United States General Accounting Office

GAO Testimony

Before the Committee on Labor and Human Resources,

U.S. Senate

For Release on Delivery

Expected at 10 a.m.

Thursday, May 15, 1997

DEPARTMENT OF

EDUCATION

Multiple, Nonintegrated

Systems Hamper

Management of Student

Financial Aid Programs

Statement of Cornelia M. Blanchette, Associate Director

Education and Employment Issues

Health, Education, and Human Services Division

GAO/T-HEHS/AIMD-97-132

Department of Education: Multiple,

Nonintegrated Systems Hamper

Management of Student Financial Aid

Programs

Mr. Chairman and Members of the Committee:

We are pleased to be here today to discuss Department of Education

information management systems that support the financial aid programs

authorized by title IV of the Higher Education Act of 1965, as amended

(HEA). These programs include the Federal Family Education Loan

Program (FFELP), the Ford Direct Loan Program (FDLP), the Federal Pell

Grant Program, and campus-based programs.1

 As you are aware, these

programs are the largest source of federal financial aid to postsecondary

students. In academic year 1998-99, title IV programs will make available

over $47 billion in loans, grants, and other aid to about 8.1 million

students.

In 1990, we began a special effort to review and report on the federal

programs we considered at high risk because of vulnerabilities to waste,

fraud, abuse, and mismanagement. Federal student financial aid programs

have been included in each of the three series of high-risk reports we have

issued. The Department has taken various actions over the last few years

in response to recommendations made by GAO and others. Many of these

actions have likely played a major role in reducing the number of student

loan defaults and the default rate.

While in our latest series we commended the Department for its efforts

over the last few years in response to recommendations we and others

have made,2

 we noted continuing concerns about the Department’s

management and oversight of postsecondary student financial aid

programs and the information systems in place to support them.

Our comments today are based on the work we have done for our

high-risk series and other studies we have done on federal student

financial aid programs, as well as ongoing work analyzing the

Department’s development and use of information systems (see list of

related GAO products at the end of this statement). In summary, we are

concerned that without effective information management that would

result from fully implementing recent legislation—the Clinger-Cohen

Act—the multiple, nonintegrated information systems currently operated

by the Department may hamper its management of student financial aid

programs.

1

The campus-based programs include the (1) Federal Work-Study Program, (2) Federal Perkins Loan

Program, and (3) Federal Supplemental Educational Opportunity Grant Program.

2

High-Risk Series: Student Financial Aid (GAO/HR-97-11, Feb. 1997).

Page 1 GAO/T-HEHS/AIMD-97-132
Department of Education: Multiple,

Nonintegrated Systems Hamper

Management of Student Financial Aid

Programs

Management of Title

IV Programs Is

Hampered by

Multiple,

Nonintegrated

Information Systems

While the Department has taken actions to comply with HEA requirements

for the National Student Loan Data System (NSLDS),3

 it still does not yet

have an accurate, efficient, and integrated system for national student

financial aid data. The Department continues to operate separate “stove

pipe” systems and lacks a strategy to integrate the systems supporting the

title IV programs.

The Department relies on data in its student financial aid information

systems to support a variety of student aid programs and financial

operations. The 1986 HEA amendments required the Secretary of Education

to develop NSLDS to ensure (1) the collection of accurate information on

student loan indebtedness and institutional lending practices and

(2) improved compliance with repayment and loan limitation provisions.

The 1992 HEA amendments expanded the scope of NSLDS by requiring the

Department to integrate NSLDS with the Pell grant applicant and recipient

databases by January 1, 1994, and with any other databases containing

information on student financial aid program participation. In response to

these legislative mandates, in January 1993, the Department awarded a

5-year contract to develop and maintain NSLDS. Loan information is now

transmitted to NSLDS on a regular basis by schools, guaranty agencies, and

the FDLP servicer.

Over the past 30 years, separate information systems—including the FFELP

System4 for the guaranteed loan program, the Pell Grant Recipient and

Financial Management System, the FDLP systems,5

 and now NSLDS—have

been developed to support student financial aid programs. These multiple

systems contain incompatible data in nonstandard formats—a situation

that has led to inaccurate information, inefficient systems, and high costs.

The fiscal year 1997 budget for contracts to maintain 11 separate,

nonintegrated systems was $281.9 million and is expected to climb to

$320.5 million in fiscal year 1998—an increase of $38.6 million, or

14 percent (see app. I). Through the 5-year period ending with fiscal year

1998, student financial aid systems’ costs will have tripled (see app. II).

Federal student financial aid programs remain vulnerable to losses as a

result of fraud, waste, abuse, and mismanagement due to a large extent

because the Department, guaranty agencies, schools, and lenders often do

3

NSLDS is the first national source of current student loan and grant data on student financial aid

participants.

4

The FFELP System has a number of subsystems—a debt collection system, guaranty agency system,

lender and school system, and support system.

5

The FDLP system includes an origination system, a central database, and four servicing systems.

Page 2 GAO/T-HEHS/AIMD-97-132
Department of Education: Multiple,

Nonintegrated Systems Hamper

Management of Student Financial Aid

Programs

not have the accurate, complete, and timely information they need to

effectively and efficiently operate and manage the programs. The resultant

program operation and monitoring difficulties stem from the lack of a fully

functional integrated database covering all title IV financial aid programs

that can integrate recipient information from all available sources. NSLDS is

not such a database, but a repository for data from multiple data

providers. Furthermore, as we reported in 1996, the Department’s Office of

Inspector General and we believe that the Department has not adequately

tested the accuracy and validity of loan data submitted to NSLDS.

6

One of the causes of the current information systems’ difficulties appears

to be the lack of a sound, integrated information technology or systems

architecture for managing the Department’s portfolio of information

systems that support student financial aid programs. A systems

architecture or strategy is a blueprint for developing and maintaining

integrated information systems that are appropriate for (1) an

organization’s mission; (2) the operations that must be executed and their

necessary relationships and informational needs; and (3) ensuring, on a

technical level, the rules and standards required for interrelated systems to

work together efficiently and effectively over a network. The architecture

ensures that the systems have computer programs that can be transferred

from one hardware configuration and/or software environment to another,

and are maintainable. In other words, a sound systems architecture would

ensure that the data being collected and maintained within an organization

are structured and stored in a manner that makes them accessible,

understandable, and useful throughout the organization.

With respect to the totality of federal student financial aid programs, the

lack of a sound information systems architecture seems to have

contributed, in part, to the development of a multitude of nonintegrated

systems across the Department. This, in turn, has led to problems in

systems interface and data exchange, confusion for users, and delays in

program operations. For example, large amounts of redundant data on

student financial aid recipients are generated by schools, lenders, guaranty

agencies, and several internal departmental systems, and then stored in

numerous databases. Often data stored on these separate systems’

databases are in conflict with data in NSLDS as a result of differences in the

timing of updates between data providers. We also found that erroneous

data submitted to NSLDS may result in duplicate loan records being created.

6

Department of Education: Status of Actions to Improve the Management of Student Financial Aid

(GAO/HEHS-96-143, July 12, 1996).

Page 3 GAO/T-HEHS/AIMD-97-132
Department of Education: Multiple,

Nonintegrated Systems Hamper

Management of Student Financial Aid

Programs

The Department, with the guaranty agencies, is undertaking a major

reconciliation effort to clean up the erroneous loan records.

Another related cause of the current information problems is a lack of

common identifiers for students and institutions, making it difficult to

track students and institutions across systems. The 1992 amendments

required the Department to establish, no later than July 1, 1993, common

identifiers for students and institutions. However, the Department’s

current plans for institutions do not call for the development and

implementation of common identifiers until academic year 1999-2000. For

students, the Department has required that all applicants for federal

student aid provide their Social Security numbers, which the Department

has stated are its common student identifiers. However, identification of

student records across systems is still a cumbersome process because

each system uses, in addition to the Social Security number, different

combinations of data fields to uniquely identify, access, and update

student records. This nonstandard method for accessing and updating

student records across systems may be one of the factors contributing to

the significant number of duplicate records on the NSLDS.

Improvements Could

Result From the

Proper

Implementation of the

Clinger-Cohen Act

The Clinger-Cohen Act of 1996 makes agency heads directly responsible

for effective information technology. Among their key duties, agency

heads are to

• establish goals to improve the efficiency and effectiveness of agency

operations and, as appropriate, the delivery of services to the public

through the effective use of information technology;

• prepare an annual report as part of the agency’s budget submission to the

Congress on the progress in achieving the agency’s information technology

goals; and

• ensure that performance measurements are prescribed for information

technology used or acquired by the agency and that they measure how

well the information technology supports the agency’s programs.

To help them carry out these new responsibilities, the agency heads are to

designate a Chief Information Officer (CIO). The CIO is to be much more

than a senior technology manager. As a top-level executive reporting

directly to the agency head, the CIO is responsible for, among other duties,

developing, maintaining, and facilitating the implementation of a sound

and integrated information technology architecture.

Page 4 GAO/T-HEHS/AIMD-97-132
Department of Education: Multiple,

Nonintegrated Systems Hamper

Management of Student Financial Aid

Programs

The Department could benefit greatly by fully implementing the

Clinger-Cohen Act. Full implementation of this law would provide another

opportunity to correct many of the Department’s student financial aid

system weaknesses. The Department has recently appointed an acting CIO.

However, because the law is in the early stages of implementation, as we

reported in February 1997, it is too early to predict how well the

Department will implement the law. We believe that, as a first step, the

Department must develop a sound information systems architecture, as

called for in the Clinger-Cohen Act, for the student financial aid programs

to guide the Department as it makes key information management

decisions.

Mr. Chairman, this concludes my prepared testimony. My colleagues and I

will be happy to answer any questions that you or Members of the

Committee may have.

Contributors For more information on this testimony, please call David B. Alston,

Assistant Director, at (202) 512-6369 or Joseph J. Eglin, Jr., Assistant

Director, at (202) 512-7009. Other major contributors included Paula N.

Denman, Joel R. Marus, Glenn R. Nichols, and M. Yvonne Sanchez.

Page 5 GAO/T-HEHS/AIMD-97-132
Appendix I 

Department of Education Student Financial

Aid Systems

System Contractor FY 98 Budget 

(dollars in millions)

Federal Direct Loan Program (FDLP):

· Direct Loan Origination System 

· Direct Loan Servicing Systems 

Computer Data Systems, Inc. (old)

and Electronic Data Systems (new)

Computer Data Systems, Inc.;

Electronic Data Systems;

Raytheon/E-Systems, Inc.; and

Education Loan Servicing Center, Inc.

$170.0

National Student Loan Data System 

(NSLDS)

Raytheon/E-Systems, Inc. 31.6

FFEL System (FFELS) Raytheon/E-Systems, Inc. 30.5

Multiple Data Entry Contracts INET and American College Testing 27.1

Central Processing System (CPS) National Computer Systems 23.9

Title IV Wide Area Network National Computer Systems 17.2 

Pell Grant Recipient and Financial 

Management System (PGRFMS) 

Planning Research Corp., Inc. 10.8

Project Easy Access for Students and 

Institutions

Price Waterhouse 5.0

Postsecondary Education Participants 

System 

Computer Business Machines, Inc.,

and Madentech

2.5

Campus-Based Systems Universal Automation Labs, Inc. 1.9

Total $320.5

Page 6 GAO/T-HEHS/AIMD-97-132
Appendix II 

Student Financial Aid Systems’ Contract

Costs Over 5 Years

FY 94 FY 95 FY 96 FY 97 FY 98

0

50

100

150

200

250

300

350

FDLP

CPS

FFELS

NSLDS

Misc Sys

PGRFMS

Dollars in Millions

Miscellaneous Systems

Federal Direct Loan Program (FDLP):

-- Direct Loan Origination System

-- Direct Loan Servicing Systems

Pell Grant Recipient and Financial 

Management System (PGRFMS) 

FFEL System (FFELS)

National Student Loan Data System 

(NSLDS)

Central Processing System (CPS)

(includes multiple data entry contracts)

Page 7 GAO/T-HEHS/AIMD-97-132
Related GAO Products

High Risk Series: Student Financial Aid (GAO/HR-97-11, Feb. 1997).

Reporting of Student Loan Enrollment Status (GAO/HEHS-97-44R, Feb. 6,

1997).

Department of Education: Status of Actions to Improve the Management

of Student Financial Aid (GAO/HEHS-96-143, July 12, 1996).

Student Financial Aid: Data Not Fully Utilized to Identify Inappropriately

Awarded Loans and Grants (GAO/T-HEHS-95-199, July 12, 1995).

Student Financial Aid: Data Not Fully Utilized to Identify Inappropriately

Awarded Loans and Grants (GAO/HEHS-95-89, July 11, 1995).

Federal Family Education Loan Information System: Weak Computer

Controls Increase Risk of Unauthorized Access to Sensitive Data

(GAO/AIMD-95-117, June 12, 1995).

Financial Audit: Federal Family Education Loan Program’s Financial

Statements for Fiscal Years 1993 and 1992 (GAO/AIMD-94-131, June 30, 1994).

Financial Management: Education’s Student Loan Program Controls Over

Lenders Need Improvement (GAO/AIMD-93-33, Sept. 9, 1993).

Financial Audit: Guaranteed Student Loan Program’s Internal Controls and

Structure Need Improvement (GAO/AFMD-93-20, Mar. 16, 1993).

Department of Education: Management Commitment Needed to Improve

Information Resources Management (GAO/IMTEC-92-17, Apr. 20, 1992).

(104892) Page 8 GAO/T-HEHS/AIMD-97-132
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