Federal Student Aid's Performance Measures and Indicators for Returning Borrowers to Repayment

Summary

U.S. Department of Education Office of Inspector General Final Inspection Report ED-OIG/I23NY0150, August 14, 2024, titled Federal Student Aid's Performance Measures and Indicators for Returning Borrowers to Repayment, addressed to Denise Carter, Acting Chief Operating Officer, Federal Student Aid, from Sean Dawson, Assistant Inspector General for Audit. The OIG found that FSA needs to establish effective performance measures and indicators to evaluate its performance for returning borrowers to repayment, saying the objectives and metrics were not written in specific and measurable terms. It makes recommendations to establish specific objectives, effective performance measures and appropriate control activities. FSA agreed with the finding and partially agreed with Recommendations 1.1 and 1.2. The report cites about $1.63 trillion in outstanding loans as of June 30, 2023.

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Document type: Fsa Performance Measures Returning Borrowers Repayment
Case: Fsa Performance Measures Returning Borrowers Repayment

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“Federal Student Aid's Performance Measures and Indicators for Returning Borrowers to Repayment.” Original at oig.ed.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/fsa-performance-measures-returning-borrowers-repayment/, SHA-256 08b1e669810696be0c1beaf3305dcd7a1faaa6ed58b34b95dca208c22fb927fa.

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U.S. Department of Education
Office of Inspector General

Federal Student Aid’s
Performance Measures and
Indicators for Returning
Borrowers to Repayment
August 14, 2024
ED-OIG/ I23NY0150

Inspection Report
NOTICE
Statements that managerial practices need improvements, as well as other conclusions
and recommendations in this report, represent the opinions of the Office of Inspector
General. The appropriate Department of Education officials will determine what
corrective actions should be taken.

In accordance with Freedom of Information Act (Title 5, United States Code,
Section 552), reports that the Office of Inspector General issues are available to
members of the press and general public to the extent information they contain is not
subject to exemptions in the Act.
UNITED STATES DEPARTMENT OF EDUCATION
OFFICE OF INSPECTOR GENERAL

Audit Services

August 14, 2024

TO: Denise Carter
Acting Chief Operating Officer
Federal Student Aid

FROM: Sean Dawson /s/
Assistant Inspector General for Audit

SUBJECT: Final Inspection Report, “Federal Student Aid’s Performance Measures and Indicators for
Returning Borrowers to Repayment,” Control Number ED-OIG/ I23NY0150

Attached is the subject final inspection report that consolidates the results of our review of Federal
Student Aid’s performance measures and indicators for returning borrowers to repayment. We have
provided an electronic copy to your audit liaison officer. We received your comments in response to our
draft report.

U.S. Department of Education policy requires that you submit a corrective action plan within 30 days of
the issuance of this report. The corrective action plan should set forth the specific action items and
targeted completion dates necessary to implement final corrective actions on the findings and
recommendations contained in this final report. Corrective actions that your office proposes and
implements will be monitored and tracked through the Department’s Audit Accountability and
Resolution Tracking System.

In accordance with the Inspector General Act of 1978, as amended, the Office of Inspector General is
required to report to Congress twice a year on recommendations that have not been completed after
6 months from the date of issuance.

We appreciate your cooperation during this inspection. If you have any questions, please contact Myra
Hamilton at 214-661-9545 or myra.hamilton@ed.gov.

Attachment

400 MARYLAND AVENUE, S.W., WASHINGTON, DC 20202-1510

Promoting the efficiency, effectiveness, and integrity of the Department’s programs and operations.
U.S. Department of Education, Office of Inspector General
Results in Brief
Federal Student Aid’s Performance Measures and Indicators for
Returning Borrowers to Repayment

Why the OIG Performed What did the OIG Find?
this Work We found that FSA needs to establish effective performance measures and indicators to
On March 27, 2020, Congress evaluate its performance for returning borrowers to repayment. While FSA and the Office
enacted the Coronavirus Aid, Relief, of the Undersecretary established operational and strategic objectives and operational
and Economic Security Act (CARES goals for returning borrowers to repayment, they were not written in specific and
Act) in response to the public health measurable terms. In addition, although FSA identified several data metrics as
and economic crisis caused by the performance measures and indicators for returning borrowers to repayment, they did not
coronavirus pandemic. include clearly defined targeted percentages, numerical values, milestones, or
measurements.
Under the CARES Act, the U.S.
Department of Education What Is the Impact?
(Department) suspended collections Without effective performance measures and indicators, FSA is unable to assess whether
and interest charged on Department- it has made progress toward achieving its goals and objectives or if adjustments are
held student loans beginning in needed to improve its performance. Overall, the lack of effective performance measures
March 2020. On June 3, 2023, the and indicators may negatively impact FSA’s ability to effectively identify, analyze, and
Fiscal Responsibility Act of 2023 respond to risks related to returning borrowers to repayment.
ended the suspension of payments
on Department-held student loans What Are the Next Steps?
and interest on such loans 60 days We made three recommendations to the Acting Chief Operating Officer for FSA to
after June 30, 2023, with interest on establish objectives for returning to repayment in specific and measurable terms, to
loans beginning to accrue again on establish effective quantitative or qualitative performance measures and indicators for
September 1, 2023, and payments returning borrowers to repayment, and to ensure that appropriate control activities are
due starting in October 2023. designed and implemented to assess FSA's performance in returning borrowers to
According to the Federal Student Aid repayment.
(FSA) Portfolio Summary, there were We provided a draft of this report to FSA for comment FSA agreed with our finding,
approximately $1.63 trillion in partially agreed with Recommendations 1.1 and 1.2, and agreed with Recommendation
outstanding loans and 43.4 million 1.3. We summarize FSA’s comments and provide the OIG’s responses at the end of the
total unduplicated recipients as of finding. We also provide the full text of the comments at the end of the report (see FSA
June 30, 2023. Comments).
Our objective was to determine if
FSA established performance
measures and indicators for
returning borrowers to repayment.

Final Inspection Report ED-OIG/I23NY0150
Table of Contents
Introduction ........................................................................................................................ 1
Finding. FSA Needs to Establish Effective Performance Measures and Indicators to
Evaluate its Performance for Returning Borrowers to Repayment .................................... 3
Appendix A. Scope and Methodology............................................................................... 10
Appendix B. Acronyms and Abbreviations........................................................................ 12
FSA Comments .................................................................................................................. 13
Introduction
Background
On March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act) in response to the public health and economic crisis caused by
the coronavirus pandemic. The purpose of the CARES Act was to provide emergency
assistance for individuals, families, and businesses affected by the coronavirus
pandemic. Under the CARES Act, the U.S. Department of Education (Department)
suspended collections and interest charged on Department-held student loans
beginning in March 2020. Between August 2020 and November 2022, the Coronavirus
pandemic emergency relief measures to suspend student loan repayment were
extended eight times.

On June 3, 2023, the Fiscal Responsibility Act of 2023 1 ended the suspension of
payments on Department-held student loans and interest on such loans 60 days after
June 30, 2023, with interest on loans beginning to accrue again on September 1, 2023,
and payments due starting in October 2023. According to the Federal Student Aid (FSA)
Portfolio Summary, there were approximately $1.63 trillion in outstanding loans and
43.4 million total unduplicated recipients as of June 30, 2023. The outstanding loans
included William D. Ford Federal Direct Loans (Direct Loan), Federal Family Education
Loans, and Federal Perkins Loans.

Federal Student Loan Return to Repayment Responsibilities
The Office of the Under Secretary (OUS) and FSA were responsible for managing the
process for returning Federal student loan borrowers to repayment after a 42-month
payment pause due to the coronavirus pandemic. The OUS was responsible for setting
policy and providing overarching strategic direction through inputs from several
stakeholders, including FSA. FSA was responsible for implementing the operational
process of returning borrowers to repayment and tracking progress. Specifically, the
Office of Student Experience and Aid Delivery (SEAD) was charged with providing
borrowers the information, tools, and resources on loan repayment to help manage
their debt.

Actions to Support Borrowers
Prior to the enactment of the Fiscal Responsibility Act of 2023, the Department and FSA
performed several activities that were intended to alleviate probable issues for
returning borrowers to repayment. This included ongoing borrower communication on

1
Public Law 118-5.

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the suspension of payments, informing servicers of changing Income Driven Repayment
(IDR) Plan instructions, and implementing pandemic-related flexibilities for servicers and
borrowers to help borrowers prepare for the return to making payments on their loans.

The Department and FSA planned several initiatives to help borrowers manage their
student loans, including a plan to prevent defaults and delinquencies. One of the
initiatives was Fresh Start, a temporary program the Department created that is in
effect until September 30, 2024, to help borrowers with defaulted Federal student
loans. Fresh Start enabled borrowers with defaulted Federal student loans to return to
repayment without any past due balance and protects borrowers from involuntary
collection efforts and costly collection fees. A new IDR plan called the Saving on a
Valuable Education (SAVE) provides nearly all student borrowers with more affordable
monthly payments than other IDR plans. 2 To help borrowers transition into repayment,
FSA also created a temporary on-ramp period through September 30, 2024. This
on-ramp period protects borrowers from some consequences of late, missed, or partial
payments. While payments will be due and interest will accrue during the on-ramp
period, interest will not capitalize at the end of the period. Borrowers will not be
reported to credit bureaus, be considered in default, or referred to collection agencies
for late, missed, or partial payments during the on-ramp period.

2
In a ruling dated July 18, 2024, the Eighth Circuit Court of Appeals blocked the Department from
operating its SAVE plan.

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Finding. FSA Needs to Establish Effective
Performance Measures and Indicators to
Evaluate its Performance for Returning
Borrowers to Repayment
FSA and OUS established operational and strategic objectives and operational goals for
returning borrowers to repayment. However, these objectives were not written in
specific and measurable terms so that performance towards meeting the objectives
could be assessed. In addition, FSA identified several data metrics as their performance
measures and indicators for returning borrowers to repayment. However, FSA did not
establish clearly defined targeted percentages, numerical values, milestones, or
measurements that can be used to assess a level or degree of performance. As a result,
these data metrics were not effective performance measures and indicators for
returning borrowers to repayment. Therefore, FSA is unable to assess whether it has
made progress toward achieving its goals and objectives or if adjustments are needed to
improve its performance.

Establishing Objectives and Goals for Return to Repayment
According to OUS and FSA officials, there were three major operational objectives for
returning borrowers to repayment. To assist with meeting these objectives, FSA focused
on the various approved programs that help student loan borrowers, such as the Public
Service Loan Forgiveness, SAVE, and IDR plans. FSA also implemented borrower
outreach, such as the Targeted Early Delinquency Intervention (TEDI) program, to assist
borrowers with transitioning back to repayment. The TEDI program is used to mitigate
delinquency for borrowers returning to repayment. Through TEDI, FSA targets
borrowers who miss a payment during the first months of repayment and borrowers at
elevated risk for missing payments with specific communications about how to get
support and return to making payments on their loans. FSA plans to analyze the results
of using different communication methods to determine which communications were
the most effective in reaching borrowers and to improve its messaging while
transitioning borrowers back to repayment.

FSA developed four operational goals for returning borrowers to repayment that aligned
with the three major objectives. FSA plans to monitor its goals by tracking engagements
with borrowers, reviewing the processing status of the IDR applications and monitoring
secret shopper results and borrower complaints. Using FSA’s operational goals as a
foundation, OUS collaborated with FSA to identify the strategic objectives used to guide
FSA actions at the start and throughout the returning to repayment process. See the
Figure for the operational objectives and goals and the strategic objectives.

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Figure. Operational Objectives, Operational Goals and Strategic Objectives for
Returning Borrowers to Repayment

According to the Government Accountability Office’s Standards for Internal Control in
the Federal Government (GAO Green Book) 6.02, 6.03, and 6.04, “[m]anagement defines
objectives in specific and measurable terms…. Specific terms are fully and clearly set
forth so they can be easily understood. Measurable terms allow for the assessment of
performance toward achieving objectives.” The operational and strategic objectives for
returning borrowers to repayment were not defined in specific terms as they did not
clearly identify who is to achieve the objectives, how the objectives will be achieved, or
a time frame for achievement. Error! Bookmark not defined. The operational objectives
were not defined in measurable terms so that performance towards meeting the
objectives could be assessed. Objectives with terminology such as a “smooth transition”
and “better borrower experience” require subjective judgement in evaluating the
performance toward achieving those objectives.

FSA’s Performance Measures and Indicators
FSA established several data metrics it associated with returning borrowers to
repayment. However, these data metrics are not effective performance measures and
indicators that can be used to assess a level or degree of performance.

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In a crosswalk, FSA stated that its identified data metrics were its performance
measures and indicators for returning borrowers to repayment. Each data metric is
connected to one or more strategic or operational objectives. FSA plans to collect
borrower and servicer data on an ongoing basis for the selected data metrics. The data
metrics include, but are not limited to, total portfolio in repayment, portfolio by loan
status, delinquency borrower count and dollar amount by number of days, and IDR
application by debt size.

FSA’s performance measures do not include a clearly defined targeted percentage,
numerical value, milestone, or a measure that can be used to assess a level or degree of
performance. For example, for the metric “total portfolio in repayment by loan status,”
FSA provided the information found in the table. However, these raw numbers do not
include the baseline value from which performance is measured and do not establish a
specific measurable target or performance indicator.

Table. Example from FSA’s Monthly Return to Repayment Portfolio Report,
November 2023
Month Total Borrower Count in Repayment Status 3

September 2023 27,737,255

October 2023 17,157,215

November 2023 15,725,997

According to the GAO Green Book 6.07, when defining objectives,

Management determines whether performance measures for the
defined objectives are appropriate for evaluating the entity’s
performance in achieving those objectives. For quantitative objectives,
performance measures may be a targeted percentage or numerical
value. For qualitative objectives, management may need to design
performance measures that indicate a level or degree of performance,
such as milestones.

3
Borrower count data based on the table “Total Portfolio in Repayment, Deferment, Forbearance or
Past Due by Current Detailed Loan Status” in FSA’s Monthly Return to Repayment Portfolio Report dated
November 2023.

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According to the Office of Management and Budget (OMB) Circular A-11, a “target” is
defined as a quantifiable or otherwise measurable characteristic typically expressed as a
number that tells how well or at what level an agency or one of its components aspires
to perform. 4 In setting and communicating targets, where available, agencies should
include the baseline value from which the target change is calculated.

According to the GAO Green Book 10.01 and 10.03, management should design control
activities to achieve objectives and respond to risks. Examples of control activities
include management (1) establishing and reviewing performance measures and
indicators; (2) tracking major entity achievements and comparing these to plans, goals,
and objectives; or (3) comparing actual performance to planned or expected results.

FSA’s SEAD officials stated they had not yet established performance targets. 5 This is
primarily due to the unprecedented nature of the payment pause and the large portfolio
of borrowers who entered or re-entered repayment in fall 2023 coupled with the
significant temporary policies that have been implemented to assist borrowers in re-
establishing a regular repayment pattern. Furthermore, FSA indicated that without
baseline data, it would not be possible to establish a measure with a comparison point
because there has been no situation that FSA could benchmark to, and any clearly
defined targeted percentage, numerical value, or milestone would not be based on valid
historical data points. FSA has expressed that it will establish targets in the future once
the loan portfolio stabilizes and more data points are collected to measure against.
Specifically, FSA stated that it would need to collect data for 2 to 3 years in order to
establish performance targets as part of its performance metrics.

Prior to establishing targets, FSA officials stated they will continuously track data related
to borrower outreach and engagement to make operational decisions and actions based
on current trends that are seen in the data metrics. The data being tracked will be used
to make decisions to provide borrowers the resources they need for a successful return
to repayment. FSA plans to collect and analyze these data metrics using its returning
borrowers to repayment dashboard 6 and to publish monthly internal portfolio reports
to assess the progress of transitioning borrowers to repayment. However, FSA has not

4
OMB Circular A-11 (2023), page 29 of section 200.
5
What FSA refers to as performance targets aligns with performance measures as described in the GAO
Green Book.
6
The dashboard is FSA’s Monthly Return to Repayment Portfolio Report.

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established a clear timeline for when it will identify benchmarks for its performance
measures.

FSA SEAD officials also stated that, if problems are detected, it plans to work with OMB
and the Department to develop specific plans and operational changes to address issues
negatively impacting borrowers as they return to repayment as identified within the
data.

Finally, according to FSA SEAD officials, another reason that FSA did not establish
performance targets is because it needed to prioritize where to focus limited resources
for the return to repayment initiative. This was due to the other program initiatives
underway (e.g., SAVE, debt relief, Fresh Start, etc.), budget concerns and additional
emergent competing priorities.

Without operational and strategic objectives written in specific and measurable terms
and without effective performance measures, FSA is unable to effectively identify,
analyze, and respond to risks related to achieving the objective or the goal of returning
borrowers to repayment.

Recommendations
We recommend that FSA’s Acting Chief Operating Officer require FSA to—

1.1 Establish objectives for returning borrowers to repayment in specific and
measurable terms that are easily understood and allow for the assessment of
performance toward achieving objectives.
1.2 Establish effective quantitative or qualitative performance measures and
indicators for returning borrowers to repayment.
1.3 Ensure that appropriate control activities are designed and implemented to assess
FSA's performance in returning borrowers to repayment, such as reviews of
performance measures and indicators; comparing achievements to plans, goals,
and objectives; and comparing actual performance to planned or expected results.

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FSA Comments
FSA agreed with our finding, partially agreed with Recommendations 1.1 and 1.2, and
agreed with Recommendation 1.3.

FSA agreed with the finding to the extent that “it is acknowledged that FSA has plans to
establish performance targets once the portfolio stabilizes, and better baseline data are
available. As FSA begins to better understand the impacts of the pause, it will establish
qualitative or quantitative performance targets.”

FSA partially agreed with Recommendation 1.1 and stated that it has established several
objectives for returning borrowers to repayment that should ensure it is working to
provide the right support to borrowers as they transition into repayment. FSA stated
that while it consciously and intentionally has not yet established specific
performance targets, it is still able to gauge indicators of borrower performance to
assess whether FSA is achieving its broader return to repayment objectives. FSA
acknowledged that it has more work to do as return to repayment is not over. FSA
stated it expects the portfolio to stabilize in the future and, once that stabilization
occurs and it begins to better understand the impacts of the payment pause, it will
establish baselines for measurable data points and indicators with the intent to
establish new objectives and performance targets for the ensuing years.

FSA partially agreed with Recommendation 1.2 and stated that it continually used
several quantitative and qualitative measurements since the beginning of the payment
pause to measure performance. FSA also stated, as return to repayment continues, it
will continue to establish the necessary quantitative and qualitative data feeds to
baseline and then monitor and track borrower performance.

FSA agreed with Recommendation 1.3 to the extent it reflects that FSA has already
implemented multiple control activities. These activities included reviews with multiple
stakeholders of FSA’s performance data and indicators and will be expanded to include
specific performance targets once they are established. FSA agrees that having internal
controls to assess performance is an important aspect of any major operational
endeavor. FSA plans to incorporate baseline data at such time the portfolio has
stabilized, as well as performance measures and indicators, to monitor progress against
planned or expected results.

OIG Response
FSA’s proposed actions, if planned and implemented appropriately, are partially
responsive to our recommendations. FSA acknowledged it has plans to establish new
objectives and performance targets once the portfolio stabilizes and better baseline
data are available. However, FSA provided no timeline on when and how the proposed

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actions will be completed. In addition, FSA did not specify whether the new objectives it
plans to establish will be in specific and measurable terms that are easily understood
and allow for the assessment of performance toward achieving the objectives. Further,
regarding FSA’s response to Recommendation 1.3, during the inspection, FSA informed
us of the meetings with some of the stakeholders identified in its response. However,
FSA did not indicate and did not provide any support demonstrating that the meetings
represented control activities for assessing its performance for returning borrowers to
repayment. Without clarity and specificity regarding performance-related information,
FSA cannot measure its progress towards meeting goals and will continue to be unable
to effectively identify, analyze, and respond to risks associated with accomplishing the
objective of returning borrowers to repayment. We did not make changes to the final
report based on FSA’s response.

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Appendix A. Scope and Methodology
This inspection examines FSA’s processes for establishing performance measures and
indicators for returning borrowers to repayment. Our review covered FSA’s work in
establishing performance measures for returning borrowers to repayment from
June 3, 2023, to March 13, 2024. We also reviewed FSA’s activities and decisions prior to
June 3, 2023, regarding establishing performance measures for returning borrowers to
repayment.

As part of our inspection, we performed the following procedures:

• We gained an understanding of relevant criteria, including
o the GAO Green Book;
o the Office of Management and Budget Circular No. A-11 Preparation,
Submission, and Execution of the Budget;
o the Fiscal Responsibility Act of 2023;
o the CARES Act; and
o FSA’s Annual Report for Fiscal Years 2022 and 2023.
• We gained an understanding of FSA’s work in establishing performance
measures and indicators for returning borrowers to repayment. This included
reviewing the following:
o FSA Crosswalk to Returning Borrowers to Repayment Objectives, goals,
and performance measures;
o FSA November Monthly Portfolio Report;
o FSA Returning Borrowers to Repayment New Communications
Playbook;
o Decision Memorandums from 2020 and 2023; and
o Functional statements for the Student Experience and Aid Delivery
group within FSA and the Department’s Office of the Undersecretary.

• We reviewed Fiscal Year 2023 Management Challenges Facing the Department.

• We reviewed the U.S. Government Accountability Office’s GAO-22-105291
Report “Covid-19: Significant Improvements Are Needed for Overseeing Relief
Funds and Leading Responses to Public Health Emergencies.”
• We gained an understanding of FSA’s objectives, goals, performance measures,
data metrics, and data analysis FSA identified for returning borrowers to
repayment.

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• We interviewed officials at FSA, SEAD, and OUS.

Compliance with Standards
We conducted our work in accordance with the Council of the Inspectors General on
Integrity and Efficiency “Quality Standards for Inspection and Evaluation.” Those
standards require that we plan and perform our work to obtain sufficient and
appropriate evidence to support our findings and provide a reasonable basis for our
conclusions. We believe that the evidence obtained provides a reasonable basis for our
conclusions.

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Appendix B. Acronyms and Abbreviations
Department U.S. Department of Education

CARES Act Coronavirus Aid, Relief, and Economic Security Act

Department U.S. Department of Education

Direct Loan William D. Ford Federal Direct Loan

FSA Federal Student Aid

GAO Green Book Government Accountability Office’s Standards for Internal
Control in the Federal Government

IDR Income Driven Repayment

OMB Office of Management and Budget

OUS Office of the Undersecretary

SAVE Saving on a Valuable Education

SEAD Office of Student Experience and Aid Delivery

TEDI Targeted Early Delinquency Intervention

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FSA Comments

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