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Student Financial Assistance PBO

Part B of Title I includes the language of H.R. 2536, the 21st Century Student Financial Aid System Improvement Act of 1997, which was introduced by Representative McKeon (R-CA) and Representative Kildee (D-MI) on September 24, 1997. This provision instructs the Department of Education to create a performance-based organization (PBO) within the Department for the delivery of federal student financial assistance. The PBO will be responsible for all aspects of managing the data and information systems that support the student financial assistance programs. A Chief Operating Officer having demonstrated management ability and expertise in information technology and financial services is to be hired to manage the PBO.

The purposes of the PBO are to: improve the level of service to program participants; reduce the costs of administering the programs; increase accountability; provide greater flexibility in the management of the operational functions; and integrate the information systems supporting federal student assistance programs.

The Committee recognized the need to make crucial changes to the student financial aid system in order to make it more simple, modern and efficient for the 21st Century. The need for this provision arises from the inability of the Department of Education to adequately manage over $40 billion in student financial aid. For instance, under the current system, the Department has made very limited progress in integrating the National Student Loan Data System (NSLDS) with its other data systems that support the delivery of federal student aid despite legislative mandates in the last two authorizations of the Higher Education Act. Also, the Department's budget for student aid information systems has tripled over the last 5 years and instead of consolidating its existing data systems, the Department has increased the number of system contracts that cannot share data with each other. And in 1998 alone the Department is expected to spend over $300 million on systems contracts to deliver student aid. Yet despite these significant expenditures, the current system requires dozens of paper forms and suffers from needless processing delays and breakdowns.

The Committee firmly believes that a customer-based, Performance-Based Organization within the Department, operated by an experienced Chief Operating Officer can take the necessary steps to properly reengineer the current systems and contracts. This is also in concurrence with the recommendations of the Department's own Inspector General and the independent Advisory Committee on Student Financial Assistance who both have advocated the PBO approach. The Committee also believes the creation of a PBO will result in a more efficient, effective, less expensive and less bureaucratic financial aid delivery system. The end result should be a system that is easy for students and parents to use and one that ensures that students have the information they need to select the education that is best for them--all while ensuring that taxpayer funds are being used efficiently and effectively.