Student Financial Aid Systems: Absence of Guiding Architecture Reduces
Efficiency, Ease of Use (Testimony, 07/29/97, GAO/T-AIMD-97-147).

GAO discussed its review of the Department of Education's progress in
integrating its National Student Loan Data System (NSLDS) with other
student financial aid systems, as required by law.

GAO noted that: (1) the Department of Education has made only limited
progress in integrating NSLDS with the other student financial aid
systems that support title IV programs; (2) this is largely because the
Department has not developed an overall systems architecture, a
framework needed to allow these disparate systems to operate in concert
with each other; (3) as a result, while information can be shared among
systems, the process is cumbersome, expensive, and unreliable; (4)
further, the lack of a systems architecture allows the proliferation of
individual stand-alone systems; (5) this is expensive, not only with
respect to system procurement, operation, and maintenance, but also in
terms of efficiency; (6) such an approach has served immediate program
needs on a limited basis, but undermines sharing of student financial
aid information across programs; and (7) this, in turn, can result in
different databases containing different and perhaps conflicting
information on the status of student loan or grant.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-AIMD-97-147
     TITLE:  Student Financial Aid Systems: Absence of Guiding 
             Architecture Reduces Efficiency, Ease of Use
      DATE:  07/29/97
   SUBJECT:  Student financial aid
             Data integrity
             Higher education
             Systems design
             Student loans
             Computer networks
             Management information systems
             Strategic information systems planning
IDENTIFIER:  Dept. of Education National Student Loan Data System
             Federal Family Education Loan Program
             Pell Grant
             Dept. of Education Campus Based Programs
             William D. Ford Federal Direct Loan Program
             Dept. of Education Title IV Program
             Dept. of Education Easy Access for Students and 
             Institutions Project
             
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Cover
================================================================ COVER


Before the Subcommittee on Postsecondary
Education, Training and Life-Long Learning
House Committee on Education and the Workforce

For Release on Delivery
Expected at
9:30 a.m.
Tuesday,
July 29, 1997

STUDENT FINANCIAL
AID SYSTEMS - ABSENCE OF GUIDING
ARCHITECTURE REDUCES EFFICIENCY,
EASE OF USE

Statement of Joel C.  Willemssen
Director, Information Resources Management
Accounting and Information Management Division

GAO/T-AIMD-97-147

GAO/AIMD-97-147T


(511231)


Abbreviations
=============================================================== ABBREV

  EASI - Easy Access for Students and Institutions
  FFELP - Federal Family Education Loan Program
  HEA - Higher Education Act of 1965
  NSLDS - National Student Loan Data System

============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

We are pleased to be here today to discuss the results of our
just-completed review of the Department of Education's progress in
integrating its National Student Loan Data System, or NSLDS, with
other student financial aid systems, as required by law.  NSLDS was
designed to track loan and grant information on programs authorized
under title IV of the Higher Education Act of 1965, (HEA) as amended. 
It also was to provide a research database, and support operations,
including prescreening of aid applicants for eligibility and student
enrollment status. 

For millions of Americans, such student aid programs are the deciding
factor in whether postsecondary education is within financial reach. 
As such, it is critical that the information contained in these
systems be accurate.  More than $47 billion is to be made available
on behalf of about 8 million students for the 1998-99 academic
year--about 80 percent of it through student loans. 

As described in detail in our report being released at this hearing
today,\1 the Department of Education has made only limited progress
in integrating NSLDS with the other student financial aid systems
that support title IV programs.  This is largely because the
Department has not developed an overall systems architecture, a
framework needed to allow these disparate systems to operate in
concert with each other.  As a result, while information can be
shared among systems, the process is cumbersome, expensive, and
unreliable. 

Further, the lack of a systems architecture allows the proliferation
of individual stand-alone systems.  This is expensive, not only with
respect to system procurement, operation, and maintenance, but also
in terms of efficiency.  Such an approach has served immediate
program needs on a limited basis, but undermines sharing of student
financial aid information across programs.  This, in turn, can result
in different databases containing different and perhaps conflicting
information on the status of a student loan or grant.  Our report
recommends specific actions that we believe offer a realistic
approach as the Department works to address these challenges. 


--------------------
\1 Student Financial Aid Information:  Systems Architecture Needed To
Improve Programs' Efficiency (GAO/AIMD-97-122, July 29, 1997). 


   NSLDS INTENDED TO BE CENTRAL
   REPOSITORY FOR TITLE IV PROGRAM
   INFORMATION
---------------------------------------------------------- Chapter 0:1

Four major sources of student aid are currently available:  the
Federal Family Education Loan Program (FFELP),\2 the Pell Grant
Program, the Federal Direct Loan Program, and Campus-Based
Programs.\3 Before the recent 5-year phase-in of the direct loan
program, FFELP and the Pell Grant programs were the largest sources
of federally financed educational assistance.  FFELP provides loans
through private lenders; these loans are guaranteed against default
by about 36 guaranty agencies nationwide--state and nonprofit private
agents of the federal government whose services include, among
others, payment of claims on defaulted loans.  The loans are
ultimately insured by the federal government.  The Pell program
provides for grants to economically disadvantaged students. 

Over the years, both FFELP and the Pell Grant Program have been
subject to waste, fraud, and abuse.  Because of the limited risks to
schools, lenders, and guaranty agencies, and the billions of dollars
in available aid, the structure of FFELP created the potential for
large losses, sometimes through abuse.  In fiscal year 1995, for
example, the federal government paid out over $2.5 billion to make
good the guarantee on defaulted student loans.  In our past work we
found that students who had previously defaulted on student loans
were nonetheless subsequently able to obtain additional loans.\4 The
Pell program has likewise experienced abuse, such as students'
receiving grants while attending two or more schools concurrently. 
Since the inception of the program in 1973, students have been
limited to receiving Pell grants from only one school at a time. 

The Department's student financial aid programs are one of 25 areas
we have categorized as high risk because of vulnerability to waste,
fraud, and abuse.\5 Although progress has been made, the Department's
controls for ensuring data accuracy and management oversight remain
inadequate.  The Department has long recognized its significant
problems with title IV data reliability.  In fact, it reported this
as a material weakness under the Federal Managers' Financial
Integrity Act.  Plans are now underway to address this issue through
a major initiative started last December to reconcile NSLDS data with
data in the program-specific databases. 

Similarly, because of the poor quality and unreliability of financial
data remaining in the Department's systems, Education staff cannot
obtain the complete, accurate data necessary for reporting on its
financial position.  In fact, the Department's Office of Inspector
General was unable to express an opinion on the fiscal year 1994
FFELP principal financial statements, taken as a whole, because of
the unreliability of student loan data on which the Department based
its expected costs to be incurred on outstanding guaranteed loans. 
Education received a disclaimer of audit opinion on the 1995
financial statements for the same reason.  The Department's acting
chief financial officer, therefore, had to present unaudited 1996
financial statements in Education's March 1997 annual accountability
report (covering fiscal year 1996).  According to this report, the
audited statements--with auditor's report--were to be available
"around July 31, 1997."

NSLDS was authorized under the 1986 HEA amendments as a means of
improving compliance with repayment and loan-limitation provisions,
and to help ensure accurate information on student loan indebtedness
and institutional lending practices.  The 1992 HEA amendments
required that Education integrate NSLDS with the databases of the
program-specific title IV systems by January 1, 1994.  In January
1993 the Department awarded a 5-year, $39-million contract to develop
and maintain NSLDS. 


--------------------
\2 Formerly the Guaranteed and Stafford Student Loan programs. 

\3 The Campus-Based Programs include the Federal Work-Study Program,
the Federal Perkins Loan Program, and the Federal Supplemental
Educational Opportunity Grant Program. 

\4 Student Financial Aid:  Data Not Fully Utilized to Identify
Inappropriately Awarded Loans and Grants (GAO/HEHS-95-89, July 11,
1995). 

\5 High-Risk Series:  Student Financial Aid (GAO/HR-97-11, February
1997). 


   DEPARTMENT ACTIONS FALL SHORT
   OF FULL INTEGRATION
---------------------------------------------------------- Chapter 0:2

Despite the mandate of the 1992 HEA amendments--and the conclusions
of studies carried out both within Education and by the Advisory
Committee on Student Financial Assistance\6 --the Department's
actions have fallen short of full integration.  Education officials
chose to establish NSLDS as a data repository, to receive information
from the other title IV systems.  Yet operating in such an
environment presents complications due to the lack of uniformity in
how the systems handle and store information. 

The lack of data standards has complicated data matching between
systems.  To assist in achieving integration\7 of the Department's
title IV systems, the 1992 amendments included specific requirements
for the establishment of common identifiers and the standardization
of data reporting formats, including definitions of terms to permit
direct comparison of data.  This has still not been accomplished. 
Hence, the NSLDS database cannot be updated without expensive
conversion workaround programs.  The result is a collection of
independent systems, many of which keep data that duplicate
information stored in NSLDS.  This lack of integration promotes an
environment of reduced management efficiency, compromised system
integrity, and escalating costs as new stand-alone systems are
developed. 

While NSLDS was envisioned as the central repository for student
financial aid data, it is not readily compatible with most of the
other title IV systems.  These various systems are operated by
several different contractors and have different types of hardware,
operating systems, application languages, and database management
systems.  Along with Education's internal systems, thousands of
schools and numerous guaranty agencies also employ disparate systems
through which they send data to NSLDS.  Therefore, to accept data
from these other systems, NSLDS must have the necessary workarounds
in place. 

Education and its data providers currently use over 300 computer
formatting and editing programs--many of them workarounds--to bridge
the gaps in this complex computing environment.  These programs,
however, may themselves introduce errors and that would not be
necessary in a fully integrated environment.  Such programs
contribute to the rapidly escalating costs for the 5-year NSLDS
contract--from an original $39 million estimate to about $83 million
today. 

Department officials have acknowledged that integration is important
and has not been fully achieved.  They told us, however, that they
had little time to consider viable alternatives in designing and
implementing NSLDS because of statutory requirements and the large
number of diverse organizations from which data had to be gathered. 

The nonstandard use of student identifiers by various title IV
systems complicates tracking of students across programs, making the
task cumbersome and time-consuming.  Likewise, identifying
institutions can be problematic because multiple identifiers are
used; for instance, the same school may have different identifying
numbers for each of the title IV programs in which it participates. 
The 1992 amendments required common institutional identifiers by July
1, 1993; as of now, the Department's plans call for their development
and implementation for the 1999-2000 academic year. 

Beyond simply having common identifiers, it is important that data
standards be established; this is the accepted technique used to
govern the conventions for identifying, naming, and formatting data. 
The absence of such standards usually results at best in confusion,
at worst in possible misinformation leading to the improper awarding
of aid.  Having data standards in place means that everyone within an
organization understands the exact meaning of a specific term.  While
each title IV system uses the format specified by NSLDS to report
data, the Department permits each program to use its own data
dictionary--defining terms in different ways. 

One example of how this disparity can affect program operations can
be seen in the differences in how student enrollment status is stored
in NSLDS, compared with the system that supports the Pell Grant
Program.  Properly determining enrollment status is important because
students generally begin repaying loans following a 6-month grace
period after leaving school.  Because NSLDS and the Pell system
report enrollment status in different formats--alpha versus
numeric--and use different definitions, exact comparisons cannot be
made, and queries may well produce inconsistent responses.  This can
lead to misinterpretations of a student's true enrollment status. 
Problems such as these resulting from data inconsistencies between
systems can take school officials weeks or months to resolve--if they
are even detected. 


--------------------
\6 The committee was created as part of the HEA amendments of 1986;
it serves as an independent public advisory body to the Department
and to the Congress. 

\7 Information integration is defined by the National Institute of
Standards and Technology as establishment of the appropriate computer
hardware/software, methodology, and organizational environment to
provide a unified and shared information management capability for a
complex business enterprise (Information Management Directions:  The
Information Challenge, special publication 500-167, September 1989). 


   SYSTEMS ARCHITECTURE ESSENTIAL
   FOR EFFICIENT INFORMATION
   SHARING
---------------------------------------------------------- Chapter 0:3

Over the last decade, computer-based information systems have grown
dramatically; with this growth has come vastly increased complexity. 
As a means of handling such size and complexity, reliance on systems
architectures has correspondingly increased.  As discussed briefly
earlier, an architecture is simply a framework or blueprint to guide
and constrain the development and evolution of a collection of
related systems.  Used in this way, it can help significantly to
avoid inconsistent system design and development decisions, and along
with them the cost increases and performance shortfalls that usually
result. 

Leading public and private organizations are today using systems
architectures to guide mission-critical systems acquisition,
development, and maintenance.  The Congress has also recognized the
importance of such architectures and their place in improving federal
information systems.  The Clinger-Cohen Act of 1996 requires
department-level chief information officers to develop, maintain, and
facilitate the implementation of integrated systems architectures. 
And experts in academia have likewise championed this approach. 

A systems architecture could significantly help Education in
overcoming its continuing problems integrating NSLDS and the other
title IV systems.  It should also reduce expenses by obviating the
need for more stand-alone systems and their requirement for
workarounds, since one function of an architecture is to ensure that
systems will be interoperable. 

Despite the importance of a systems architecture, Education officials
have not devoted the time or effort necessary to develop such a
blueprint.  According to these officials, two factors accounting for
this are the Department's focus on responding to legislative mandates
and its lack--until recently--of a chief information officer. 
However, the Department reports that work on an architecture has
begun and that it expects completion by June 30, 1998. 

We have conducted a preliminary review of the technical portion of
the draft architecture, and we believe that Education is
underestimating what will be required to fully develop and implement
a systems architecture departmentwide.  Further, we are concerned
that the Department has drafted the technical component before the
"logical" component.\8

The logical part should be developed first because it is derived from
a strategic information systems planning process that clearly defines
the organization's mission, the business functions required to carry
out that mission, and the information needed to perform those
functions. 


--------------------
\8 The logical component of an architecture first defines the
organization's functions, providing high-level descriptions of its
information systems and their interrelationships and specifying how
and where information flows.  Then, the technical component explains
operations in technical terms, such as specifying hardware, software,
data, communications, security, and performance characteristics. 


   ACQUISITION OF STAND-ALONE
   SYSTEMS CONTINUES, INCREASING
   PROBLEMS AND COST
---------------------------------------------------------- Chapter 0:4

The Department has a compelling need for a systems architecture that
would enable the eventual integration of all title IV systems.  In
spite of this, however, it continues to acquire multiple stand-alone
systems.  Today the Department manages 9 major systems, supported by
16 separate contracts, to administer student financial aid programs. 
They range from legacy mainframe systems, several developed over 15
years ago, to a new client-server system.  For the most part, these
systems operate independently, and cannot communicate or share data
with one another. 

They are also expensive.  As I mentioned earlier, this is a costly
approach to systems acquisition.  Our chart, reproduced at the end of
this statement, shows that Education's information technology costs
have almost tripled since fiscal year 1994.  The reported cost of
these systems in fiscal year 1994 was $106 million; for fiscal year
1998 it is expected to be about $317 million. 

Many of the systems, including NSLDS, were developed independently
over time by multiple contractors responding to new functions,
programs, or mandates--and not as part of a long-range, carefully
considered systems-design strategy.  This has evolved into a
patchwork of stovepipe systems that rely heavily on contractor
expertise to develop and maintain systems responsible for
administering critical student financial aid information. 

A case in point:  the Department recently awarded separate contracts
to three vendors for new, stand-alone systems to service direct
loans.  Including the original servicer, the total cost for the four
systems could be as high as $1.6 billion through fiscal year 2003. 
This will result in four different servicing systems for the same
loan program, inviting problems that stem from a likely lack of
systems interoperability. 

For over 2 years, the Advisory Committee on Student Financial
Assistance has been a consistent voice favoring movement away from
this "stovepipe" approach and toward integration.  It has attributed
deficiencies in the delivery system for student financial aid to the
lack of a fully functional, title IV-wide recipient database that
could integrate all program operations. 

Two years ago, a project was initiated that held the promise of
reengineering current processes and developing a system that would
integrate all players in the student financial aid community.  Called
Project EASI, for Easy Access for Students and Institutions, it has
endured loose definition, a tentative start, and uncertain commitment
from top management.  As such, whether it can achieve real process
redesign and systems integration is in doubt.\9


--------------------
\9 See GAO/HR-97-11, February 1997. 


-------------------------------------------------------- Chapter 0:4.1

In summary, the Department of Education continues its slow pace
toward compliance with the 1992 HEA amendments.  While we understand
the difficulty of the challenges it faces, we nonetheless believe
that the longer the Department waits to develop a sound architecture
and integrate its systems, the more difficult and expensive that job
will eventually be.  Accordingly, our report recommends that the
Secretary of Education direct the Department's chief information
officer to develop and enforce a Departmentwide systems architecture
by June 30, 1998; that all information technology investments made
after that date conform to this architecture; and that funding for
all projects be predicated on such conformance, unless thorough,
documented analysis supports an exception. 

Mr.  Chairman, this concludes my statement.  I would be pleased to
respond to any questions you or other Members of the Subcommittee may
have at this time. 


STUDENT FINANCIAL AID SYSTEMS
CONTRACT COSTS OVER 5 YEARS
================================================== Appendix Attachment



   (See figure in printed
   edition.)

RELATED GAO PRODUCTS

Student Financial Aid Information:  Systems Architecture Needed To
Improve Programs' Efficiency (GAO/AIMD-97-122, July 29, 1997). 

Department of Education:  Multiple, Nonintegrated Systems Hamper
Management of Student Financial Aid Programs (GAO/T-HEHS/AIMD-97-132,
May 15, 1997). 

High-Risk Series:  Student Financial Aid (GAO/HR-97-11, Feb.  1997). 

Reporting of Student Loan Enrollment Status (GAO/HEHS-97-44R, Feb. 
6, 1997). 

Department of Education:  Status of Actions To Improve the Management
of Student Financial Aid (GAO/HEHS-96-143, July 12, 1996). 

Student Financial Aid:  Data Not Fully Utilized To Identify
Inappropriately Awarded Loans and Grants (GAO/T-HEHS-95-199, July 12,
1995). 

Student Financial Aid:  Data Not Fully Utilized to Identify
Inappropriately Awarded Loans and Grants (GAO/HEHS-95-89, July 11,
1995). 

Federal Family Education Loan Information System:  Weak Computer
Controls Increase Risk of Unauthorized Access to Sensitive Data
(GAO/AIMD-95-117, June 12, 1995). 

Financial Audit:  Federal Family Education Loan Program's Financial
Statements for Fiscal Years 1993 and 1992 (GAO/AIMD-94-131, June 30,
1994). 

Financial Management:  Education's Student Loan Program Controls Over
Lenders Need Improvement (GAO/AIMD-93-33, Sept.  9, 1993). 

Financial Audit:  Guaranteed Student Loan Program's Internal Controls
and Structure Need Improvement (GAO/AFMD-93-20, March 16, 1993). 

Department of Education:  Management Commitment Needed To Improve
Information Resources Management (GAO/IMTEC-92-17, April 20, 1992). 

*** End of document. ***