Washington, D.C. — Federal student aid programs have increasingly come under fire for their lack of transparency on outcomes, limited oversight, and inconsistency in their estimated costs. As the outstanding federal student loan debt load surpasses $1.4 trillion, these issues have prompted calls for radical change at the Office of Federal Student Aid (FSA) within the U.S. Department of Education such as moving all the programs to the U.S. Department of the Treasury. Others have hit on FSA’s special designation as a performance-based organization (PBO), which allows it to operate more like a private business, as a source of troubles.
Today, Ben Miller, vice president for Postsecondary Education at the Center for American Progress, and Jason Delisle, resident fellow at the American Enterprise Institute, released a joint report exploring the degree to which FSA’s unique structure as a PBO does or does not help it address pressing challenges in the federal aid programs.
“FSA and its structure are neither pariah nor panacea in fixing challenges in the student aid programs,” said Miller. “Instead of big and flashy reforms, policymakers must make better use of the management and accountability tools that FSA’s PBO designation provides.”
“Two decades ago, policymakers insulated FSA from day-to-day political interference so that it could focus on performance goals that policymakers set for it,” said Delisle. “This history seems lost on today’s policymakers who have invested little in shaping and monitoring the office’s goals while expressing frustration over its independence. Our report should help them see the potential benefits of FSA’s unique status and why abandoning it could reintroduce the problems it was meant to solve.”
FSA manages a growing portfolio that affects 1 in every 6 adult Americans and would make it the fifth-largest bank in the country if it were a financial institution. The report underscores the need for a nuanced approach to reforming the PBO structure that is updated to reflect the changing needs of student borrowers.
As Congress wrestles with rewriting the Higher Education Act—and as federal investment in college aid programs becomes increasingly important—policymakers would be wise to pursue steps that maximize the unique advantages of a PBO designation rather than upend FSA’s structure entirely for a new design that may not improve performance. The report includes guidance for policymakers, including:
- Congress should consider necessary updates to the statutory goals and structure of the PBO.
- The Education Department should make improvements to its management of FSA.
- Not all concerns with the federal aid programs fall under FSA’s purview.
- Congress also has a role to play in properly managing FSA.
Click here to read the full report: “Ensuring Accountability and Effectiveness at the Office of Federal Student Aid” by Ben Miller and Jason Delisle
For more information or to speak with an expert, please contact Kyle Epstein at [email protected] or 202.481.8137.