
    protocol. It's essential if we are going to ensure that we have
    security with respect to our database, our database. So I think
    that's got to be addressed.
        One final question. Also what came up yesterday was the
    history of why FSA is a PBO because we had a lot of frustration
    over why can't you access this, and why can't you access that
    for the CIO. Well, because Congress by statute created FSA as a
    PBO. Are we going to take a fresh look at that as to whether
    that still makes sense, that's 1997 legislation, and Madam
    Chairman, once Mr. Runcie answers, I will, as promised, yield
    back.
        Mr. Runcie. So the FITARA, and the PBO, they are not
    mutually exclusive. All right, so the Department-level OCIO can
    have visibility, a level of control, and you know, be a part of
    the investment management and project management process that
    we have for our IT infrastructure. We have worked with the
    Department CIO and put together a plan that was submitted to
    OMB where he would have exactly that. And I'm not sure what the
    status is, but my understanding is it is close to being
    approved. That will not undermine our flexibility as a PBO.
        I think as a PBO, given all the changes both regulatory,
    statutory, and administrative initiatives, we need the
    flexibilities to be able to respond to all of those changes
    within short windows. But it does not exclude FITARA.
        Mr. Connolly. It better not.
        Mr. Runcie. I hear you loud and clear.
        Ms. Foxx. The gentleman yields back.
        Mr. Connolly. I do.
        Ms. Foxx. Thank you. It is now my turn. And as I indicated
    at the beginning of this to a couple of our witnesses, there's
    so much that we need to get out and so little time.
        Mr. Runcie, I just want to be clear on something that has
    been said and alluded to. Ms. Tighe indicated that one of the
    things that can be done is that we not allow students to borrow
    more money than they actually need for their college. However,
    it's my understanding that institutions aren't allowed to stop
    students from borrowing money they don't need, and if they try
    to stop them, or take too much time trying to counsel them, the
    school hears about it from you, and tells them to stop doing
    that. Is that correct?
        Mr. Runcie. Well, I mean, there are statutory limits and
    what the student is eligible for, you know, there is an
    eligibility amount that they receive. And if they want to, my
    understanding is if they want to use that full amount, you
    know, in most cases they will have access to it. There is this
    concept of professional judgment, but that's very specific, and
    it doesn't address the issue that the institutions face, what
    we're constrained with from our regulatory framework.
        Ms. Foxx. Well, I have heard that from financial aid folks
    myself that they feel very constrained to be able to give that
    advice to students.
        Mr. Draeger, in your testimony, you discussed the troubling
    rollout of gainful employment reporting requirements and how
    schools did not have the necessary guidance in order to
    properly report their data. Even though FSA acknowledged they
    didn't deliver guidance in an appropriate timeframe, they did
    not provide any deadline extensions to schools trying to catch
    up. You said schools are now starting to get responses, but do
    you have any explanation for why they haven't until now? Have
    they all heard back and been removed from a limbo not of their
    own making?
        Mr. Draeger. It's after letters have gone out to these
    schools accusing them of noncompliance even though it looked to
    be just data conflicts. It's not clear to us that any
    widespread communication has gone back from FSA to schools
    letting them know that everything is in the clear. I understand
    that as of last night, some communications were going back out
    to these schools saying that they had satisfied the data
    conflict requirements.
        Ms. Foxx. You think the fact that we were having this
    hearing today might have had anything to do with the fact that
    they got an answer last night at 7 p.m.?
        Mr. Draeger. I think it makes a strong case that
    accountability is needed outside of FSA's own self-assessments.
        Ms. Foxx. Well, I would tend to agree with you.
        Mr. Runcie, the FSA is charged with enforcing reporting
    requirements and timely monitoring of institutions. You say
    that you have facts and we are just looking at isolated
    incidents. But there's one case where you took 7 years to
    complete a program review for which no fines were imposed for
    an additional 2 years. Then you imposed a fine of $10,000 for a
    mistake by a school in categorizing a burglary as a larceny.
    Based on these examples alone, it's clear to me that it's
    unacceptable for an organization that has such vast
    responsibility to make such arbitrary decisions.
        I have some questions I'm going to submit to you because we
    have so little time today, and I will be expecting a very
    prompt response from you.
        Ms. Foxx. But I think that based on the 35 outstanding
    recommendations from the IG, multiple findings of deficiencies
    by GAO, combined with the egregious insufficiencies we have
    heard today, I'm extremely concerned about FSA's ability to
    serve students, borrowers, and taxpayers as well. And you have
    been given the high honor, in my opinion, of being a
    performance-based organization, and you have not lived up to
    that right that has been given to you.
        And I would suggest to you that if you come to us and say,
    you need more money to grow your infrastructure, that before
    you ask for more money, you'd better show this Congress that
    you have made some progress in straightening out your
    operation. Because we expect students--you also said there have
    been no negative impact to students and families and comment,
    after comment, after comment in this room and in reports have
    shown negative impact.
        You get my ire up and the ire of a lot of members when you
    start messing with our constituents.
        Thank you, I yield back.
        Mr. Jeffries, you are recognized for 5 minutes.
        Mr. Jeffries. Thank you, Madam Chair. Mr. Runcie, you
    testified earlier today, I believe, that there were
    approximately $2 billion in improper financial aid payments. Is
    that correct?
        Mr. Runcie. Yeah, the improper payment calculation yielded
    about $2 billion, but there weren't $2 billion in payments. It
    was an estimation.
        Mr. Jeffries. And is that an estimation on an annual basis
    or is that an aggregate?
        Mr. Runcie. That's an annual basis, or it was for 2015.
        Mr. Jeffries. Can you explain the general nature of these
    improper payments, or improper allocations?
        Mr. Runcie. Yeah, so first of all, a third of the improper
    payments could be--they could be underpayments, as well. So
    it's just that it's not accurate. Right? So, for instance, you
    know, if the information that was put in a FAFSA form was
    wrong, and so a student received more or less, you know, in the
    financial package, that would be considered an improper
    payment. Right? So there are instances like that, and so, you
    know, when we use a methodology to try to figure out how much
    of that is out there, we come up with the $2 billion.
        Mr. Jeffries. Now, what if any corrective actions have you
    taken to sort of address this improper payment situation?
        Mr. Runcie. Well, well, we have taken some of the
    recommendations from the IG and GAO in terms of putting in
    systems, edits. We have verification procedures that we put out
    there. So there have been a number of things that have helped
    the income. The IRS data retrieval has increased our ability to
    address improper payments because there's less error for
    inaccuracy, less room for inaccuracy, so there's some things
    that we have done to try to address that.
        Mr. Jeffries. Now, Ms. Tighe, you noted in your testimony,
    I believe, that there was an increasing risk of people
    attempting to fraudulently obtain Federal Student Aid in the
    context of distance education programs. Is that correct?
        Ms. Tighe. That's correct.
        Mr. Jeffries. And a distance education program would be one
    where activities is conducted either exclusively or primarily
    over the Internet. Is that right?
        Ms. Tighe. Yes, that's right.
        Mr. Jeffries. In your view, what makes these particular
    programs susceptible to an increased risk of fraud?
        Ms. Tighe. Well, because all of the transactions are done
    online. And so you don't know that the person who has signed up
    for classes and applied for Federal Student Aid is intending--
    they can misrepresent income. They can misrepresent their
    identity. They can misrepresent their graduation status from
    high school, and there's really no other way to check that
    unless you go through some other more unusual verification
    processes with the students.
        But you have the ability--fraudsters do, of either
    borrowing, or stealing identities, signing up for class,
    applying for Federal student aid, getting disbursements of aid,
    and then walking away.
        Mr. Jeffries. Are there any steps that you would recommend
    that Congress take or consider in combating this fraud problem?
        Ms. Tighe. I think a couple of recommendations I would
    address to you; one I talked about earlier which relates to
    cost of attendance. Do we need to have the same amount of money
    disbursed in distance Ed programs which typically are, you
    know, working parents sitting at home, already own a house, and
    you are not attending a brick-and-mortar school. Costs may be
    different.
        The second is, do we need to disburse the money at the
    beginning of a semester term all at once? Can we do it over the
    course of a semester or some other term? And that makes the
    fraud less likely to happen if there is less money up front to
    get.
        Mr. Jeffries. And lastly, I think you also expressed
    concern with the sort of sudden school closure phenomenon. Is
    that right?
        Ms. Tighe. Yeah, we did an inspection a few years ago to
    look at, essentially, at FSA's readiness to deal with school
    closures.
        Mr. Jeffries. And what if any steps, I guess the Corinthian
    College example would be----
        Ms. Tighe. Yeah.
        Mr. Jeffries. --a prominent case of the consequences of a
    sudden school closure both on the student side and on the
    taxpayer side. You know, is there anything that you would
    recommend that Congress do in strengthening our ability to
    address this situation?
        Ms. Tighe. Well, I don't know. I mean, I think FSA, our
    inspection certainly pointed to some areas that they needed to
    work on. They had a group sort of that I think Mr. Runcie
    mentioned, this publicly traded large school working group that
    was supposed to be keeping abreast of these issues. It hadn't
    met in the 3 years before it was created and then didn't meet
    regularly for 3 years. They need to do a better job of
    gathering financial information, and particularly from outside
    sources, and not just within FSA. I think for Congress, I would
    have to think about that.
        Mr. Jeffries. Thank you, Madam Chair. I yield back.
        Ms. Foxx. Thank you very much. Mr. Hinojosa, you are
    recognized for any brief closing comments you would like to
    make.
        Mr. Hinojosa. Thank you very much, Chairman Foxx. I want to
    make a statement and then a closing remark.
        The congressional intent was for FSA to use best business
    practices and the members of both of these committees have
    intended to listen and learn to see how we can address the poor
    performance of servicers. And being that the servicers failed
    in their performance, why didn't FSA replace the prime
    contractor Accenture, and the subcontractor, TSYS. I am going
    to request, respectfully request, that Mr. Runcie, and Mrs.
    Tighe give members of these two committees in writing, within
    30 days, why the servicers' contracts were not canceled, and
    new servicers given the Federal contract, just like we do in
    business.
        Mr. Hinojosa. I was president of a large company and I
    remember having contracts with the Department of Defense to
    supply food for them. And many who did not meet the
    requirements were removed and a new provider given the
    contract.
        It seems to me that something as big as we are talking
    about here with $1 trillion in debt, and the amounts that were
    taken by the savings of getting rid of the middleman that were
    the lenders of student college loans and replaced by the
    Federal Government, where I, as chairman, was told that over a
    10-year period we would save $96 billion, and with that, we
    took apart and put it into Pell grants. It seems to me that
    that should have been an action that should have been taken
    immediately, not to wait for us to have this kind of a hearing
    and see the weaknesses of the performance and that those people
    were not removed immediately.
        So in closing, let me say that I want to thank our
    distinguished panel for being here this morning. Today we heard
    those concerns, but we must not forget that it plays a vitally
    important role in expanding college access and affordability.
        Moving forward, I'm confident that FSA will continue to
    strengthen its management systems and performance in order to
    best serve our student borrowers. And with that I yield back,
    Madam Chair.
        Ms. Foxx. Thank you very much. Mr. Meadows, I would like to
    recognize you for closing comments.
        Mr. Meadows. Thank you, Madam Chair, and thank you for your
    leadership on a number of areas that relate to higher
    education. It's certainly not only this hearing, but it's been
    recognized time and time again, your commitment to students,
    and as you so accurately put it, our constituents. So I thank
    you for your leadership.
        Instead of doing a closing statement, I'm going to
    hopefully ask for a few things to clarify and wrap up some of
    this without going into a second line of questioning. But one
    of the big areas that we did not address that Ms. Tighe was a
    part of yesterday, was the whole cyber aspect because we had
    Dr. Harris here yesterday. And one of the questions that came
    up during that particular hearing made the potential liability
    from a cyber standpoint just frightening, Mr. Runcie. And when
    we asked Dr. Harris about some of the dashboard things that are
    on the--what the Issa-Connolly bill, or as Mr. Connolly would
    put it, the Connolly-Issa bill, it's--as we look at that
    particular issue, Dr. Harris couldn't answer one thing and he
    said that he didn't know, that we would have to ask FSA. And so
    you're here today so I'm going to ask you very quickly.
        Can you explain to these committees why there is no PIV
    cards to protect from an encryption standpoint to protect this
    some 139 million Social Security, unique Social Security
    numbers that are there; why the very basic of encryption is not
    employed? Because as your Chief Information Officer, he
    couldn't answer it. So can you answer that?
        Mr. Runcie. Yeah. Dr. Harris is the Department's CIO. We
    have our own separate CIO who has 30 years----
        Mr. Meadows. But he said this was your call.
        Mr. Runcie. Oh.
        Mr. Meadows. He couldn't even look. That's the reason I'm
    asking you is because he said he couldn't look behind the
    curtain; that you're the only one that could look behind the
    curtain, so I'm asking you.
        Mr. Runcie. So we've had two-factor authentication for some
    time. Right? It was level 3.
        Mr. Meadows. Yeah, but you went backwards. I was here
    yesterday. I don't want to get into all of that. I guess let me
    ask you this question more specifically. When can we count on
    PIV cards being there, the basic encryption to protect all of
    these student's Social Security numbers? When can we count on
    that from your agency?
        Mr. Runcie. By second quarter.
        Mr. Meadows. Okay, by second quarter of next year? I mean,
    let's make sure that we're talking about--I mean, second
    quarter 10 years from now is a tough----
        Mr. Runcie. Our target is the end of December, but there
    may be some constraints that move us into the next quarter. So
    that's why I meant that quarter.
        Mr. Meadows. All right.
        Mr. Runcie. January through March.
        Mr. Meadows. All right, so in two quarters you will have it
    done. All right. So let me go to one other thing that a lot of
    people were excited about, this whole REPAY thing that here in
    just a few weeks, I guess, is going to be there.
        Do all the service providers, do they have what they need
    to make the best decisions and all of that, and to implement
    that, the contractors?
        Mr. Runcie. Yes.
        Mr. Meadows. And so you have been working on that as I
    understand for a while. Is that correct?
        Mr. Runcie. Yes, REPAY, the delivery of REPAY. Yeah.
        Mr. Meadows. And so dating back as far as as, I guess, from
    my records it showed that you had a proposed rule draft change
    contract change that went out in May of 2015, is that correct?
        Mr. Runcie. That sounds right.
        Mr. Meadows. And then a final contract change that went out
    in July of this year?
        Mr. Runcie. I believe that's right.
        Mr. Meadows. And so I'm a little confused, so help me with
    this. And I don't understand the process. But since the
    Secretary just put out the final rule on October the 30th, how
    did you send out those contract changes before a final rule was
    complete? I mean, was it just that we assumed that it was going
    to not change?
        Mr. Runcie. I know that we provided guidance. Because of
    the window that we are talking about, it's obviously a tight
    timeframe, so if we waited until the last minute to give any
    sort of guidance or instruction----
        Mr. Meadows. Well, but these aren't--these are contract
    changes which is a lot difference than guidance and so are you
    assuming that the rule that just became final was going to be
    the final rule? Because on October 30, the final rule, it
    wasn't exactly like the proposed rule. It actually changed.
        Mr. Runcie. I will have to get back to you with a timeline.
        Mr. Meadows. It sounds like we've got things backwards.
        Mr. Runcie. Yeah, I can confirm the time line and get that
    back to you.
        Mr. Meadows. I yield back. I thank the chairwoman for her
    patience.
        Ms. Foxx. Thank you very much. This has been a very
    interesting hearing to me, a very revelatory hearing, and I
    want to thank Mr. Meadows for co-chairing this. And I want to
    thank the OGR staff and our staff for putting the hearing
    together.
        There are a couple of things that have come up here that I
    think are important to point out. One is the issue of
    complexity. You know, I have been around in the Federal
    Government business for a long time. I was the director of an
    upward bound special services program at Appalachian State
    University. We dealt with financial aid, and very concerned,
    again, about what our students, what our students were getting
    in financial aid.
        When we talked today about FSA's management of our broken
    financial aid system, I think it's important to remember that
    in 1990 there was only one forbearance option, and two
    repayment plans. In 2015, we have 13 forbearance options, 15
    repayment plans, and the all new forgiveness programs.
        It's clear, and Mr. Runcie, this is one area you and I
    agree on, you mentioned you have tremendous complexity to deal
    with. It's clear we have allowed the system to become far too
    complex to serve students well. I believe it is the life of
    bureaucrats to make things complex. I think this administration
    has made things way too complex. And I think it's going to be
    up to us to look for ways to make the system less complex
    because it is clear, FSA cannot administer this program. And if
    you cannot administer the program, your servicers cannot
    administer.
        And I agree with Mr. Carter. It appears that there is a lot
    of blame being foisted upon the servicers. That's not where the
    problem is, Mr. Runcie. The problem is with the leadership of
    the FSA.
        If you gave clear guidelines to the servicers, if you did
    things in a timely fashion, we would not have this problem. And
    even the complexity you have generated could be gotten through.
    And there's no benefit to the servicers to not explain things
    fully to students. I have inquired about that. The only problem
    is, they don't have the guidance from you to be able to do it.
    And it's so complex even financial aid administrators don't
    understand it. That's not the way it should be. It's not the
    way it should be.
        Again, you are harming the people you are supposed to be
    helping. And that has to stop. Again, I thank all of you for
    being here today. I thank you for revealing a lot of things
    that I think will be useful to us as we look to the
    reauthorization of the HEA and I appreciate the time that
    you've given us. This hearing is adjourned.
        [Whereupon, at 11:36 a.m., the subcommittees were
    adjourned.]

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