[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


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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.]


                                APPENDIX

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