I
105TH CONGRESS
1ST SESSION
H. R. 2536
To amend the Higher Education Act of 1965 with respect to improving
the administration of the student financial assistance programs under
title IV of that Act.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 24, 1997
Mr. MCKEON (for himself and Mr. KILDEE) introduced the following bill;
which was referred to the Committee on Education and the Workforce
A BILL
To amend the Higher Education Act of 1965 with respect
to improving the administration of the student financial
assistance programs under title IV of that Act.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘21st Century Student
Financial Aid System Improvement Act of 1997’’.
SEC. 2. PERFORMANCE-BASED ORGANIZATION FOR THE
DELIVERY OF FEDERAL STUDENT FINANCIAL
ASSISTANCE.
Title XII of the Higher Education Act of 1965 (20
U.S.C. 1141 et seq.) is amended—
(1) by striking ‘‘TITLE XII—GENERAL
PROVISIONS’’ and inserting the following:
‘‘TITLE XII—GENERAL AND
ADMINISTRATIVE PROVISIONS
PART A—GENERAL PROVISIONS’’;
and
(2) by adding at the end the following new part:
‘‘PART B—ADMINISTRATIVE PROVISIONS FOR
DELIVERY OF STUDENT FINANCIAL ASSISTANCE
‘‘SEC. 1221. PERFORMANCE-BASED ORGANIZATION FOR
THE DELIVERY OF FEDERAL STUDENT FI-
NANCIAL ASSISTANCE.
‘‘(a) ESTABLISHMENT AND PURPOSE.—
‘‘(1) ESTABLISHMENT.—There is established in
the Department a Performance-Based Organization
(hereafter referred to as the ‘PBO’) which shall be
a discrete management unit responsible for manag-
ing the information systems supporting the pro-
grams authorized under title IV of this Act, as speci-
fied in subsection (b).
‘‘(2) PURPOSES.—The purposes of the PBO
are—
‘‘(A) to improve the level of service to stu-
dents and participants in the programs;
‘‘(B) to reduce the costs of administering
the Federal student financial assistance pro-
grams authorized under title IV;
‘‘(C) to increase the accountability of the
officials responsible for administering the oper-
ational aspects of these programs;
‘‘(D) to provide greater flexibility in the
management of the operational functions of the
Federal student financial assistance programs;
and
‘‘(E) to integrate the information systems
supporting the Federal student financial assist-
ance programs.
‘‘(b) AUTHORITY.—
‘‘(1) AUTHORITY
OF
SECRETARY.—Notwith-
standing any other provision of this Act, the Sec-
retary shall maintain responsibility for the develop-
ment and promulgation of policy relating to the pro-
grams of student financial assistance under title IV.
In the exercise of its functions, the PBO shall be
cluding the development of policy relating to
such programs.
‘‘(B) The administrative, accounting, and
financial management functions of the delivery
system for Federal student assistance, includ-
ing—
‘‘(i) the collection, processing and
transmission of applicant data to students,
institutions and authorized third parties,
as provided for in section 483;
‘‘(ii) technical specifications for soft-
ware development and systems supporting
the delivery of student financial assistance
under title IV;
‘‘(iii) information technology and sys-
tems infrastructure related to the delivery
and management of student financial as-
sistance under title IV;
‘‘(iv) all software and hardware acqui-
sitions and all information technology con-
tracts related to the delivery and manage-
ment of student financial assistance under
title IV; and
‘‘(v) all customer service, training and
user support related to the functions de-
scribed in clauses (i) through (iv).
‘‘(C) Annual development of a budget for
the operations and services of the PBO, in con-
sultation with the Secretary, and for consider-
ation and inclusion in the Department’s annual
budget submission.
‘‘(D) Other functions proposed by the Sec-
retary, and agreed to by the Chief Operating
Officer as are not inconsistent with the func-
tions of the PBO.
‘‘(3) INDEPENDENCE.—In carrying out its
functions, the PBO shall exercise independent con-
trol of its budget allocations and expenditures, per-
sonnel decisions and processes, procurements, and
other administrative and management functions.
‘‘(4) REVIEW OF PBO.—The PBO shall be sub-
ject to the usual and customary Federal audit proce-
dures, and be subject to review by the Inspector
General of the Department.
‘‘(c) AUTHORIZATION OF APPROPRIATIONS.—For the
purpose of funding the administrative costs incurred by
the PBO in administering systems supporting programs
under this part, there are authorized to be appropriated
such sums as may be necessary for fiscal year 1999 and
each of the 4 succeeding fiscal years, except that funds
authorized under section 458 shall be made available to
the PBO by the Secretary for administrative costs author-
ized to be funded under that section.
‘‘(d) ORGANIZATIONAL REPORTS.—
‘‘(1) PERFORMANCE PLAN.—Within 6 months
of the hiring of the Chief Operating Officer, and
every 12 months thereafter, the Secretary and the
Chief Operating Officer of the Department shall de-
velop a performance plan for the PBO that estab-
lishes measurable goals and objectives for the orga-
nization. In developing this performance plan, the
Secretary and the Chief Operating Officer shall con-
sult with the Committee on Education and the
Workforce of the House of Representatives, the
Committee on Labor and Human Resources of the
Senate, and the Advisory Committee on Student Fi-
nancial Assistance.
‘‘(2) ANNUAL ACCOUNTABILITY REPORT.—The
Chief Operating Officer shall prepare and submit an
annual accountability report to the Secretary and
the Committee on Education and the Workforce of
the House of Representatives and the Committee on
Labor and Human Resources of the Senate. The ac-
countability report shall include—
‘‘(A) an independent financial audit of the
expenditures of both the PBO and programs
administered by it;
‘‘(B) financial and performance require-
ments applicable to the PBO under the Chief
Financial Officer Act of 1990 and the Govern-
ment Performance and Results Act of 1993;
‘‘(C) the results achieved by the PBO dur-
ing the year relative to the goals established in
the organization’s performance plan;
‘‘(D) the results of the evaluations of per-
formance of the Chief Operating Officer and
senior managers under subsections (e)(2) and
(f)(2), including the amounts of bonus com-
pensation awarded to these individuals;
‘‘(E) a discussion of the effectiveness of co-
ordination between the PBO and the Secretary;
‘‘(F) recommendations for legislative and
regulatory changes to improve service to stu-
dents and their families, and to or improve pro-
gram efficiency and integrity; and
‘‘(G) other such information as the Direc-
tor of the Office of Management and Budget
shall prescribe for performance based organiza-
tions.
‘‘(e) CHIEF OPERATING OFFICER.—
‘‘(1) IN
GENERAL.—The management of the
PBO shall be vested in a Chief Operating Officer
who shall be appointed by the Secretary to a 5-year
term and compensated without regard to chapters
33, 51, and 53 of title 5, United States Code. The
Secretary shall appoint the Chief Operating Officer
within 6 months of the date of enactment of this
part. The Secretary shall consult with the Chairmen
of the Committee on Education and the Workforce
of the House of Representatives and the Committee
on Labor and Human Resources of the Senate prior
to making an appointment. The appointment shall
be made on the basis of demonstrated management
ability and expertise in information technology, in-
cluding extensive experience in the financial services
industry, and without regard to political affiliation
or activity. The Secretary may reappoint the Chief
Operating Officer to subsequent terms so long as the
performance of the Chief Operating Officer, as set
forth in the performance agreement, is satisfactory
or better. The Chief Operating Officer may be re-
moved by—
‘‘(A) the President; or
‘‘(B) the Secretary, for misconduct or fail-
ure to meet performance goals set forth in the
performance agreement in paragraph (2).
The President or Secretary shall communicate the
reasons for any such removal to the appropriate
committees of Congress.
‘‘(2) PERFORMANCE
AGREEMENT.—The Sec-
retary and the Chief Operating Officer shall enter
into an annual performance agreement which shall
set forth measurable organization and individual
goals for the Chief Operating Officer in key oper-
ational areas. The agreement shall be subject to re-
view and renegotiation at the end of each term. The
final agreement shall be transmitted to the Commit-
tee on Education and the Workforce of the House
of Representatives and the Committee on Labor and
Human Resources of the Senate, and made publicly
available.
‘‘(3) COMPENSATION.—The Chief Operating
Officer is authorized to be paid at an annual rate of
basic pay not to exceed the maximum rate of basic
pay for the Senior Executive Service under section
5382 of title 5, United States Code, including any
applicable locality-based comparability payment that
‘‘(2) PERFORMANCE
AGREEMENT.—The Chief
Operating Officer shall enter into an annual per-
formance agreement with each senior manager ap-
pointed under this subsection which shall set forth
measurable organization and individual goals in key
operational areas. The agreement shall be subject to
review and renegotiation at the end of each term.
‘‘(3) COMPENSATION.—The Chief Operating
Officer is authorized to pay senior managers at an
annual rate of basic pay not to exceed 75 percent of
the maximum rate of basic pay for the Senior Exec-
utive Service under section 5382 of title 5, United
States Code, including any applicable locality-based
comparability payment that may be authorized
under section 5304(h)(2)(C) of such title 5. In addi-
tion, a senior manager may receive a bonus in an
amount up to, but not in excess of, 50 percent of
such annual rate of basic pay, based upon the Chief
Operating Officer’s evaluation of the manager’s per-
formance in relation to the performance goals set
forth in the performance agreement described in
paragraph (2).
‘‘(g) PERSONNEL FLEXIBILITY.—
‘‘(1) PERSONNEL
CEILINGS.—The PBO shall
not be subject to any ceiling relating to the number
or grade of employees.
‘‘(2) 
ADMINISTRATIVE
FLEXIBILITY.—The
Chief Operating Officer shall work with the Office of
Personnel Management to develop and implement
personnel flexibilities in staffing, classification, and
pay that meet the needs of the PBO and are consist-
ent with title 5, United States Code.
‘‘(h) PERFORMANCE MANAGEMENT SYSTEM.—
‘‘(1) ESTABLISHMENT OF A FAIR AND EQUI-
TABLE SYSTEM FOR MEASURING STAFF PERFORM-
ANCE.—The PBO shall establish an annual perform-
ance management system, consistent with applicable
provisions of law and regulations, which—
‘‘(A) maintains individual accountability;
and
‘‘(B) strengthens the organizational effec-
tiveness of the PBO by providing for—
‘‘(i) establishing goals or objectives for
individual, group, or organizational per-
formance (or any combination thereof),
consistent with the performance plan of
the PBO and its performance planning
procedures, including those established
under the Government Performance and
Results Act of 1993, and communicating
such goals or objectives to employees; and
‘‘(ii) using performance assessments
as a basis for granting employee awards,
adjusting an employee’s rate of basic pay,
and other appropriate personnel actions, in
accordance with applicable provisions of
law and regulation.
‘‘(i) PROCUREMENT FLEXIBILITY.—
‘‘(1) IN GENERAL.—Except as provided in this
subsection, the PBO shall abide by all applicable
Federal procurement laws and regulations when pro-
curing property and services. The PBO shall—
‘‘(A) enter into contracts for information
systems supporting the programs authorized
under title IV to carry out the functions set
forth in subsection (b)(2); and
‘‘(B) obtain the services of experts and
consultants without regard to section 3109 of
title 5, United States Code and set pay in ac-
cordance with such section.
‘‘(2) PERFORMANCE
BASED
SERVICING
CON-
TRACTS.—The Chief Operating Officer shall, to the
extent practicable, maximize the use of performance
based servicing contracts, consistent with guidelines
for such contracts published by the Office of Federal
Procurement Policy, to achieve cost savings and im-
prove service.
‘‘(3) FEE FOR SERVICE ARRANGEMENTS.—The
Chief Operating Officer shall, to the extent prac-
ticable and consistent with the purpose of the PBO,
utilize services available outside of the Federal Gov-
ernment in the delivery of Federal student financial
assistance. To achieve this purpose, the PBO is au-
thorized to pay fees to an organization that are
equivalent to those paid by other entities for such
services, if the Chief Operating Officer determines
that such organization currently provides an infor-
mation system or service that meets the require-
ments of the PBO.
‘‘(j) FOCUS GROUPS.—To facilitate information shar-
ing and customer involvement, the Chief Operating Officer
may establish focus groups composed of students, institu-
tions, and other participants in the programs authorized
by title IV to provide advice on student aid delivery mat-
ters.
‘‘SEC. 1222. ADMINISTRATIVE SIMPLIFICATION OF STU-
DENT AID DELIVERY.
‘‘(a) IN GENERAL.—The Secretary, and the Chief
Operating Officer shall improve the efficiency and effec-
tiveness of the student aid delivery system by encouraging
and participating in the establishment of voluntary con-
sensus standards and requirements for the electronic
transmission of information necessary for the administra-
tion of programs under title IV.
‘‘(b) ADOPTION OF VOLUNTARY CONSENSUS STAND-
ARDS.—Except with respect to the common financial re-
porting form under section 483(a), the Secretary shall
adopt voluntary consensus standards for transactions re-
quired under title IV, and common data elements for such
transactions, to enable information to be exchanged elec-
tronically between systems administered by the Depart-
ment and among participants in the Federal student aid
delivery system.
‘‘(c) REQUIREMENTS FOR ADOPTION OF VOLUNTARY
CONSENSUS
STANDARDS.—Any 
voluntary 
consensus
standard adopted under this section shall—
‘‘(1) be a standard that has been developed,
adopted, or modified by a standard setting organiza-
tion that is open to the participation of the various
entities engaged in the delivery of Federal student
financial assistance; and
‘‘(2) be consistent with the objective of reducing
the administrative costs of delivering student finan-
cial assistance under title IV.
‘‘(d) PARTICIPATION IN STANDARD SETTING ORGA-
NIZATIONS.—
‘‘(1) The Chief Operating Officer shall partici-
pate in the activities of standard setting organiza-
tions in carrying out the provisions of this section.
‘‘(2) The Chief Operating Officer shall encour-
age higher education groups seeking to develop com-
mon forms, standards, and procedures in support of
the delivery of Federal student financial assistance
to conduct these activities within a standard setting
organization.
‘‘(e) PROCEDURES FOR ADOPTION AND IMPLEMEN-
TATION
OF VOLUNTARY CONSENSUS STANDARDS.—In
adopting voluntary consensus standards and implementa-
tion timetables under this section, including modifications
of existing standards, the Secretary shall follow the proce-
dures for negotiated rulemaking in section 492.
‘‘(f) INITIAL VOLUNTARY CONSENSUS STANDARDS
TO BE ADOPTED.—Through coordinated participation be-
tween the Chief Operating Officer and standard setting
organizations, the initial standards adopted by the Sec-
retary shall include the following:
‘‘(1) ELECTRONIC PERSONAL IDENTIFIER NUM-
BER.—The Secretary shall adopt standards for a
single electronic personal identifier number for stu-
dents receiving assistance under title IV.
‘‘(2) ELECTRONIC SIGNATURE.—The Secretary,
in coordination with the Secretary of Commerce,
shall adopt standards specifying procedures for the
electronic transmission and authentication of signa-
tures with respect to transactions requiring a signa-
ture under title IV.
‘‘(3) SINGLE INSTITUTIONAL IDENTIFIER.—The
Secretary shall adopt standards for a single identi-
fier for eligible institutions under title IV.
‘‘(g) USE OF CLEARINGHOUSES.—Nothing in this
section shall restrict the ability of participating institu-
tions and lenders from using a clearinghouse to comply
with the standards for the exchange of information estab-
lished under this section.
‘‘(h) APPLICABILITY TO CURRENT SYSTEMS.—
‘‘(1) GENERAL RULE.—Except as provided in
paragraphs (2) and (3), this section shall apply to
all Department of Education information systems
supporting the delivery of programs under title IV
no later than 12 months from the date of enactment
of this part.
‘‘(2) NATIONAL
STUDENT
LOAN
DATA
SYS-
TEM.—This section shall apply to sections 485B (e)
and (f) no later than 18 months after the date of
enactment of this part.
‘‘(3) INTEGRATED POSTSECONDARY EDUCATION
DATA SYSTEM.—The Secretary shall coordinate the
adoption of voluntary consensus standards under
this section to ensure that standards are compatible
with the integrated postsecondary education data
system (IPEDS).
‘‘(i) DATA SECURITY.—Any entity that maintains or
transmits information under a transaction covered by this
section shall maintain reasonable and appropriate admin-
istrative, technical, and physical safeguards—
‘‘(1) to ensure the integrity and confidentiality
of the information; and
‘‘(2) to protect against any reasonably antici-
pated security threats, or unauthorized uses or dis-
closures of the information.
‘‘(j) AUTHORIZATION OF APPROPRIATIONS.—There
are authorized to be appropriated in any fiscal year or
made available from funds appropriated to carry out ac-
tivities in this section in any fiscal year such sums as may
be necessary to carry out the provisions of this section,
except that if no funds are appropriated pursuant to this
subsection, the Secretary shall make funds available to
carry out this section from amounts appropriated for the
operations and expenses of the Department of Education.
‘‘(k) DEFINITIONS.—For purposes of this section:
‘‘(1) The term ‘voluntary consensus standard’
means a standard developed or used by a standard
setting organization accredited by the American Na-
tional Standards Institute.
‘‘(2) The term ‘standard setting organization’
means a standard setting organization accredited by
the American National Standards Institute that de-
velops standards for information transactions, data
elements, or any other standard that is necessary to,
or will facilitate, the implementation of this section.
‘‘(3) For purposes of this section, the term
‘clearinghouse’ means a public or private entity that
processes or facilitates the processing of non-
standard data elements into data elements conform-
ing to standards adopted under this section.’’.
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