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Audit: Office of Federal Student Aid Bungled Loan Overhaul | Inside Higher Ed


The Office of Federal Student Aid didn’t follow best practices in budgeting, planning and managing the modernization of its student loan system, the Education Department’s Office of Inspector General found in an audit published Tuesday.

FSA staff didn’t complete budget requests for many components of the modernization until after the bid solicitations were issued. Staff also didn’t follow other required procedures that would’ve allowed “appropriate officials to agree on the project’s objectives, requirements, and funding,” the report says.

The Next Gen initiative would centralize the student loan servicing system as part of a broader overhaul of FSA’s operations. The project has been in the works for years and faced several delays. The audit reviewed the agency’s planning for and managing of the transition from October 2016 to July 31, 2021.

FSA officials said last year that previous efforts were unsuccessful because of “budget deficiencies and poorly scoped solutions due to overly optimistic cost and procurement expectations; poor proposals from offerors due to unclear and overly complex solicitation requirements; unclear timelines due to inadequate time and resources dedicated to implementation; confusion and frustration among stakeholders, including Congress, due to inadequately defined changes in strategy and a failure to account for constituent feedback; and changes in direction under previous administrations,” according to the report.

The inspector general’s office wrote in the audit that those problems might have been avoided if the agency had followed the required project management steps and best practices.

The Government Accountability Office said in a 2021 report that the Office of Federal Student Aid was understaffed. The agency didn’t receive additional funding in the most recent federal budget.

The inspector general’s office recommended that the FSA chief operating officer Richard Cordray develop internal controls to ensure that someone is tasked with overseeing the project management planning process, that individuals are held accountable when key processes aren’t followed and that required documents are completed and maintained.

Additionally, the office recommended that FSA create a policy to require a completed and approved budget initiative request before bid solicitations are issued.

FSA agreed with both recommendations but didn’t explicitly agree or disagree with the inspector general’s findings, according to the report.

“FSA stated that while it appreciates and benefits from the best practices identified by the OIG for the implementation of the Next Gen initiative, the OIG evaluated the effort based on ‘best practices identified by OIG rather than based on a standard of legal compliance,’” the report says.



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