WASHINGTON
Republicans introduced legislation in the House of Representatives last week to overhaul and modernize the system by which the government delivers financial-aid funds to colleges and students.
Surrounded by officials of 23 higher-education associations and leaders of major student groups, the bill’s sponsor, California Representative Howard P. (Buck) McKeon, said at a press conference: “Our college students, their families, and American taxpayers need and deserve a simple, modern, and efficient financial-aid system.” Mr. McKeon heads a subcommittee of the House Committee on Education and the Workforce that oversees student-aid programs.
The Republicans introduced a second bill -- on which they plan to act quickly -- that would allow students in the government’s direct-loan program to refinance their loans in the guaranteed-student-loan program. The bill is meant to aid tens of thousands of borrowers who have been waiting months for the Education Department to clear a backlog of applications from people seeking to consolidate their loans into a single direct loan.
The bill to overhaul the student-aid programs represents a slap in the face to the current managers of the Education Department, who have long argued that they could lead the effort to better integrate the computer and financial systems by which the government delivers federal student aid. The department now relies on 13 separate computer contractors to run all the student-aid programs, at a cost of $320-million a year, according to the General Accounting Office.
The Republican lawmakers and college lobbyists said that they were tired of hearing about the promise of the department’s own modernization efforts, like Project EASI (Easy Access for Students and Institutions), and not seeing results. Project EASI, which is two years in the making, aims to combine all data on student grants and loans into one computer network that is readily accessible to students, parents, and colleges.
“It is time to stop talking about delivery-system improvements and system integration and to start doing something about it,” said Representative William F. Goodling, the Pennsylvania Republican who heads the Committee on Education and the Workforce. “It is time to try a new approach.”
The bill would take the management of student-aid delivery away from the department’s top officials. It would require the department to hire an executive, with expertise in financial management, to run the delivery systems.
The manager would be a non-political appointee, unlike the department’s leaders, and would oversee a separate “performance-based organization” within the Education Department. He or she would be able to hire staff members to run the programs and to fire the employees if they did not perform well. In addition, the new organization would be given the authority to judge contractors by their performance -- rewarding or penalizing them according to how well they accomplished specific tasks.
Skepticism among college leaders and lawmakers about the department’s ability to manage the massive student-aid program increased last year when computer glitches by data-processing contractors created a backlog of about 900,000 financial-aid applications. The resulting delay forced some students to make decisions about college without access to all of the financial-aid data they needed.
Computer problems at an Alabama site managed by another contractor, Electronic Data Systems, have created a backlog of more than 80,000 borrowers seeking to merge multiple student loans into one direct loan from the government. As a result, the department has temporarily stopped accepting new applications for consolidation. The department says it will clear the backlog by December 1.
Terry W. Hartle, vice-president for government relations at the American Council on Education, said that the computer problems had frustrated colleges and their students. “A rapid consensus has emerged about the need for substantial changes in federal student-aid processing,” he said.
The measure to overhaul the student-aid delivery system will be incorporated into a larger bill designed to extend the Higher Education Act for five years. That bill is expected to be finished next year.
At a hearing this month before the House subcommittee, Marshall S. Smith, the Education Department’s Acting Deputy Secretary, said that the department would not fight the proposal to overhaul the student-aid system. But some student-aid experts privately said last week that they were worried that department officials could undermine the changes made in the bill if they are not committed to it.
For example, they pointed out that the bill would give the Education Secretary the authority to appoint the “chief operating officer,” who would be in charge of managing the student-aid programs. In addition, the bill would give the President and the Education Secretary the authority to remove the officer before his or her five-year term expired.
Even so, aides to Congressional Republicans said that the bill would provide Congress with significant oversight authority to insure that the department complied with both the letter and the spirit of the law.
The other measure that Mr. McKeon offered last week would allow direct-loan borrowers to refinance their loans in the guaranteed-loan program for one year. Right now, borrowers with guaranteed loans can merge their loans into direct loans, but direct-loan borrowers cannot consolidate their loans into guaranteed loans.
The bill would give those borrowers the same favorable terms and conditions they would get for refinancing their loans in the direct-loan program. For example, they would not have to pay the higher interest rate that is charged to borrowers who consolidate into the guaranteed-loan program.
Such legislation is desperately needed, the Republican lawmakers said, while students wait for the department to clear its backlog of applications for loan consolidation. Lawmakers at the press conference again questioned whether the department would be able to fulfill its promise to eliminate the backlog by December 1. Mr. McKeon said that the department had cleared just 2,600 of the 84,000 pending applications. More than half of the 2,600 applications, he said, were removed from the list after frustrated loan borrowers withdrew them.
The House committee is expected to take up the loan bill soon.