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27–117 PDF 2017

IMPROPER PAYMENTS IN THE FEDERAL 

GOVERNMENT: STUDENT AID 

JOINT HEARING 

BEFORE THE

SUBCOMMITTEE ON 

GOVERNMENT OPERATIONS 

AND THE

SUBCOMMITTEE ON 

INTERGOVERNMENTAL AFFAIRS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

MAY 25, 2017 

Serial No. 115–34 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://oversight.house.gov 


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(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

Jason Chaffetz, Utah, Chairman 

John J. Duncan, Jr., Tennessee 

Darrell E. Issa, California 

Jim Jordan, Ohio 

Mark Sanford, South Carolina 

Justin Amash, Michigan 

Paul A. Gosar, Arizona 

Scott DesJarlais, Tennessee 

Trey Gowdy, South Carolina 

Blake Farenthold, Texas 

Virginia Foxx, North Carolina 

Thomas Massie, Kentucky 

Mark Meadows, North Carolina 

Ron DeSantis, Florida 

Dennis A. Ross, Florida 

Mark Walker, North Carolina 

Rod Blum, Iowa 

Jody B. Hice, Georgia 

Steve Russell, Oklahoma 

Glenn Grothman, Wisconsin 

Will Hurd, Texas 

Gary J. Palmer, Alabama 

James Comer, Kentucky 

Paul Mitchell, Michigan 

Elijah E. Cummings, Maryland, Ranking 

Minority Member 

Carolyn B. Maloney, New York 

Eleanor Holmes Norton, District of Columbia 

Wm. Lacy Clay, Missouri 

Stephen F. Lynch, Massachusetts 

Jim Cooper, Tennessee 

Gerald E. Connolly, Virginia 

Robin L. Kelly, Illinois 

Brenda L. Lawrence, Michigan 

Bonnie Watson Coleman, New Jersey 

Stacey E. Plaskett, Virgin Islands 

Val Butler Demings, Florida 

Raja Krishnamoorthi, Illinois 

Jamie Raskin, Maryland 

Peter Welch, Vermont 

Matt Cartwright, Pennsylvania 

Mark DeSaulnier, California 

John Sarbanes, Maryland 

Jonathan Skladany, Staff Director 

Rebecca Edgar, Deputy Staff Director 

William McKenna, General Counsel 

Drew Baney, Professional Staff Member 

Kiley Bidelman, Clerk 

David Rapallo, Minority Staff Director 


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SUBCOMMITTEE ON GOVERNMENT OPERATIONS

Mark Meadows, North Carolina, Chairman 

Jody B. Hice, Georgia, Vice Chair 

Jim Jordan, Ohio 

Mark Sanford, South Carolina 

Thomas Massie, Kentucky 

Ron DeSantis, Florida 

Dennis A. Ross, Florida 

Rod Blum, Iowa 

Gerald E. Connolly, Virginia, Ranking 

Minority Member 

Carolyn B. Maloney, New York 

Eleanor Holmes Norton, District of Columbia 

Wm. Lacy Clay, Missouri 

Brenda L. Lawrence, Michigan 

Bonnie Watson Coleman, New Jersey 

SUBCOMMITTEE ON INTERGOVERNMENTAL AFFAIRS

Gary Palmer, Alabama, Chairman 

Glenn Grothman, Wisconsin, Vice Chair 

John J. Duncan, Jr., Tennessee 

Trey Gowdy, South Carolina 

Virginia Foxx, North Carolina 

Thomas Massie, Kentucky 

Mark Walker, North Carolina 

Val Butler Demings, Florida, Ranking 

Minority Member 

Mark DeSaulnier, California 

Matt Cartwright, Pennsylvania 

(Vacancy) 

(Vacancy) 


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C O N T E N T S 

Page 

Hearing held on May 25, 2017 ............................................................................... 1 

WITNESSES 

Mr. John W. Hurt, Chief Financial Officer, Federal Student Aid, U.S. Department of Education, Washington D.C. 

Oral Statement ................................................................................................. 7 

Written Statement ............................................................................................ 9 

The Hon. Kathleen S. Tighe, Inspector General, U.S. Department of Education, Washington D.C. 

Oral Statement ................................................................................................. 15 

Written Statement ............................................................................................ 17 

Mr. Justin Draeger, President, National Association of Student Financial 

Aid Administrators (NASFAA), Washington D.C. 

Oral Statement ................................................................................................. 26 

Written Statement ............................................................................................ 28 


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IMPROPER PAYMENTS IN THE FEDERAL 

GOVERNMENT: STUDENT AID 

Thursday, May 25, 2017 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON GOVERNMENT OPERATIONS, JOINT

WITH THE SUBCOMMITTEE ON INTERGOVERNMENTAL

AFFAIRS, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, D.C. 

The subcommittees met, pursuant to call, at 10:02 a.m., in Room 

2154, Rayburn House Office Building, Hon. Mark Meadows [chairman of the Subcommittee on Government Operations] presiding. 

Present from Subcommittee on Government Operations: Representatives Meadows, Hice, Jordan, Ross, Blum, Connolly, Norton, 

Lawrence, and Watson Coleman. 

Present from Subcommittee on Intergovernmental Affairs: Representatives Palmer, Grothman, Foxx, Walker, Demings, and 

DeSaulnier. 

Mr. MEADOWS. The Subcommittee on Government Operations 

and the Subcommittee on Intergovernmental Affairs will come to 

order. And without objection, the chair is authorized to declare a 

recess at any time. 

Good morning, and welcome to everybody to this joint subcommittee hearing on improper payments at the Department of 

Education. Today’s hearing is a continuation of the committee’s 

work to oversee improper payments throughout the government 

and also as a continuation of the committee’s oversight of the Federal Student Aid program. 

Improper payments is an important topic that doesn’t get enough 

attention and is also critical for us to get it right. Addressing this 

area has been especially challenging at the Federal Student Aid, 

given the richness and complexity of the programming. Student aid disbursements, which total nearly $130 billion a 

year, are made in accordance with complex rules, some of which 

are too burdensome, and in conjunction with stakeholders at 

schools, contractors, and college access providers. Rightfully so, the 

inspector general, who we welcome today, has designated this area 

as a ‘‘management challenge,’’ quote, for the agency. This has been 

a management challenge for FSA since 2012. Let’s be clear, though. 

FSA has all the tools it needs to fix this problem. 

When Congress created FSA as a performance-based organization in 1998, it gave the organization all the flexibility necessary 

to get the job done, and in return, the statutory expectation was 


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that FSA would be transparent and that Congress would hold it accountable. 

When FSA testified before this committee not too long ago in November of 2015, I said that Congress created this PBO and then 

walked away. I said we, Congress, didn’t uphold our end of the bargain and pledged to continue with that oversight, and we have. 

Which brings me to my next point perhaps addressing the elephant in the room. We are looking forward to speaking with the 

head of FSA today, but regrettably, he resigned 24 hours ago. And 

that is too bad because under statute he was responsible to Congress for the operations of FSA, and we had questions. 

It is also a slap in the face to the millions of taxpayers who provided this gentleman with over $430,000, yes, $430,000 in bonuses 

since 2010. With an investment like that, they deserve better. 

That said, I am pleased to welcome FSA’s chief financial officer 

here today. We sincerely appreciate you coming, and I recognize 

that you only had 24 hours to prepare. 

I also look forward to working with Secretary DeVos to address 

the shortcomings of the student aid program, including improper 

payments. In fact, I spoke with her yesterday, and her commitment 

to getting this right was very reassuring. I am hopeful that as we 

look to swiftly appointing a new chief operating officer and a permanent one for the Federal Student Aid that we will be able to 

work very closely together and address some of the concerns the inspector general has pointed out. 

Today, however, we are focused specifically on improper payments, and I look forward to figuring out how we will really fix this 

problem. We need a meaningful dialogue, and we need to identify 

real solutions. 

And with that, I just again welcome all of you. 

Mr. MEADOWS. I will now recognize the ranking member, Mrs. 

Demings, for her opening statement. 

Mrs. DEMINGS. Thank you so much, Mr. Chairman, for holding 

this very important hearing on improper payments, and I also welcome our witnesses and thank you for being here with us today. 

Loan services have had a lamentable record of taking advantage 

of the students who rely on them. For too long, they did this with 

few repercussions from the Department. But in 2015, President 

Obama’s Department of Education, Treasury, and Consumer Financial Protection Bureau announced a joint statement of principles on student loan servicing. These principles were developed to 

address the poor customer service scores and rampant borrower 

abuse. This guidance instructed the Department to consider the 

past performance of its loan servicing contracts. 

In one of her first official actions, Secretary DeVos rescinded that 

guidance. On May 19, Secretary DeVos announced her intention to 

hire a single loan servicer that will be solely responsible for managing the Nation’s $1.3 trillion-plus student loan portfolio and will 

be able to subcontract to other companies. Apparently, the Trump 

administration intends to hire a fox to guard the hen house. 

The National Association of School Financial Aid Administrators 

serves 9 of every 10 undergraduates in the United States and has 

served the financial aid community for over 50 years. It recently 


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reported that within Federal Student Aid office strategic planning 

is not happening as Congress intended. 

In May 2016 Government Accountability Office concluded that 

the Department of Education lacks comprehensive and comparable 

information on the nature of borrowers’ complaints made to the Department and its contracted loan services, hindering its ability to 

track trends and address borrower concerns. In other words, the 

Department of Education was not capable of protecting student 

borrowers and preventing abuses by loan servicing companies. 

In response to the GAO report, the Department agreed to evaluate existing and alternative performance metrics and compensation 

strategies as part of its ongoing student loan servicing procurement 

and reflect the results in future servicing contracts. Secretary 

DeVos seems to be retreating from that agreement and is moving 

the Department back to the bad old days. 

I look forward to hearing from the witnesses about specific plans 

that are being developed and what actions should be undertaken 

to ensure that student borrowers are provided the best services and 

loan servicers are given notice that the Department will not tolerate further abuses. 

Thank you so much, Mr. Chairman, and I yield back. 

Mr. MEADOWS. I thank the gentlewoman for her opening statement. 

I recognize the gentleman from Alabama, Mr. Palmer, for his 

opening statement. 

Mr. PALMER. Thank you, Mr. Chairman. And I want to thank the 

witnesses for being here. This is an important issue. It was an important issue to President Obama in July of 2010. He signed a bill, 

the Improper Payments Elimination and Recovery Act, because it 

is a drain on our resources. Every dollar that we send out improper 

payments is not just a dollar; it is a dollar plus interest because 

we are operating in deficit so it puts a huge constrain on our ability 

to fund the legitimate functions of government. 

It is a concept that is easy to understand. An improper payment 

is any payment that was made improperly, including payments 

made to the wrong person for the wrong amount to ineligible recipients and without supporting documentation. As a matter of fact, in 

the GAO’s report, 54 percent of the improper payments that were 

made were because of insufficient documentation and inability to 

authenticate eligibility. That is not a heavy lift to correct that. 

What is hard to understand is how the Federal Government reported $144 billion of improper payments last year, $11 billion of 

which was they didn’t pay people enough, leaving $134.7 billion in 

overpayments. Since reporting began in fiscal year 2004, the Federal Government has reported $1.2 trillion in improper payments, 

and I would like to add again, Mr. Chairman, that would be plus 

interest. 

Unfortunately, the Department of Education, specifically the Office of Federal Student Aid, has tended in the same direction as the 

rest of the Federal Government in regards to increasing improper 

payments and is a good place to start to dig into this growing problem. I would also like to point out that in 2016 GAO found several 

examples of contract mismanagement that have led to confusion 

among the student loan servicers. GAO has specifically highlighted 


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concerns over the quality of communications and unclear guidance 

from FSA to the services. 

The Department of Education inspector general is here to report 

for the third straight year the Department is not in compliance 

with Improper Payments Elimination and Recovery Act of 2010, as 

I pointed out, legislation that the President signed in July of 2010. 

By law, agencies are required to conduct risk assessments to determine if programs are susceptible to significant improper payments. 

Susceptible programs must report a statistically valid estimate of 

improper payments and other details about the causes and corrective actions taken by the agency. 

The IG has reported concerns about the methodology the Department uses to develop the estimate. The IG has also reported that 

the Department has not conducted effective risk assessments or 

used the risk assessments to appropriately designate programs. 

These failures are particularly concerning given the amount of 

money at risk. Last year, the Department reported more than $6 billion of improper payments from just two programs: Direct Loans and Pell 

Grants. The Office of Management and Budget has designed both 

programs has high-priority programs, which means they are among 

the 20 programs with the highest rates of improper payments in 

the Federal Government. 

However, the estimate that the Department reports is based on 

flawed methodology. The Department admits as much in its annual 

financial report, which says, ‘‘The Department acknowledges that 

its alternative estimation methodology can lead to volatile improper payment estimates.’’ How can we understand the risk and 

taxpayer dollars at stake when the Department is unable to provide effective estimates? The Department needs to take responsibility for the taxpayer dollars invested in the agency and do better. 

The Department reports that the improper payments are primarily a result of a failure to verify financial data and administrative errors made outside of the Department. Correction: The problem is the Department. It is responsible for the money. The Department is responsible for developing effective processes. The Department is responsible for ensuring that the schools and the students 

understand the process and that the process is not overly burdensome. 

We are here today to begin the process of helping the Department to assume this responsibility since it appears unable to do so 

on its own. We can’t begin to fix the growing problem of improper 

payments across the government until agencies follow suit. And I 

look forward to working with my colleagues to do so. 

Thank you, Mr. Chairman. I yield back. 

Mr. MEADOWS. I thank the gentleman for his opening statement. 

The chair recognizes the gentleman from Virginia, the ranking 

member of the Subcommittee on Government Operations, Mr. 

Connolly. 

Mr. CONNOLLY. I thank you, Mr. Chairman, and welcome our 

witnesses today. 

Today’s hearing examines improper payments at the Department 

of Education, a very important topic, one that this committee has 

done a lot of work on, not only Department of Education but 


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throughout the Federal Government. And we have reason to be 

concerned for a lot of reasons. 

The Department of Education inspector general has repeatedly 

reported on the Department’s noncompliance with Improper Payments Information Act of 2002, the Improper Payment Elimination 

and Recovery Act of 2010, and the Improper Payments Elimination 

and Recovery Improvement Act of 2012. We must understand how 

the Department can improve its evaluation and targeting of improper payments and how it fails to comply with the law, in this 

case, three of them. 

However, the more pressing issue at the Department of Education and the one facing most Americans’ checkbooks is the unethical abusive and predatory actions of student loan companies themselves. The Department distributes $125 billion in student assistance every year. With more than $1.3 trillion in loans on the books, 

it is in fact one of the largest financial institutions in the country. 

To manage the portfolio, the Department contracts with student 

loan companies. Last September, the OIG issued a report that 

found multiple student loan companies which were supposed to be 

assisting students were actually accessing and changing student 

log-on information as part of a predatory scheme to access their accounts, change their regular mail and email addresses, and even 

intercept correspondence. 

Specifically, the IG reported that the process for logging onto the 

Federal Student Aid website was, quote, ‘‘being misused by commercial third parties to take over borrower accounts,’’ unquote. It 

sounds like stealing to me. In one case, the IG warned that student 

loan companies changed the mailing address, phone number, and 

email address for borrowers so that it would be difficult for the borrowers to be contacted by their loan services. 

Less than two months ago on April 20th, the staff of this committee conducted a transcribed interview with the special agent in 

charge of this investigation and the IG’s Office. The special agent 

warned that these companies were, quote, ‘‘controlling thousands of 

accounts or creating thousands of accounts and controlling them.’’ 

In other words, the very companies that were supposed to be helping students, as contracted by the Department of Education, were 

in fact abusing their trust in an egregious way. 

In January of this year, the Consumer Financial Protection Bureau filed suit against Navient, one of the largest student loan 

servicing companies in the United States, alleging that it steered 

high-risk borrowers into plans designed for those with short-term 

financial hardships, misrepresented the consequences of nonrenewal plans, and prevented some of the most financially vulnerable borrowers from securing the benefits of payment plans specifically intended for them. 

In response to documented abuse by loan servicers in the default 

rate of one default for every 29 seconds, the previous administration issued a memorandum requiring the FSA to do more to help 

borrowers manage and discharge debt. The new guidance put protections in place for borrowers by reducing the possibility that new 

contracts would be given to companies that had misled or otherwise 

harmed debtors. 


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Unfortunately, the new Secretary of Education, Ms. DeVos, has 

rescinded those directives and instructed the FSA to move forward 

with awarding contracts to companies that have current lawsuits 

against them or have admitted in court to their abuses and have 

been fined millions of dollars. The elimination of these important 

protections by the Secretary herself allows student borrowers to be 

charged up to 16 percent of the principal and accrued interest owed 

on loans unless they enter the government’s Loan Rehabilitation 

Program within 60 days of default. 

The Secretary also intends to shift to contracting with one loan 

servicer, one, which will potentially have subcontractors along with 

them. This policy would eliminate direct government oversight of 

many loan servicers. I would like to know how this new policy will 

provide better customer service and reign in loan servicer abuse. 

From the announcement by the Secretary, it appears the Department will in fact have less oversight of the loan servicers, not more, 

in this new model. 

The rollback of these vital protections and financial oversight, 

combined with recently announced budget by the President, represent a unilateral retreat from safeguarding the best interests of 

students and borrowers. Budget outlines a $9.2 billion or 13.5 percent cut to the Department of Education. The administration would 

eliminate the Federal Student Loan Forgiveness Program for public 

service workers, limit student loan repayment options, and end federally subsidized student loans. 

The actions of this administration constitute in my view an assault on education and economic opportunity. Education is an investment. The government has a return on that investment. When 

we shortchange that investment by leaving students to fend for 

themselves against unscrupulous loan services or withdraw Federal 

support for education, we diminish our expected return: the talented, well-educated workforce the United States so desperately 

needs in the 21st century as we move forward. 

With that, I yield back. 

Mr. MEADOWS. I thank the gentleman for his remarks. 

I will hold the record open for five legislative days for any member who would like to submit a written statement. 

I will now recognize our panel of witnesses. I am pleased to welcome Mr. Jay Hurt, chief financial officer for Federal Student Aid 

at the U.S. Department of Education; the Honorable Kathleen 

Tighe, inspector general of the U.S. Department of Education, welcome; and Mr. Justin Draeger, president of the National Association of Student Financial Aid Administrators. Welcome. Welcome 

back. Welcome to you all. 

Pursuant to committee rules, all witnesses will be sworn in before they testify, so if you will please rise and raise your right 

hand. 

[Witnesses sworn.] 

Mr. MEADOWS. Thank you. Please be seated. Let the record reflect that the witnesses answered in the affirmative. 

In order to allow time for discussion, we would appreciate if you 

would limit your oral testimony to five minutes. However, your entire written testimony will be made part of the record. 

Mr. Hurt, you are recognized for five minutes. 


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WITNESS STATEMENTS 

STATEMENT OF JAY HURT 

Mr. HURT. Thank you, Chairmen Meadows and Palmer, Ranking 

Members Connolly and Demings, and members of the subcommittees, for the opportunity to join you today. My name is Jay Hurt, 

and as the FSA CFO, I am the accountable—program accountable 

official for improper payments at Federal Student Aid. 

I am here to talk to you about improper payment estimates for 

the Pell Grant and Direct Loan Programs, the most recent audit 

of the Department’s compliance with IPERA, and our work to minimize the level of improper payments in these two programs. As the 

largest source of student aid for postsecondary education in the 

United States, FSA delivered more than $125 billion in aid to more 

than 13 million students attending more than 6,000 schools last 

year. 

FSA must balance the simplicity and efficacy of the Federal student aid delivery process with the need to protect taxpayer dollars. 

This balance has led us to create a highly automated and integrated aid delivery process with hundreds of controls to combat improper payments. 

We appreciate the partnership with our IG looking for opportunities to improve this process. In 2014, OMB approved our alternative improper payment estimation methodology for Pell Grant 

and Direct Loan Programs. This methodology leverages data collected through FSA program reviews, avoids significant costs that 

would otherwise be required for separate testing at schools if FSA 

were to use statistical sampling techniques and integrates the improper payment estimation into core FSA monitoring functions. 

In June 2016, FSA submitted updates to the alternative sampling methodology to OMB in response to findings from the IG’s fiscal year 2015 IPERA Compliance Audit Report. OMB approved the 

revised estimate methodology in October of 2016. As a result of the 

changes to the methodology, and as a likely result of the inherent 

variability of the methodology, the fiscal year 2016 estimated improper payment rate for the Pell Grant and Direct Loan Programs 

increased over the estimates produced in fiscal year 2015 and were 

higher than the targets set in fiscal year 2015. 

The improper payment rates are primarily based on the assessment of completed program reviews. Schools are selected for a program review based on risk-based criteria. Only a small set of 

schools are selected for review randomly, typically less-risky 

schools. Because all schools are not randomly selected for review, 

the extrapolation of findings from these reviews does not produce 

an estimate that is representative of the full population of payments. In order to eliminate the variability of the estimate to the 

tolerance level prescribed by current OMB guidance, FSA would 

need to spend millions more on its improper payment estimation 

process and impose significant burdens on roughly 1,000 schools. If 

FSA were to divert resources from the higher-risk program reviews 

to the randomly selected reviews, we would essentially be giving up 

the identification and recovery of improper payments in order to 

improve our estimates. 


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Although fiscal year 2016 IPERA Compliance Audit Report identified the Department as noncompliant with IPERA due to missing 

its improper payment reduction targets, the IG found that the Department’s improper payment reporting, estimates, and methodology were generally accurate and complete. FSA has developed robust internal controls to prevent, detect, and, where appropriate, 

recover improper payments. In designing controls, FSA strives to 

strike the right balance between providing timely and accurate 

payments to students and ensuring that controls are not overly 

costly and burdensome. 

In fiscal year 2016, FSA documented and assessed 328 controls 

to detect and prevent improper payments and found that 97 percent were designed and operating effectively. FSA has also identified corrective actions to address the root causes of improper payments. For example, FSA annually reviews verification procedures 

that require schools to verify specific information reported on the 

FAFSA form by student aid applicants. These school verification 

procedures are an effective control, avoiding hundreds of millions 

annually in actual improper payments. 

Despite our continuous efforts to reduce improper payments, it 

would be misleading for us to leave Congress and the public with 

the impression that zero percent improper payment rate is feasible. 

In its 2016 Global Fraud Study, the Association of Certified Fraud 

Examiners found that the typical organization loses 5 percent of 

revenues in a given year as a result of fraud. As currently defined 

by OMB, improper payments include much more than fraud. Using 

this definition, FSA’s estimated combined fiscal year 2016 improper 

payment rate is 4.85 percent. 

I appreciate the opportunity to provide you with this information, 

and I welcome any questions you have. 

[Prepared statement of Mr. Hurt follows:] 


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Mr. MEADOWS. I thank you, Mr. Hurt. 

We now recognize you, Ms. Tighe, for five minutes. 

STATEMENT OF KATHLEEN S. TIGHE 

Ms. TIGHE. Thank you very much. I apologize for my voice this 

morning. I’ll try to speak loud. 

Thank you for inviting me here today to discuss the work of the 

Department of Education Office of Inspector General involving improper payments. Our work related to improper payments has 

evolved and increased over the years with the passage of several 

statutes, including the Improper Payments Elimination and Recovery Act of 2010. In these efforts, where we have identified instances of noncompliance with IPERA by the Department and 

weaknesses in the Department’s efforts to measure, estimate, and 

report on improper payments, we have provided recommendations 

for improvement. 

In our recent improper payments audit covering fiscal year 2016, 

we found for the third year in a row that the Department did not 

comply with IPERA. Like the previous two years, the Department 

did not meet the annual reduction target for the Direct Loan Program. This year, it also did not meet the annual reduction target 

for the Pell Program. The improper payment estimate for the Pell 

Program was 7.85 percent, or $2.21 billion, which exceeded the reduction target of 1.87 percent. The improper payment rate for the 

Direct Loan Program was 3.98 percent, or $3.86 billion, which exceeded the reduction target of 1.29 percent. 

This was not unexpected. As in response to my office’s recommendations, the Department had revised its estimation methodologies for both the Direct Loan and Pell Programs to include estimates of inaccurate self-reported income and improper payments 

associated with ineligible programs and locations. The Department 

also expanded the number of program reviews it used. 

Although these revisions to its methodologies caused a significant 

increase in improper payments for both programs, tripling the estimate for the Direct Loan Program and quadrupling the estimate 

for the Pell Program, the increased rates show the progress the Department has made in its estimates and provide a more realistic 

picture where these programs are in terms of improper payments. 

This should result in better information for the Department to use 

when designing appropriate corrective action. 

Our recent audit also found for the first time that the Department did not conduct risk assessments that confirmed with the appropriate requirements to determine whether Department-managed 

grant programs and FSA-managed contracting activities may be 

susceptible to significant improper payments. 

Through its own risk assessment, the Department identified the 

rehabilitation services Administration Vocational Rehabilitation 

State Grants Program as a program that exceeded the established 

improper payments threshold. Single audits reviewed by the Department had identified questioned costs for the voc rehab program 

ranging from $31 million to $44 million, which are between 1.56 

percent and 1.81 percent of program outlays all over the threshold. 

Yet despite these findings, the Department did not conclude the voc 

rehab program may be susceptible to significant improper payVerDate Nov 24 2008 10:40 Nov 08, 2017 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 H:\27117.TXT APRIL

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ments and did not report the program in its fiscal year 2016 annual financial report, as it was required to do. 

Further, for FSA-managed contracting activities, the Department 

did not consider seven of the nine required risk factors. FSA-managed contracting activities accounted for 76 percent of the Department’s active contracts in 2016. For the Department-managed 

grant programs, the Department did not consider two of nine risk 

factors. As a result, these risk assessments did not comply with 

IPERA. 

Based on our findings, we made 10 recommendations to help the 

Department comply with IPERA and improve its improper payments reporting, estimates, and methodologies. With the exception 

of our recommendation pertaining to the voc rehab program, the 

Department indicated it will take action to respond to our recommendations. 

This concludes my testimony. I’m very happy to answer questions. 

[Prepared statement of Ms. Tighe follows:] 


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Mr. MEADOWS. Thank you. 

Mr. Draeger, you are recognized for five minutes. 

STATEMENT OF JUSTIN DRAEGER 

Mr. DRAEGER. Mr. Meadows, Mr. Palmer, Mrs. Demings, Mr. 

Connolly, thank you for the invitation to testify today. As has been 

pointed out, NASFAA represents financial aid administrators at 

3,000 public, private colleges, universities, and trade schools across 

the United States. 

Financial aid administrators really sit at the nexus between policy and practice, and so we like to believe that our perspective can 

add value as how things that emanate from Washington, D.C., affect students on the ground. 

An improper payment can be the result of fraud or it can be the 

result of error, and from an institutional perspective, we’ve made 

some progress on both of those fronts in recent years. Concerning 

fraud, some of the most recent institutional practices that have 

been implemented to combat fraud include more stringent academic progress monitoring to make sure students are moving 

through their program; with help from the Department of Education, tracking students who are attending multiple institutions; 

smaller disbursements made to students on an ongoing basis; more 

in-depth one-on-one counseling; and more faculty involvement to 

track attendance to make sure students are actually attending the 

courses they are taking financial aid for. 

But one of the greatest challenges in dealing with improper payments within the student aid programs is really in our efforts to 

drive down improper payments, we don’t want to simultaneously 

and sometimes inadvertently drive out the very students that we’re 

trying to help. So I want to offer two real-life contrasting examples 

of—that have come up in recent years. 

First, as has been pointed out by the other folks on the panel, 

one of the root causes of improper payments is unverified financial 

data from an applicant that is put on their financial aid application. To correct this issue, the Department of Education, the IRS 

several years ago implemented an IRS data retrieval tool, which 

was really a win-win because it allowed students to automatically 

import their data automatically verified by the IRS into their application, lowered barriers for students, and decreased improper payments. 

As the folks on the subcommittees are aware, though, in an unfortunate twist, that tool was taken down in March because it detected fraud. And without that tool being operational and securely 

operational, improper payments will likely increase and students 

will have larger-than-necessary barriers in completing their applications. Still, though, the DRT is a good example of a tool that 

automated a process to lower improper payments and serve students and families. 

On the other hand, sometimes when we try to drive down improper payments, students and schools are subjected to very burdensome regulations and requirements that have pretty questionable outcomes and results. For example, the Department found 

that 15 percent of all financial aid applicants who said they did not 


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file a tax return actually did end up filing a tax return. And on the 

face of it, that sort of error is disconcerting. 

So the Department began requiring students to provide documentation from the IRS that they did not file a tax return. As it 

turned out, that process was ridiculously complex and archaic and 

required 10 business days for students to request a transcript from 

the IRS through the U.S. Postal Service. In 2015, 2016, 2017, that 

sort of archaic process can at best delay financial aid and at worst, 

as schools reported, disrupt enrollment. 

And the one unanswered question in all of this is did any of the 

changes that resulted from this requirement actually reduce improper payments? That question was not answered, at least publicly to the institutions that had to implement this for students. 

Unfortunately, a solution that was under consideration where 

the IRS and the Department would, just behind the scenes through 

a database match, automatically determine whether somebody had 

filed a tax return has since been scrapped. 

I want to offer in my last minute here just a few suggestions. 

One is that we would like to encourage the Department to continue 

to leverage technology whenever possible, to take the burden off 

the students and rely on other Federal or State databases as much 

as possible to verify student eligibility. This has to be done, of 

course, securely. 

Second, we need a better partnership with the Department of 

Education to work closely together so that any new requirements 

or data collection requirements go through some sort of testing first 

so that we understand the impact on students and schools. Audit 

and program reviews must be issued in a timely way, and the Department should consider a voluntary program where schools can 

come forward with errors without fear of reprisal, fines, and liabilities in the spirit of partnership to fix improper payments. 

And finally, we need congressional help to simplify everything 

from the application to the formula determining student eligibility. 

Thank you for your time and schools stand with you in wanting 

to ensure the right dollars are going to the right students. 

[Prepared statement of Mr. Draeger follows:] 


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Mr. MEADOWS. Thank you all for your testimony. 

The chair recognizes the gentlewoman from North Carolina, a 

leader in educational issues, Dr. Foxx, for five minutes. 

Ms. FOXX. Thank you very much, Mr. Chairman. And I want to 

thank our witnesses for being here today and providing testimony 

on this very, very important issue to all Americans. When you hear 

about $3.86 billion in fraud, that affects every person in this country, not just the people who are applying for financial aid. 

Mr. Hurt, FSA testified before this committee earlier this month 

on the suspension of the FAFSA’s IRS data retrieval tool, the DRT, 

which Mr. Draeger referred to. That tool is touted for curbing improper payments by providing for more accurate financial data reporting by applicants. 

In response to the DRT being down, new flexibilities were announced by the Department on April 24 for borrowers, including removing the requirement for institutions to collect documentation 

for verification of non-filing applicants. How is the Department balancing these flexibilities while also attempting to improve its improper payment rate management? And do you expect improper 

payments to rise given the Department’s reliance on manual reporting and backend verification during the DRT suspension? 

Mr. HURT. Thank you, Congresswoman Foxx. Yes, we do—during 

the—the DRT actually assisted—it was a win-win situation. It assisted with the reduction of improper payments, it reduced burdens 

on schools, and it reduced burden to applicants. While we are 

working on the security of the tool, we are providing alternative 

means—information about alternative means to obtain your tax information. We’re also—we did provide some relief to schools around 

the verification requirements. And we do expect that there will be 

some impact on improper payments. That is—that’s a given. That’s 

what the DRT was meant to do. But we are trying to balance—to 

your point and the point of Mr. Draeger, we’re attempting to balance the burden on schools and the denial of service to the most 

needy with the—offsetting the improper payments that come. 

Ms. FOXX. Thank you. You know, you said earlier that zero mistakes is unrealistic. That is not what the American people expect 

out of their government, especially, again, when you are dealing 

with the money of hardworking taxpayers. And so I find it very, 

very frustrating when you say we can’t have a program—I don’t 

use an ATM card but the banks have ATM machines. I bet their 

improper payments are a whole lot lower than the improper payments of the Department of Education. And I think we should 

strive for zero mistakes. 

You are not dealing with your own money, you are dealing with 

somebody else’s money, and I want the people in the Department 

to remember that every day. 

So going back to that, the inspector general has flagged improper 

payments as a management challenge every year since 2012, but 

during that time, OMB has designated the programs as highly susceptible for significant improper payments. What concrete steps 

have you taken to reverse this trend, whether it be combatting 

fraud or reducing human or systemic errors? Why haven’t they 

worked? And what is so wrong with your office that you can’t move 

in a more timely fashion? 


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Mr. HURT. For the past three years, we have been noncompliant 

with IPERA. The noncompliance is based on the fact that we have 

missed our estimates, our targets, and there’s a number of reasons 

for that. One of them is the fact that we’ve been changing the 

methodology to address the findings from the IG. The IG has given 

us in ’14 and ’15—fiscal year 2014 and 2015 they gave us 19 recommendations, and we did implement all 19 to improve our estimates. 

Part of the issue is, though, the variability of the issue—of the 

estimates and the need to increase cost to the taxpayer and burden 

on schools to be able to improve on the estimate. We—it would be 

a significant burden on schools and cost to taxpayers simply for the 

improvement of the estimate. Instead, we spend more effort and 

money on an annual basis on the actual improvement of the controls themselves. 

So, for example, this past year we implemented early—what was 

referred to as Early FAFSA and Prior-Prior. That was a change to 

the FAFSA that it was done earlier and it allowed applicants to 

utilize prior-prior—tax payment information that was already complete. Both of those things allowed them to be more accurate in 

their filing and didn’t require them to come back and file kind of 

corrections. So what that did was improved our improper payment 

as—it—actually, the controls over real improper payments as opposed to just the estimate. 

Ms. FOXX. Thank you. Mr. Chairman, I know my time has expired, but I would like to say I will be submitting some questions 

to some of the panelists for their response. Thank you, Mr. Chairman, for your indulgence. 

Mr. MEADOWS. I thank the gentlewoman. And as we have those 

questions, we will give each of you 30 days to respond to those and 

get it back to the committee. 

The chair recognizes the gentleman from Virginia, Mr. Connolly, 

for five minutes. 

Mr. CONNOLLY. I thank the chair. I thank our panel for being 

here. And I certainly agree with my friend Ms. Foxx that the goal 

should be to strive to move to zero in terms of improper payments. 

Depending on how one counts their $150 billion of improper payments, Federal Government-wide every year, that sound right to 

you Inspector General Tighe, around that? 

Ms. TIGHE. Yes, it’s quite large. 

Mr. CONNOLLY. But if you were to stretch it out over a 10-year 

period and if we could ever get it close to zero and dedicated just, 

you know, the savings to deficit reduction, it would be a good down 

payment. 

Ms. TIGHE. It would be. 

Mr. CONNOLLY. And it wouldn’t cut any programs and it wouldn’t 

raise any taxes. So the more efficient we can get, the better off we 

are going to be from a fiscal point of view and the discipline of efficiency. So I agree with Ms. Foxx in making that point. 

Ms. Tighe, I began by citing your report that consistently the Department of Education has failed to comply fully with the Improper 

Payments Information Act of 2002, the Improper Payments Elimination and Recovery Act of 2010, and the Improper Payments 


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Elimination and Recovery Improvement Act of 2012. Is that accurate? 

Ms. TIGHE. That is accurate. 

Mr. CONNOLLY. Mr. Hurt, why is that the case? These are the 

laws? 

Mr. HURT. We—over the years, we have taken the recommendations from the IG and modified the methodology. That’s one of the 

reasons why the rate differs from the actual target. We—the way 

the IPERA works, we cannot go back and modify the target when 

the methodology changes. So as we’ve become more inclusive of our 

estimates, our estimates include looking for more risks in the estimates, and they grow. The targets don’t grow. Therefore, when we 

miss the targets, by definition, we’re noncompliant. So that’s one 

reason they—we’ve been noncompliant. 

And the other is just the nature of the estimate is—it is—we 

base it on existing work and monitoring work within the Federal 

Student Aid, so that monitoring work is a targeted—most of our 

work is targeted to high-risk areas, and it’s not randomly selected. 

And we do that because we want to find improper payments. We 

want to get—find opportunities to fix. 

Mr. CONNOLLY. Ms. Tighe—I am sorry, because I am running out 

of time. Ms. Tighe do you agree with Mr. Hurt’s explanation for 

why the Department is not in compliance? 

Ms. TIGHE. Well, yes, for the most part. I would say that until 

this past year our recommendations made in our peer reports 

weren’t always necessarily followed by the Federal Student Aid. 

That changed this past year when they did take our recommendations from our ’14 and ’15 reports, which were very similar in findings and decided to I think do better root-cause analyses and then 

also then plot out a strategy for dealing with those. I do think Federal Student Aid is in a better place right now than it was a couple 

of years ago. 

Mr. CONNOLLY. Okay. I am going to run out of time, so let me 

get to—that is good to hear. Let me get to this issue, though, of 

private companies engaging in clearly unethical if not illegal behavior. How widespread is that, and what is the relationship between that behavior and improper payments? 

Ms. TIGHE. Well, I think the—we’ve certainly seen the issue— 

you saw the—you mentioned the report that we did last summer. 

We consider it to be a problem that keeps reoccurring. I think the 

relationship to improper payments is not all that clear. It’s certainly bad behavior, and what I would worry about, it’s really for 

the borrowers’ accounts who are taken over. And I think there 

could be a relationship between—which do not affect the Direct 

Loan and Pell Programs directly, but the fact that they’re cut off 

sometimes from their own servicer and not able to make good 

choices on their loans is a problem. 

Mr. CONNOLLY. Mr. Hurt, why wouldn’t the Department just cut 

off any company that engages in that kind of behavior? 

Mr. HURT. We —— 

Mr. CONNOLLY. Why would we continue to contract with a company that is clearly behaving I would argue illegally? 

Mr. HURT. The—I probably should draw a distinction between 

that activity, which is done by third-party providers, and our—the 


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loan servicing companies that contract with the Department of 

Education. The findings around third-party providers are not our 

loan servicing companies. They are—they can be unscrupulous actors, and we are cooperating fully—actually collaborating with our 

IG colleagues to identify bad actors in those scenarios and take actions and put in controls to avoid that from happening. 

Mr. CONNOLLY. My time is up but I see Ms. Tighe wanted to 

comment on that and then I will —— 

Mr. MEADOWS. And I want you to comment on that. 

Mr. CONNOLLY. Yes. Thank you. 

Ms. TIGHE. Thank you. I—Mr. Hurt is correct is that we are talking about in our report and what I was just talking about are 

third-party—they’re really people pretending to be—companies pretending to be loan consolidators. The loan services who the Department contracts with are different than that. But nevertheless, 

these bad actors need to be dealt with. And we did our report and 

we made really two major recommendations because we’d like to be 

able to prosecute some of these people. And one of those things was 

simple—very simple fix of changing the banner—the log-in banner 

on the website. And we made that recommendation a while ago 

now, and I’m happy to say I think FSA just implemented it I think 

last week, and that’s a good thing. But —— 

Mr. MEADOWS. When did you make that recommendation? 

Ms. TIGHE. It was September a year ago I think. And I could be 

wrong on that, so let me check on that. 

Mr. CONNOLLY. No need to rush into these things, Mr. Chairman. 

Ms. TIGHE. Yes. 

Mr. CONNOLLY. Okay. Well, this whole area of the topic we are 

going to pursue perhaps in some subsequent questioning, but I 

thank you all for your testimony, and thank you for your indulgence, Mr. Chairman. 

Mr. MEADOWS. I thank the gentleman for his insightful questions. 

Before I recognize the chairman of the subcommittee, I want to 

recognize a delegation that came in from the European Parliament 

Committee on Budgetary Control. I want to welcome you from 

across the pond and say thank you for being here and certainly for 

your willingness to share your ideas and allow us to share ours. So 

welcome. 

And with that, I recognize the chairman of the subcommittee, the 

gentleman from Alabama, Mr. Palmer. 

Mr. PALMER. I would like to welcome the members of the European Parliament as well. 

Now to get back to business, FSA did not meet three of its performance goals, Mr. Hurt, two of which specifically related to customer service. There are only two performance metrics that evaluate customer service, so FSA did not meet either of its customer 

service goals. What is causing this failure? 

Mr. HURT. So the goals that you referenced, one was the American Customer Satisfaction Index. That is the—it’s a way that we 

can measure customer satisfaction that is consistent with what 

many —— 

Mr. PALMER. My question is what caused the failures. So I don’t 

need a description. 


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Mr. HURT. Sorry. 

Mr. PALMER. Not to be rude, but just for sake of time, please. 

Mr. HURT. So the causes were twofold for the ACSI score. One 

was there was a methodology change. We—to be more consistent 

with the way the score is calculated with others in the industry, 

we switched to—it was either from phone to an email interaction. 

I think that’s the way it went. That was one way—one cause. Another cause was most likely things associated with changes to the 

way we work. For example, we implemented FSAID to improve security, and that more than likely had an impact on satisfaction as 

well. So we had to—back to that tradeoff of ensure some security 

for our applicants and the folks—our customers that use our service, but it was at the detriment to some extent to the satisfaction 

and ease with which those good actors can use it. 

Mr. PALMER. To what extent do you consider how you can improve service to help reduce administrative errors by others that 

cause improper payments? So when I look at the GAO report where 

most of these improper payments occur, and this may or may not 

apply in this situation, but it is just insufficient documentation, inability to authenticate, process errors. I think that is what we are 

talking about now. 

Mr. HURT. The bulk of the errors or the—probably the most significant is around errors of eligibility. So it’s misreported income or 

misreported other aspects on the application. We do do—that’s 

what the DRT helps us greatly with. It does help us with the 

misreporting of income. In addition to DRT, school verification can 

be very helpful in identifying mistakes in eligibility. So that’s 

where a lot of our focus is on that, but there’s —— 

Mr. PALMER. When you talk about misreported income, Mr. 

Draeger, how much of that is fraud? In your testimony you mentioned that student fraud ring activity had increased 82 percent 

from 2009 to 2013. How much of that is fraud and how much of 

an ability do we have to catch that? 

Mr. DRAEGER. It’s difficult for me to give an exact percentage of 

how much is fraud versus just honest mistakes. What we will say— 

what we see on campuses are that those who are interested in committing fraud have a very specific and targeted way that they pursue their fraudulent activities. And in recent years, schools have 

found ways to then defend against that sort of fraud. A lot of times 

when it comes to improper payments with income reporting, it’s— 

it appears to be honest mistakes, confusion about which tax years 

students or families should be using. So to the extent that this can 

be automated and we can get a secure IRS data retrieval tool back 

working, that seems to be one of the best solutions —— 

Mr. PALMER. General Tighe, you want to comment on that? 

Ms. TIGHE. Yes, I do. I would just point out one thing we need 

to keep in mind is the DRT is a fine tool, and we would totally 

agree with that. It is not going to catch fraud because people who 

want to defraud the government, the fraud rings we were talking 

about, based on—usually representing your income to be zero, they 

aren’t using the DRT so it’s not going to help with that. 

Mr. PALMER. So the checks go directly to the fraudsters and not 

to the schools? 


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Ms. TIGHE. Well, the checks, yes, will go to the credit balance— 

the balance that doesn’t cover tuition and room and board will go 

to the students and to the—and the students really aren’t students; 

they’re fraudsters. 

Mr. PALMER. Getting off maybe just a little bit if the chairman 

will indulge me, is there instances of fraud where there are fake 

institutions? I mean, we have had this with Medicaid where there 

are people filing for Medicaid reimbursements and they were nonexistent entities. Does that happen in this case, General Tighe? Do 

we know of any of that? 

Ms. TIGHE. I’m not aware. 

Mr. PALMER. Okay. Let me ask you one other quick question. In 

your fiscal year 2016 audit finds issues in the Department’s report 

in estimates and methodology. What did you specifically find with 

regard to challenges with the estimates? 

Ms. TIGHE. Specifically, we found a couple of things, which were 

that they didn’t—they included some program reviews that weren’t 

geared toward finding improper payments. So they would deal— 

like there was one that dealt with a cohort default rate, so that 

should have been excluded from the sample of program reviews, 

and there were issues like that. We did recalculate the improper 

payments rate estimate, and those—correcting for those mistakes 

really only made a marginal increase in the improper payment 

rate, so we did not consider them to be hugely significant errors, 

but they were errors that they need to deal with. 

Mr. PALMER. Thank you. I yield back. 

Mr. MEADOWS. I thank the gentleman. 

The chair recognizes the ranking member, Mrs. Demings, for a 

generous five minutes. 

Mrs. DEMINGS. Thank you so much, Mr. Chairman. 

Inspector General Tighe, back to your report from March of 2016, 

I believe the report pretty much found that the Department knowingly misled the public, that they misled the public about the findings in its own review of loan services and potential widespread 

abuses, including charging active-duty servicemembers high interest rates on student loans. Your poll found that one of these companies, Navient, charged nearly 78,000 members of the military interest in excess of the 6 percent cap permitted by a law specifically 

designed for servicemembers. Is that pretty much correct? 

Ms. TIGHE. That’s correct. 

Mrs. DEMINGS. Navient continues to service loans for the Department today. Is that correct? 

Ms. TIGHE. Yes, that’s correct. 

Mrs. DEMINGS. I am wondering if this company, considering its 

history, may be too big to fail. I am wondering if no matter what 

the abuses, the Department of Education will continue to contract 

with them. Last week, Secretary DeVos laid out her vision of the 

loan servicer model. As we all know, the loan servicer model allows 

the one prime contractor to subcontract out portions of the portfolio 

or manage the whole itself. 

Mr. Hurt, currently, four loan servicers have submitted proposals 

for the opening bidding process: Navient, FedLoan Servicing, and 

a combination of Nelnet and Great Lakes Educational Loan Services. Is that correct to your understanding? 


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Mr. HURT. It is. 

Mrs. DEMINGS. Can you explain the separation between the procurement arm of FSA and the management side, and who is going 

to make the determination as to the award of the contract? 

Mr. HURT. It’s my understanding that ultimately the contracting 

officer is the one with the warrant so they make—they will make 

the final decision, but it’ll be based on a recommendation from a 

technical evaluation panel and a cost evaluation panel. 

Mrs. DEMINGS. Can you explain the separation between the procurement arm of FSA and the management side? 

Mr. HURT. The procurement—the acquisitions office is an office 

within Federal Student Aid, so they report—the head of acquisitions reports directly to the chief operating officer. 

Mrs. DEMINGS. Reports directly to them? 

Mr. HURT. Yes, ma’am. 

Mrs. DEMINGS. Okay. It seems that one loan servicer under contract managing the entire portfolio, the Department would have no 

recourse if the servicer commits any number of abuses we have 

spoken to today. It will be maybe too big to fail. How will this 

huge—excuse me. In fact, it appears that there are subcontractors 

under the loan prime contractor. The subcontractors will be only 

accountable to the prime, leaving the Department with even less 

oversight than it has today. Would you agree with that or no? 

Mr. HURT. No, ma’am. We have—the rerelease of the modification for the procurement has thousands of requirements and has 

performance metrics that we’ll use to hold the—any new servicer 

accountable for their role. Any subcontractors that report to the 

prime, that is a relationship between the prime and the sub, but 

we will hold the prime accountable for all metrics and all service 

that they provide for borrowers. 

Mrs. DEMINGS. Okay. Check my time. President Trump proposed a $9.2 billion or 13.5 percent cut to the Department of Education. 

How will this huge cut affect the Department’s ability to oversee 

these services? 

Mr. HURT. The Department just issued their budget a few days 

ago. That’s something that we will—we have yet to analyze from 

an operational perspective. 

Mrs. DEMINGS. So you are not sure how the cuts, the 13.5 percent cut will affect your ability to oversee this process, not yet? 

Mr. HURT. I’ll have to take that question and get back to you. 

Mrs. DEMINGS. Okay. Ms. Tighe, given your experience over the 

last seven years, are you confident that the Department can cut its 

funding and simultaneously improve the management of its largest 

contract in the history of the Department? 

Ms. TIGHE. Well, I think budget cuts that would cut resources— 

let me back up. One of our management challenges historically has 

been oversight and management of the various entities that the 

Department has to oversee and manage, whether it’s contractors or 

grantees, and I think that it’s going to be a challenge for the Department if resources are cut in those areas to maintain a level of 

sufficient monitoring and oversight that is needed. 

Mrs. DEMINGS. Thank you so much. 

And, Mr. Chairman, thank you for your generous five minutes. 

I yield back. 


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Mr. MEADOWS. I thank the gentlewoman. 

The chair recognizes the gentleman from North Carolina, Mr. 

Walker, for five minutes. 

Mr. WALKER. Thank you, Mr. Chairman. 

Again, welcome to our guests across the Atlantic Ocean. We are 

always happy to see you guys. 

Mr. Hurt, as the chief financial officer now, I know you haven’t 

had a lot of time to prepare, but I have got a few questions specifically on the data retrieval tool. It has been offline since March the 

3rd, 2017. Do you expect it to be offline for financial aid filing purposes until October or when? 

Mr. HURT. The data retrieval tool will come up with a mass 

encrypted solution for the ’18/’19 FAFSA on October 1. That’s the— 

that’s when the cycle starts for ’18/’19. 

Mr. WALKER. Okay. And how does the outage affect improper 

payments for calendar year 2017, this year? 

Mr. HURT. For calendar year 2017, we would expect that the improper payments will increase related to the lack of DRT being— 

or DRT not being available. 

Mr. WALKER. So, I mean, your best word on record is that these 

improper payments will continue to increase until basically this is 

back online. Is that correct? 

Mr. HURT. They will—the portion of improper payments that the 

DRT was actually helping us to avoid will for that period of time 

until October 1 for—well, for 2017/18, unfortunately, the improper 

payments will increase. 

Mr. WALKER. So yes. That is painful to hear. The Department 

announced new flexibilities for schools working with students given 

the data retrieval tool outage. Can you talk about these new flexibilities? What were they? 

Mr. HURT. For schools they—specifically, I believe the school 

verification on income, the—it was—the old requirement—or the 

requirement normally is to get a specific tax transcript from the 

IRS and now we will require a signed tax form essentially. 

Mr. WALKER. Okay. What do you propose or how will the Office 

of Federal Student Aid ensure that improper payments do not suffer during the DRT outage? Do you have any advice? I mean, what 

are we to do in the meantime? 

Mr. HURT. We are—one of the things we can do and we’re—we’ve 

been working on is to increase our communication through our numerous channels to the applicant to help them use these alternative ways to get their tax information. We do that through our 

StudentAid.gov. We do that through social media. We do that 

through our communication and coordination with student advocacy groups. So we’re using multiple avenues to attempt to train 

or assist the applicants in this period. 

Mr. WALKER. I guess time will tell how successful those options 

are. 

Inspector General Tighe, first of all, thank you for being here. 

You are probably not feeling your best today but —— 

Ms. TIGHE. No. 

Mr. WALKER.—I am glad you are being such a trooper today. 

This week, news broke that the data retrieval tool was misused in 

a criminal personal manner in September of 2016 by a Louisiana 


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man who was targeting personal information on Donald Trump. 

Can you confirm this reporting? 

Ms. TIGHE. Yes. 

Mr. WALKER. Okay. The data retrieval tool is clearly a valuable 

tool to Federal Student Aid to assist with ease of processing for 

students—we know that—and also to program integrity measures 

such as curbing improper payments. However, the data retrieval 

tool is without a doubt also a high-value target for cybercriminals. 

How do we strike that balance, the right balance between program 

integrity, efficient service to students and schools, and then also 

the cybersecurity concerns? 

Ms. TIGHE. I should point out that the—in the matter you 

talked—you spoke about with the criminal case involving the misuse of the DRT to get—try to get the President’s information, it 

was—they were unsuccessful in achieving that. They did not have 

enough information to trigger access of the AGI available. And I’m 

also happy to say that it was noticed by the IRS and they immediately brought it back to us. And we have—and that resulted in 

somebody’s arrest and then prosecution, which is a good thing. 

Mr. WALKER. Sure thing. 

Ms. TIGHE. But I think it’s an important tool, but I do think it’s 

good that the Department and the FSA is—are looking at ways of 

keeping the tool viable but still protecting it against its misuse. I 

mean, the masking will help the DRT misuse problem, but we also 

have to stay one step ahead of the bad guys, right —— 

Mr. WALKER. Yes. 

Ms. TIGHE.—because, you know, they’re always thinking of 

things. And we would also like to see the Department, who has a 

recommendation that was in our report that Ranking Member 

Demings noted was—they need to do more proactive analytics related to usage on the FAFSA online and—because there were patterns that I think they could have seen of bad guys. 

Mr. WALKER. Thank you, General Tighe. I appreciate your work. 

Mr. Chairman, I yield back. 

Mr. MEADOWS. I thank the gentleman. 

The chair recognizes the gentlewoman from the District of Columbia, Ms. Eleanor Holmes Norton. 

Ms. NORTON. I thank the chairman for this hearing. 

And I am interested in the issue of accountability because we are 

not dealing with a new issue, although the inspector general report 

came out in September about the misuse of the Department’s own 

systems to take advantage of students. Now, the students are going 

to be under a lot of pressure because of substantial cuts to subsidized student loan programs that at least are being proposed. I 

certainly hope the appropriators do the right thing, though. 

The inspector general’s report was fairly emphatic that the systems were taken advantage of, Department systems were taken advantage of. Then, the Consumer Financial Protection Bureau and 

I believe jointly with the Department did a public inquiry and 

found a plethora, a huge number of complaints regarding loan 

servicers. I do want to quote the finding. They found a huge number of complaints, the Department itself. It already had the inspector general’s report, but the finding was, ‘‘Current saving practices 

may not meet the needs of borrowers or loan-holders.’’ What does 


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that mean? It seems a modest way to frame what has been under 

discussion at this hearing. What does that mean, ‘‘may not meet 

the needs of borrowers or loan-holders’’? Mr. Hurt? 

Mr. HURT. I’m not sure—Congresswoman Norton, I can speculate 

what the—about the meaning of that particular phrase —— 

Ms. NORTON. Well, it was a joint inquiry by the Consumer Financial Protection Bureau and the Department so that is why I am 

asking you what you meant to say. I am interested in accountability here. 

Mr. HURT. As for—if it relates to the servicer practices and the 

work to improve servicer practices, the modification that just came 

out for the loan servicing competition, again, it includes requirements, many of which are requirements or suggestions that have 

been made to us to improve borrower outcomes. So we expect that 

the outcome of this procurement will, in fact, have significant improvements to borrower outcomes while still balancing the cost to 

taxpayers. 

Ms. NORTON. Thank you, Mr. Hurt. Now, the Consumer Financial Protection Bureau has filed a suit against your largest services, 

Navient, with rather strong and serious allegations that it withheld 

information about income-based programs and then that they could 

have lowered borrowers’ monthly payments, then pushed borrowers 

into forbearance while of course they were continuing to accrue interest. Are you familiar with the allegations of the Navient lawsuit? 

Mr. HURT. I am familiar with the allegations. 

Ms. NORTON. The reason I ask because I don’t expect you to comment on those allegations—the reason I ask is that apparently you 

had nine borrowers before, and there is a proposal to have only one 

borrower now. Why would you want to go down to one borrower? 

And that that could be Navient, which is of course the biggest of 

them and the one that is now ensconced in litigation. 

Mr. HURT. We’re looking at this—the new modifications to the 

procurement are looking at one loan servicer so that with a more 

robust set of requirements and performance metrics that we can 

hold that servicer accountable. So the procurement is actually 

meant to improve service. But part of the issue of having multiple 

servicers is it also spreads the oversight out a bit thinner. It —— 

Ms. NORTON. Was there any competition among them? 

Mr. HURT. The incentives structure for the previous—for the 

four—or for the previous servicers, there was based on—there was 

competition associated with—or allocations were made based on 

metrics, allocation of new servicers. So there were incentives in 

that previous procurement. 

In the one we’re looking for, we also were—are looking to have 

metrics and adjust metrics to address many of the borrower outcomes that we’re seeking and were recommended to us. 

Ms. NORTON. Well, I recognize that there are a number of—there 

is a competition and that there are a number of applicants for this 

role, but I think the Department will be under very severe pressure 

if Navient, in the sconce of being involved in a lawsuit, is made in 

charge essentially as the prime contractor of all the subcontractors. 

And I thank you, Mr. Chairman. 

Mr. MEADOWS. I thank the gentlewoman. 


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The chair recognizes the gentleman from Ohio. 

Mr. JORDAN. Thank you, Mr. Chairman. 

Today’s hearing highlights exactly what American taxpayers hate 

about the Federal Government. Ms. Tighe, isn’t it true that last 

year there were $144 billion in improper payments across the government? Isn’t that accurate? 

Ms. TIGHE. That sounds accurate. 

Mr. JORDAN. Yes, and the trend is up, right? So that number has 

been growing? 

Ms. TIGHE. Yes. 

Mr. JORDAN. Growing over the last four years? 

Ms. TIGHE. Yes. 

Mr. JORDAN. And one of the most egregious agencies that is part 

of that overall number is the guy sitting beside you, the Department of Education, is that correct? 

Ms. TIGHE. Well, it’s not actually —— 

Mr. JORDAN. It’s in the top five, right? 

Ms. TIGHE. I think top five. 

Mr. JORDAN. Yes, top five. And the trend is the same with them. 

Overpayments have been increasing over the last several years. Is 

that right? 

Ms. TIGHE. Yes. 

Mr. JORDAN. And —— 

Ms. TIGHE. Certainly this past year. 

Mr. JORDAN. Yes. In the Direct Loan and the Pell Grant areas, 

they have both been trending up. And you sent them a letter where 

you said something like it was a management—they had improper 

payments at the Department were a management challenge. Is 

that right? You sent a letter to them? 

Ms. TIGHE. That’s correct. 

Mr. JORDAN. Yes. And it basically said they weren’t complying 

with the law, right, this IPERA law? 

Ms. TIGHE. Correct. 

Mr. JORDAN. Yes. So $144 billion across government, one of the 

most egregious agencies within that $144 billion is the Department 

of Education. Their trend is up. You sent them a letter saying, hey, 

get your act together; you are not even complying with the law, 

right? 

Ms. TIGHE. Yes. 

Mr. JORDAN. All that is true? 

Ms. TIGHE. Yes. 

Mr. JORDAN. And three weeks ago, we had a hearing and we find 

out that in the Direct Loan program they had to shut down their 

DRT on the FAFSA issue, and they failed to comply with another 

law there to notify Congress in the proper way and at the proper 

time. Is that true? 

Ms. TIGHE. Well, the notification I think may be a more ambiguous issue, but —— 

Mr. JORDAN. Exactly. Yes. I mean, we had that hearing—so this 

is now two hearings in a row this committee has had with the Department of Education has not complied with two Federal laws. 

And, oh, by the way, the increase in improper payments continues 

to rise. 


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And here is the kicker. Mr. Hurt, your boss, the guy we asked 

to come, Mr. Runcie. You know Mr. Runcie, Mr. Hurt? Do you 

know a Mr. Runcie? 

Mr. HURT. Yes, sir. 

Mr. JORDAN. Yes, and he was your boss? 

Mr. HURT. Yes, sir. 

Mr. JORDAN. Yes. And he was asked several times to come in 

front of this committee and talk about this situation. Is that true? 

Mr. HURT. Yes. 

Mr. JORDAN. Yes. And instead of coming in front of this committee, what did Mr. Runcie decide to do? Do you know? 

Mr. HURT. Mr. Runcie resigned. 

Mr. JORDAN. Resigned, yes, the night before, right, he is supposed to come. It is the night before we were going to send him a 

subpoena he decided to resign. Do you know why he would do that, 

Mr. Hurt? 

Mr. HURT. I can’t speculate for Mr. Runcie. 

Mr. JORDAN. How about you, Ms. Tighe? Do you know why he 

might do that? 

Ms. TIGHE. I do not know. 

Mr. JORDAN. Mr. Hurt, did Mr. Runcie receive any bonus payments over the last few years for his stellar job of not complying 

with two Federal laws, improper payments that continue to increase and have increased over the last three years? Did he receive 

any bonus payments for his job performance? 

Mr. HURT. I think the chairman referenced bonus payments. I 

personally don’t have—I’m not involved in Mr. Runcie’s bonuses. 

Mr. JORDAN. Yes. Ms. Tighe, did he get some bonus payments? 

Ms. TIGHE. I’m not aware of Mr. Runcie’s bonus payments either. 

I’m sorry. 

Mr. JORDAN. Yes. Well, it is our understanding that there were several thousand—last year alone $75,000 bonus. Ms. Tighe, do you 

know if Mr. Runcie was at the top of the Federal pay scale? 

Ms. TIGHE. I do not know that. 

Mr. JORDAN. Yes. My guess he was at the top of the Federal pay scale, got his $75,000 bonus last year, and over the last six years, 

bonuses totaling $432,815 for a guy who can’t comply with two 

laws, it asked to come testify in front of this committee, and instead of coming to testify in this committee to answer for what took 

place at the Department of Education, one of the most egregious 

agencies in overpayments or improper payments, instead of doing 

all that, he just decides to resign on the spot. Man, no wonder the 

American taxpayers are fed up with our Federal Government and 

the way this place operates. 

I think, Mr. Chairman, we should have Mr. Runcie in here. I 

think we should go ahead and subpoena the guy and bring him in 

here to answer some of these questions. I mean, again, you just 

walk through it, $144 billion across government, the agency that 

is maybe one of the most egregious offenders of overpayments is 

the Department of Education, two laws they don’t comply with. 

That trend is going up. The who is responsible is asked several 

times to come in front of this committee, and instead of coming in 

front of this committee, he up and resigns. And to add insult to injury, he has been receiving bonus payments the last six years that 


KING-6430 with DISTILLER
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total $432,815. This is amazing. This is why we have this committee, to get to the bottom of these kind of things. But Mr. Runcie 

should be in front of the committee. 

And frankly, whoever was responsible—my guess it was Mr. 

Duncan who was responsible ultimately, the former Secretary of 

Education, in allowing these bonus payments to be given to Mr. 

Runcie, should be in front of this committee as well and say why 

was he given this kind of bonus, taxpayer dollars, when there is 

billions of taxpayer dollars that go unaccounted for that are under 

his watch. 

So, Mr. Chairman, with that, I would yield back the balance of 

my time. 

Mr. MEADOWS. I thank the gentleman. 

Mr. Hurt, let me follow up one quick question. I mean, don’t you 

think Mr. Runcie could have illuminated some of the questions that 

you have been unable to answer today? Do you think he would be 

the appropriate person to answer some of these questions? 

Mr. HURT. Chairman Meadows, I can’t speak to —— 

Mr. MEADOWS. But don’t you work for him? 

Mr. HURT. I did. 

Mr. MEADOWS. Okay. So wouldn’t he have some knowledge of improper payments? 

Mr. HURT. He would have some knowledge. 

Mr. MEADOWS. It is a softball question, Mr. Hurt. 

Mr. HURT. Yes, sir. 

Mr. MEADOWS. I am not trying to trap you. 

Mr. HURT. He would have some knowledge of improper payments. 

Mr. MEADOWS. And so shouldn’t he have some I guess responsibility to come before Congress and help us understand why the 

record is so deplorable? 

Mr. HURT. That’s for Mr. Runcie to answer, not me. 

Mr. MEADOWS. No, I am asking you. You are the sworn witness. 

Don’t you think he could have helped? 

Mr. HURT. That’s for Mr. Runcie to answer, Mr. Chairman. 

Mr. JORDAN. Mr. Chairman? 

Mr. MEADOWS. Yes? 

Mr. JORDAN. Mr. Runcie has been able to go out and talk to the 

press. He can’t talk to a congressional committee with oversight responsibilities for the very fact he is allowed all kinds of billions of 

dollars of improper payments —— 

Mr. MEADOWS. Well —— 

Mr. JORDAN.—to go out but he can talk to the press. He can’t 

come talk to us? That is why we need to subpoena the guy. 

Mr. MEADOWS. Well, we have votes, and so I am going to give 

you about 30 minutes to think of a better answer, Mr. Hurt, okay, 

because I am going to come back to that. We were going to adjourn, 

but at this point we are going to just recess subject to the call of 

the chair. And for planning purposes so you can get some additional tea, Ms. Tighe, we are looking at about 30 minutes. So the 

committee stands in recess. 

[Recess.] 


KING-6430 with DISTILLER
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Mr. MEADOWS. The subcommittees will come back to order. 

Thank you so much for your flexibility. I appreciate you coming 

here. 

The chair recognizes the gentleman from Wisconsin, Mr. 

Grothman, for five minutes. 

Mr. GROTHMAN. Thanks. Mr. Hurt, I would like to ask you a couple questions. Your annual financial report stated, ‘‘Recovery audits 

to recapture improper payments would not be cost-effective.’’ Why 

did you decide to exclude these audits from your payment recapture program? It would seem to be fairly obviously you would want 

to use them. Do you have a comment on that? 

Mr. HURT. A few years ago, Congressman Grothman, we did actually—the Department actually used a recovery audit, attempted 

a recovery audit, and we eventually—the Department abandoned it 

because it was finding so little. It was focused on the contract, contract management or contract management activities. 

Mr. GROTHMAN. When there are overpayments, give me a typical 

example of an overpayment. How is an overpayment made? Give 

me a —— 

Mr. HURT. Overpayments might occur in, let’s say, the loan consolidation process. So when someone—when I say I want to consolidate my loans, I’m going to consolidate them on the 10th of March. 

If I end up consolidating on the 12th of March, then I will have— 

but if I don’t consolidate on the exact day, I could—that could result in an overpayment or an underpayment based on the timing 

of when the actual consolidation occurred. 

Mr. GROTHMAN. We are talking about $120 million a year. I 

would think that is a relatively small amount. When I look at this 

graph here that says $120 million a year in overpayments, give me 

a typical example of how you work your way up to $120 million. 

Or, Mrs. Tighe, you can weigh in if the answer is not satisfactory. 

Mr. HURT. Most of the overpayments—the most significant root 

cause for overpayments is actually issues around eligibility. That 

could be misreported income on the FAFSA or misreported data on 

the FAFSA. That’s usually the—probably the most impactful or the 

biggest root cause for improper payments. 

Mr. GROTHMAN. And right now, looking—by the way, Ms. Tighe, 

do you agree with that or do you have anything to add? 

Ms. TIGHE. I’m sorry. Excuse me? 

Mr. GROTHMAN. Do you agree with that or do you have anything 

to add? 

Ms. TIGHE. No. Well, I agree that the largest—or one of the two 

largest drivers of improper payments for Federal Student Aid is eligibility issues, misreported income. And that’s why we made a recommendation that they needed to include information related to 

that in the improper payments calculation. 

Mr. GROTHMAN. Do you ever catch people who are getting, you 

know, two different forms of aid, you are not supposed to get them 

both at the same time? Is that ever a problem? 

Ms. TIGHE. Well, we catch people getting all sorts of aid they 

shouldn’t be getting. That’s been looking at issues like our fraud 

rings where people are getting Pell Grants and student—and Direct Loan disbursements that they are not entitled to has been an 

active part of our criminal caseload. 


KING-6430 with DISTILLER
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Mr. GROTHMAN. Did you ever convict anybody? 

Ms. TIGHE. Yes, we do. 

Mr. GROTHMAN. What happens to them? 

Ms. TIGHE. Well, they go to jail. 

Mr. GROTHMAN. Oh, wow. Okay. 

Ms. TIGHE. And sometimes pay the money back. 

Mr. GROTHMAN. Okay. Good. I notice here, you know, it varies 

from year to year but usually the amount paid back from the 

amount identified is, you know, not that great. I mean, one year 

we did better but it seems a lot of times most recently it is under 

20 percent. Do you want to comment on that? I mean, is there a 

way you can dial that up a little bit or what is your opinion on 

that, getting less than 20 percent of what we identify—and I assume we identify only a fraction of what is done. 

Mr. HURT. I think you are referring to the $120 million in the 

AFR of assessed liability. Is that—if that’s true, then these are actual improper payments we identified during our program reviews, 

our compliance audits, or the IG’s audits. We will assess a liability 

to whomever the bad actor—or the individual or school in some 

cases that is due to pay us back, and then we’ll collect on that. 

Mr. GROTHMAN. Is it usually the school or the student? Probably 

usually the student? 

Mr. HURT. I don’t have the data —— 

Mr. GROTHMAN. Or sometimes the school? Sometimes the school, 

too, is at fault? 

Mr. HURT. There are times when the—I better let the inspector 

general speak to school. 

Ms. TIGHE. Well, we do audits sometimes on compliance with the 

title IV requirements, and we do see schools that may not be complying with the regulations properly and disbursing money properly 

or returning the money properly, and that incurs a liability to the 

Department. 

Mr. GROTHMAN. Okay. And I will go back. The most recent year 

here you say identified $119 million and recovered $20 million, 17 

percent recovery rate. Do you just want to comment on that? I 

mean, are you just with young people who don’t have money? What 

do you do to put a lien on them or what is going on there? 

Mr. HURT. It’s treated as a receivable, and we will employ many 

tools to collect. And it will—that’s how much has been recovered 

thus far is another way to look at that, too. So we will employ a 

number of Treasury—alternatives would be treasury offset against 

their—whatever—any payments that are coming out of Treasury. 

That could be IRS tax refunds, things like that. We will employ administrative wage garnishment, other tools mostly through Treasury to collect on that money. 

Mr. GROTHMAN. Okay. Thank you very much. 

Mr. MEADOWS. I thank the gentleman. 

The chair recognizes himself for a series of questions. 

So, Ms. Tighe, let me come back to you. You had talked about 

how people need to be prosecuted earlier, you know, in terms of 

when we find these things. I mean, how do we go about this? I 

mean, have we prosecuted many? 


KING-6430 with DISTILLER
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Ms. TIGHE. Well, I mean, we have prosecutions all the time. I 

mean, we have right now about 250—over 250 active criminal investigations. 

Mr. MEADOWS. Right. 

Ms. TIGHE. About 60 percent of those relate to the Federal Student Aid operations and programs. I think that we certainly see, 

you know, the big areas for us within that. The fraud rings, we 

talked about that and we do see prosecutions. But sometimes the 

dollar levels on those don’t justify me spending the resources, so we 

end up referring those to the Federal Student Aid to take administrative action. But we do see prosecutions —— 

Mr. MEADOWS. So do they take the appropriate action? 

Ms. TIGHE. I know that they have been following up on some. I 

would—I am not —— 

Mr. MEADOWS. On a scale of 1 to 10 with 10 being the most appropriate, how would you rate their actions? 

Ms. TIGHE. Well, I think I’d have to give a different scale because 

I’m not sure what they’re doing with our referrals, and I think it’s 

something —— 

Mr. MEADOWS. Well, since we are talking about education —— 

Ms. TIGHE.—we need to sit down with —— 

Mr. MEADOWS. If you are going to talk about education, give 

them a letter grade A through F. 

Ms. TIGHE. Well, I will give them the grade of I am not sure. I 

know that they have taken some action on some of the —— 

Mr. MEADOWS. So do you not see it being a problem if the inspector general is not sure? Does that mean that you don’t have enough 

information —— 

Ms. TIGHE. I don’t have enough information. It’s actually an area 

I’ve been wanting to sit down and talk to FSA about. 

Mr. MEADOWS. All right. So if it is an area that you want to talk 

to FSA about, and since it was made very clear earlier today that 

all of these problems apparently are the problems of Ms. DeVos, 

would you agree with that? 

Ms. TIGHE. Well, no, this is—I think the issues related to referrals of —— 

Mr. MEADOWS. Didn’t they happen before she was even confirmed —— 

Ms. TIGHE. Yes. 

Mr. MEADOWS.—into her position. All right. Let’s be clear about 

what it is and what it is not because it is very easy for us to start 

to go after a new Secretary who—all of these things that you are 

talking about I don’t know that even we had President Trump in 

the White House at that point when you were identifying these 

areas of concern, did we? 

Ms. TIGHE. No. 

Mr. MEADOWS. All right. So if we are looking backwards and we 

are looking at these issues, tell me about program review and 

where we are in terms of you being able to make a good analysis. 

Do we have good audits? Do we have what we need there? 

Ms. TIGHE. We did do a review a couple of years ago, I believe 

in 2015, that found a number of issues related to the program review process. 


KING-6430 with DISTILLER
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Mr. MEADOWS. And Mr. Runcie got right on those and fixed them 

all, did he not? 

Ms. TIGHE. Well, they did do a couple of things. They did implement a quality kind of assurance process where they reviewed—the 

program reviews themselves —— 

Mr. MEADOWS. All right. So they did quality assurance —— 

Ms. TIGHE. The problem was —— 

Mr. MEADOWS. Since we are talking about improper payments —— Ms. TIGHE. Yes. 

Mr. MEADOWS.—quality assurance, I guess that is why the Direct Loan Program went from $1.28 billion up to $3.86 billion in improper payments, and the Pell Grant Program went from $562 million to $2.2 billion because we put in additional quality assurance. 

Ms. TIGHE. Well, no, I don’t think that’s the reason. The issue 

we had, which I should explain, with the quality assurance process 

was that they had recommendations for improvement but they 

didn’t require the managers to take action. And that was one of the 

findings in our report. 

Mr. MEADOWS. So they would make recommendations but they 

wouldn’t have to act on those recommendations? 

Ms. TIGHE. Well, at that point we were looking at it they did not 

have a process in place to act on them, no. 

Mr. MEADOWS. Do they now? 

Ms. TIGHE. I would have to get back and check on that. As part 

of our audit resolution process, I am not sure what the status of 

that recommendation is. 

Mr. MEADOWS. Would you say that as part of your audits there 

is a whole lot of outstanding issues that still need to be made? 

Ms. TIGHE. Yes, that’s fair to say. 

Mr. MEADOWS. All right. So on a scale of 1 to 10—I will give you 

a different one. On a scale of 1 to 10, how much work is left to be 

done to satisfy those outstanding issues with 10 being the most 

amount of work and 1 being hardly any? 

Ms. TIGHE. Well, I’d say, you know, they’re at a 5. They’ve done 

some work to—trying to resolve some of our audits in the past 

year, but there are still some ways to go. 

Mr. MEADOWS. All right. So this is a performance-based organization, is it not, a PBO? 

Ms. TIGHE. Yes, it is. 

Mr. MEADOWS. All right. So that means compensation is directly 

related to performance? 

Ms. TIGHE. As I understand it, yes. 

Mr. MEADOWS. Okay. So let me ask it a different way. Compensation should be directly related to performance? 

Ms. TIGHE. Yes. 

Mr. MEADOWS. So have you seen any correlation between the 

compensation and the performance? Because I cannot find any. 

And so I am just trying to get to the facts here. 

Ms. TIGHE. I am not privy to compensation, knowledge about the 

senior leadership of those —— 

Mr. MEADOWS. So if you are not, how do you properly oversee— 

if we are a performance-based organization, how would you properly oversee whether we are actually doing that or not? 


KING-6430 with DISTILLER
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Ms. TIGHE. Well, we do look at a number of issues related to 

FSA, and we’ve made a number of recommendations —— 

Mr. MEADOWS. So who is overseeing that? 

Ms. TIGHE.—for improvement. 

Mr. MEADOWS. Is that you, Mr. Hurt? Are you overseeing whether people get the proper compensation based on performance? 

Mr. HURT. No. Performance —— 

Mr. MEADOWS. I didn’t think so. So who is? 

Mr. HURT. The performance evaluations for the chief operating 

officer would be determined by the Department senior leadership, 

and then within the Federal Student Aid, performance is evaluated 

and awarded based on a process consistent with the Department’s 

award process but done by the operating committee essentially 

—— 

Mr. MEADOWS. All right. 

Mr. HURT.—at FSA. 

Mr. MEADOWS. Maybe I am confused, but what the heck does 

that mean? I mean, I don’t understand how—if I am going to explain that to the American people, when you say ‘‘consistent with 

other things,’’ why would a COO get a bonus of $75K last year 

when your improper payments went through the roof? 

Mr. HURT. I can’t speak towards the —— 

Mr. MEADOWS. Did you get a bonus? 

Mr. HURT. I did, sir. 

Mr. MEADOWS. Performance bonus? 

Mr. HURT. Yes. 

Mr. MEADOWS. So Mr. Runcie said that improper payments are 

all your responsibility. Is he accurate with that? 

Mr. HURT. I am the program accountable official for improper 

payments related to —— 

Mr. MEADOWS. So why did you get a bonus then paid to you 

based on these what I would call abysmal results? 

Mr. HURT. I think the results are based on the—it’s an estimate 

that’s based—that’s published in the AFR, and the estimate is—it 

essentially went up because of a changed methodology, inclusion of 

more root causes in the methodology —— 

Mr. MEADOWS. So you are saying it is just we started reporting 

it better and it is not really any worse? 

Mr. HURT. I’d say we’re —— 

Mr. MEADOWS. You are under sworn testimony. And let me tell 

you, you are talking to a guy that looks at the numbers and I am 

going to go back and look at them. So are you saying the improper 

payments are no worse today in fiscal year 2016 than they were 

in fiscal year 2015? 

Mr. HURT. I’m saying the rates went up based on a change to 

methodology and based on the inherent variability of the methodology. So the methodology—because we focus our funds and our resources on high-risk program reviews, we don’t have sufficient randomly sampled numbers of reviews and audits to be able to 

produce a statistically valid estimate. We would have to make a 

management decision to divert our resources from going after improper payments and assessing liabilities to coming up with a better estimate to do that. 


KING-6430 with DISTILLER
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Mr. MEADOWS. So what you are saying is you would have to take 

time to figure out how to measure if you are doing a good job or 

not? 

Mr. HURT. We’d have to take money away from finding improper 

payments to be able to produce a better estimate. 

Mr. MEADOWS. All right. And so would you say that having 7.85 

percent of improper payments in the Pell Grant program is a good 

job? 

Mr. HURT. I say 7.85 percent improper—improper payment rate, 

anything above zero is something we should be striving to bring 

down. 

Mr. MEADOWS. Great answer to a question I didn’t ask. I am asking you is 7.85 improper payment rate a good job, Mr. Hurt? 

Mr. HURT. The blended rate, if you look at both Pell and Direct 

Loan, was 4.85. 

Mr. MEADOWS. And so are you saying 4.85 is good? 

Mr. HURT. Four-point-eight-five compared to the—the industry 

estimates they lose about 5 percent to fraud, which is a much narrower —— 

Mr. MEADOWS. What industry? 

Mr. HURT. Private industry. So the American Certified Fraud —— Mr. MEADOWS. Mr. Hurt, let me just tell you, I told you I would 

try to go easy on you and I am going to go easy on you, but you 

are going to have to answer my question. Are you willing to answer 

my question? 

Mr. HURT. Yes, sir. 

Mr. MEADOWS. All right. Is 7.85 a good number or a bad number, 

yes or no? Just tell me what it is, good or bad? 

Mr. HURT. It’s a number we need to address for sure. 

Mr. MEADOWS. We are going to wait until you answer it. Is it a 

good number or a bad number? 

Mr. HURT. It’s a bad number. 

Mr. MEADOWS. All right. If it is a bad number, at what point is 

it a good number where Inspector General Tighe can applaud you 

and say this is great? 

Mr. HURT. The only way to produce a statistically accurate number is to divert our resources from finding—actually finding improper payment and bringing down the real amount of improper 

payments to producing a more valid estimate. 

Mr. MEADOWS. All right. Justin, will you—maybe you can help 

me see how the PBO is working or not working, Mr. Draeger, if you 

can help us maybe have a little clarity here. 

Mr. DRAEGER. So from our perspective, Mr. Palmer asked earlier 

about the metrics that FSA did not meet when it laid out its strategic objectives. And I would say the answer is pretty simple. The 

objectives they did not meet, at least two of the three were focused 

solely on customer service and stakeholder engagement. 

And so I think one of the underlying issues with a performancebased organization—and FSA was the first performance-based organization in 1998—we benchmarked other performance-based organizations that have been created since then, and they have a 

unique quality that is just lacking at FSA which are a specific oversight board. And if you are going to give a Federal agency private 


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sector flexibility, then some of the private sector oversight needs to 

be there. And when you look at the other Federal PBOs, they have 

that in place. So I think it’s a lot easier when you have a board 

in place that’s helping align your strategic objectives to overall 

strategy to determine whether you’re successful or not. 

Mr. MEADOWS. So what is wrong with what he said, Mr. Hurt? 

Mr. HURT. FSA currently has oversight from many oversight bodies. 

Mr. MEADOWS. Apparently not enough, but go ahead. 

Mr. HURT. We have oversight from the senior—Department senior management, from Office of Management and Budget, from Domestic Policy Council, from the inspector general, from multiple 

congressional oversight committees. So adding another layer of 

oversight would actually further—well, it would further confuse the 

oversight picture relative to private companies. 

Mr. MEADOWS. Mr. Hurt, so let me be clear. We are going to get 

to the bottom of this, and we are going to get it right. The American taxpayer and quite frankly students all across this country deserve to get it right. And, you know, you are sitting here today and 

Mr. Draeger just pointed out some things and I think there are two 

customer service matrices that are out there, and you are failing 

on both of them. So, I mean, when we really look at it—so your 

sworn testimony here today is that these abysmal reviews and the 

fact that you are not doing enough about improper payments are 

all a result of too much oversight? 

Mr. HURT. No. 

Mr. MEADOWS. Well, I mean, that is kind of where you were 

going. You said you got all this oversight, and so are you suggesting that we just need to pull back on a little bit of oversight 

so the improper payments go down? 

Mr. HURT. No, Chairman Meadows. My statement was in response to do we need another oversight board. That was the question I was answering. 

Mr. MEADOWS. All right. So at what point do you find Mr. 

Draeger’s constituency satisfied from a customer service point of 

view? I mean, does it matter whether they are satisfied from a customer service point of view? 

Mr. HURT. It matters that our partners in delivering financial 

aid to our student and borrower customers and taxpayer customers 

—— 

Mr. MEADOWS. So his constituency would give you what kind of 

a grade? 

Mr. HURT. I believe actually that was one of our failing metrics 

out of three was —— 

Mr. MEADOWS. So he gave you an F? 

Mr. HURT. The—I don’t—it’s a number based—it wasn’t necessarily an F. It was a number-based metric, sir. 

Mr. MEADOWS. Okay. Was it below 60? 

Mr. HURT. Specifically, it was—our goal was to have a 74.3 to 

77.3 ease of doing business, and we received a 72.3. 

Mr. MEADOWS. Okay. So a C minus depending on which grade 

scale you get to. So how are you going to get it up to where it needs 

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Mr. HURT. We have numerous ways to interact with our consumer advocacy groups and our schools. We—a great example is 

the FAFSA Advisory Board that we—every year we’re doing —— 

Mr. MEADOWS. So you are saying that that interrelationship is 

going pretty well? 

Mr. HURT. I’m saying we have mechanisms to continue and then 

improve upon our relationship. 

Mr. MEADOWS. Okay. So, Mr. Draeger, would you say that the 

program reviews are going well, or do you consider those adversarial? 

Mr. DRAEGER. We asked our members that question a year ago 

in a survey. We received 1,000 institutional responses. Of those 

who had had a program review in the last five years, 30 percent 

had reported that when—from the time they had their program reviewed, they did not have a final report in hand 12 months later. 

So if the goal is to correct improper payments but these just continue to hang out there and hang out there, schools feel like they’re 

under tremendous pressure with this perpetually hanging ax over 

institutional eligibility. 

We asked our members also in one word to describe their relationship with the Department of Education at the time, and I know 

that this wasn’t under Mr. Hurt’s leadership, but the words most 

cited were adversarial, adversarial, complicated, and 90 percent of 

the words that they provided were negative, not positive. And 

again, not under Mr. Hurt’s leadership, but I do want to point out 

that since that hearing in October —— 

Mr. MEADOWS. November of 2015. 

Mr. DRAEGER.—of 2015 —— 

Mr. MEADOWS. I was here. 

Mr. DRAEGER.—Mr. Runcie refused to take meetings with myself 

or my board of directors who are acting financial aid administrators. 

Mr. MEADOWS. Hold on. You are saying that he left a hearing 

where he said that he was willing to address this and that he has 

refused to take any meetings with you? Is that your sworn testimony? 

Mr. DRAEGER. While the career staff at FSA have continued to 

enter dialogues, the Secretary’s office in both administrations continued dialogue, the Under Secretary’s Office continued dialogue, 

we specifically requested meetings with the chief operating officer, 

which —— 

Mr. MEADOWS. Well, I appreciate you sharing that because, Mr. 

Hurt, this is only partially on your watch. And I talked to Secretary DeVos yesterday because I was real concerned about students and making sure that students have what they need because 

really that is what this is all about. You don’t even exist if we are 

not providing the kind of service to students that they deserve. And 

really, your having to come here in the last 24 hours with very little notice is a disservice to you, it is a disservice to those students. 

And what I guess is more appalling to me is that Mr. Runcie decided to not come back, has not met with Mr. Draeger when you 

have Secretaries of both administrations willing to do that, and 

then wants to avoid follow-up questions, some of which I know I 

asked personally of him back in November of 2015, some of which 


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Inspector General Tighe has identified over and over and over 

again, and for him to suggest that it is all your fault or all Secretary DeVos’ fault, you can’t agree with that statement, do you, 

that it is all your fault or Secretary DeVos’ fault? 

Mr. HURT. I couldn’t speak for what Mr. —— 

Mr. MEADOWS. Now, I have given you 40 minutes to come up 

with a better answer, Mr. Hurt, and I am sure you have talked to 

counsel, I am sure you have talked to everybody else, and they may 

not want you to say anything, but I would remind you you are 

under sworn testimony. We can compel you to answer the questions. So at this point is it totally your responsibility for what has 

happened on improper payments, totally and completely? 

Mr. HURT. I am the program accountable official for direct —— 

Mr. MEADOWS. Great answer to a question I didn’t ask again, 

Mr. Hurt. You are making this more difficult than you need to be. 

Is 100 percent of the responsibility yours, Mr. Hurt? 

Mr. HURT. No, sir. 

Mr. MEADOWS. All right. Is 100 percent of it Secretary DeVos’? 

Mr. HURT. No, sir. 

Mr. MEADOWS. So if that is the case, and we understand—and 

I agree with that—that 100 percent of it is not your fault, how do 

we fix it? How do we fix this problem where I am not coming back 

here with unbelievable billions of dollars, customer service reports 

that are not there, an inspector general’s request for a number of 

things—which I understand she gave you a little bit of a pass because apparently in the last few days you have agreed to do that 

so I would assume that there is a new sheriff in town and so they 

are going to get it done. How do we make sure that this doesn’t 

happen? 

Mr. HURT. We stay vigilant on oversight, sir. 

Mr. MEADOWS. All right. So what is success going forward? So let 

me put it more bluntly. If you are going to get a performance 

bonus, at what number do we peg that to? 

Mr. HURT. It’s hard to peg it for improper payments to a number 

of —— 

Mr. MEADOWS. Well, it is not hard for the American people. The American people said if you lose over $3 billion, they would think 

that you should get a zero performance bonus. And I know that you 

don’t agree with that, but at some point we are going to have to 

get to the bottom line, you know, and figure this out. So what is 

the number? 

Mr. HURT. The estimate is variable based on the methodology so 

I can’t come up with —— 

Mr. MEADOWS. Okay. Here is —— 

Mr. HURT.—a number, sir. 

Mr. MEADOWS. Since we do have oversight capability, here is 

what I need from you, and I need you to take this back to the Secretary and make sure that we get it. We need to know the matrix 

for what performance, good performance, excellence performance, 

and poor performance is going to be for your senior management, 

for the new COO, whomever that maybe, for yourself, for the others, and we need to understand what the matrix is. We need to understand where customer services comes in and what it factors in 

with that as well. And if I ever hear about government officials not 


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being willing to meet with key stakeholders because they are too 

busy collecting their check—you know, there was a song in the 

’70s. You know, I am dating myself. But it seems like that Mr. 

Runcie could be singing a song ‘‘Take the Money and Run’’ because 

that is what he has done and that is what the American taxpayers 

have seen it as, as an irresponsible way to hold government accountable for their actions. 

Now, I am not asking you to comment on that, but here is what 

I am asking you to do. We need to know when you are going to get 

the inspector general’s recommendations done, a time frame, a specific time frame on what you are going to accomplish and how you 

are going to accomplish it. What is a reasonable amount of time to 

get that plan back to this committee? 

Mr. HURT. The—I think there is a specific amount of time for us 

to develop our corrective action. I think that is coming due within 

a few months. 

Mr. MEADOWS. That is with her. I am saying a plan of action to 

this committee. Is 45 days enough to get a plan of action on how 

you are going to address that back to this committee? 

Mr. HURT. Yes, sir. 

Mr. MEADOWS. All right. I see heads nodding in the back. I don’t 

want to make a request that is too difficult, okay? All right. So we 

are going to do that. 

Mr. MEADOWS. The other part of that is is that—and I don’t 

think you are going to get much resistance on this. We need to 

know what the performance matrices are and how we know when 

we are doing a great job, a good job, a mediocre job, and a poor 

job. And we need to make sure that compensation, since it is a 

PBO, is tied to that. 

And then lastly, I want to see how you pull in some of the comments. The next time I don’t want to have 90 percent of the comments coming back negative. You don’t either, do you, Mr. Hurt? 

Mr. HURT. No, sir. 

Mr. MEADOWS. I didn’t think so. All right. So Inspector General 

Tighe, I am going to close with this. I need you to help prioritize 

the recommendations you have made in terms of those open issues 

that are there from previous reports. It is critically important that 

we communicate those at the very top level with the Secretary and 

those that are going to implement it. 

Any change of administration there can be a drop of a baton so 

to speak. I don’t want that to happen so I am asking you if you 

would get that to this committee as well. 

Ms. TIGHE. Yes, we will. 

Mr. MEADOWS. Is 45 days enough for you? 

Ms. TIGHE. Yes, it is. 

Mr. MEADOWS. Okay. We will do that and go there. 

Mr. MEADOWS. Lastly, I think it is appropriate for me to say, Mr. 

Hurt, I am not blaming you for this, but you are partially responsible. And in doing that, I am going to be myopically focused on results, all right? My favorite quote is ‘‘No matter how beautiful the 

strategy, we must occasionally look at the results.’’ So I don’t want 

to hear about the great plan. I want to see about the results because I don’t want to have another hearing like this, or if we have 

another hearing, I want us to be talking about and celebrating the 


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successes that we have. Does that make sense to all of you? Do you 

think we can do that? Do I have your commitment to work diligently to do that? 

Yes. Let the record reflect that all witnesses answered in the affirmative. 

That being said, thank you so much. The committee stands adjourned. 

[Whereupon, at 12:35 p.m., the subcommittees were adjourned.] 

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