USDS PowerPoint Presentation Stakeholder Briefing Slides.pdf

NEXT GEN FSA UPDATE

Unified Servicing and Data Solution (USDS) Procurement

May 19, 2022

AGENDA

1 Next Gen Overview

2 History of servicing procurements

3 The Unified Servicing and Data Solution

4 USDS Accountability

5 Next Steps

NEXT GEN VISION

REIMAGINE HOW FSA SERVES CUSTOMERS AND PARTNERS

1. Make it easier for students, parents, borrowers, partners at postsecondary institutions, and others to engage with FSA’s programs, products, and services

2. Modernize FSA’s technical, organizational, and analytical infrastructure to form a cohesive ecosystem

3. Improve customer experiences and outcomes with the aid programs

4. Establish greater operational flexibility to allow FSA to rapidly develop data-driven responses to new policies, practices, and challenges

NEXT GEN IN 2022

Our strategy has evolved as we have learned from our past efforts.

The projects that fall under the Next Gen umbrella are:

• Digital and Customer Care (DCC)

• Business Process Operations (BPO)

• Enterprise Data Management and Analytics Platform Services (EDMAPS)

• FSA Partner Connect

• Next Gen National Student Loan Data System (NSLDS®)

• Unified Servicing and Data Solution (USDS)

LOAN SERVICING BACKGROUND

FSA has attempted to award a total of four servicing procurements through the past years and has developed a series of lessons learned from each of these.

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Contracts Awarded to

TIVAS

First Contracts

Awarded to NFPs

Contracts Modified with Adjustments to Payment Structure and Incentives

New Servicing

Solicitation Issued (#1)

Amendments Issued Followed by a Cancellation Due to a Change in

Administration

Next Gen Phase 1

Solicitation Issued (#2)

Enhanced Processing

System (EPS) Solicitation Issued (#3)

EPS Protests Received and Solicitation

Cancelled Due to Failed Negotiations and Budget Constraints

Interim Servicing

Solution (ISS) Solicitation Issued (#4)

ISS Solicitation Cancelled Due to a

Change in Appropriations

Language

L E S S O N S L E A R N E D :

1) Unreasonable assumptions and budget projections

2) Unclear and overly complex requirements in the solicitation

3) Inadequate time and resources allotted for procurement

4) Failure to align the strategic direction of the new servicing environment with the concerns of stakeholders, including Congress

Authorization for FSA to Extend

Legacy Contracts for Two Years

(December 2023) Provided by

Congress

TIME MACHINE: GOING BACK TO 2009

Legacy USDS

Scope Create “capacity” – only 9M DL borrowers with $154B in debt

Manage a growing portfolio of 37M DL borrowers with $1.4T in debt

Complexity

• Six major repayment plans, only two IDR plans

• Early days of PSLF

• Nine major repayment plans, five of which are IDR plans

• PSLF and TEPSLF

Oversight Minimal; No SLAs & FSA led More substantial at FSA, with added oversight from states and CFPB

Potential Vendors

35 GAs and 2,900 lenders Aside from TIVAS and NFPs, only three major lenders/guarantors

Environment Portfolio was split among FFEL and DL Entire portfolio is DL

USDS – PATH FORWARD

USDS servicers will manage the platforms, contact centers, and manual processing activities for all nonspecialty loan servicing tasks

FSA will hold USDS servicers accountable for their portfolio performance, prioritize more support for borrowers at risk of delinquency and default, Servicers must be up-to-date with cybersecurity standards and compliant with applicable consumer protection rules

USDS will replace the legacy servicing contracts for Direct Loans and federally managed Federal Family Education Loan (FFEL) Program loans to enable FSA to transition from the current loan servicing contracts into a more stable, long-term servicing environment. USDS builds on investments FSA has made in recent years, including DCC, BPO, and EDMAPS.

USDS GOALS & OBJECTIVES

Bring specialty programs into StudentAid.gov

Enhance servicers’ cybersecurity posture

Enable single sign on and integration with

StudentAid.gov

Develop a common data model and reporting schema

FSA is taking an incremental approach to this procurement, with a focused set of high-return enhancements scheduled for implementation when the new vendors go live, then building upon those improvements as time goes on.

Ultimately, transition the entire student aid experience— from completing the FAFSA® form to successfully repaying loans—to StudentAid.gov

HOW DOES USDS DIFFER FROM PAST EFFORTS?

Past Efforts USDS

Sought to reduce number of platforms Seeks to award contracts to multiple servicers

BPOs take all contact center and processing work

BPOs take specialty work

SA.gov work begins after new contract awards

SA.gov work begins before new contract awards are made

FSA-only branding Co-branding between servicers and FSA to start, in service of single sign-on

THE SOLUTION

WHERE WE’RE GOING

This is a mock-up of StudentAid.gov when we have full repayment functionality incorporated.

Draft: Internal – Confidential – Deliberative – Pre-Decisional

Default Servicing* BPOs and DMCS provide default collections support

Debt Management and Collection System (DMCS)

BPO Vendors

SERVICING AND COLLECTIONS ENVIRONMENT TODAY

Digital Platform StudentAid.gov

Marketing and Communications Platform Provides FSA with the ability to send personalized emails to customers

Customer Care Platform A customer relationship management tool that supports customer service representatives and FSA staff

BPO Vendors

Provide FSA-branded information via general contact centers

• Dashboard

• Aid Summary

• Loan Simulator

• MPN

• Entrance and Exit Counseling

• Consolidation Application

• PSLF Help Tool

• Feedback

• IDR Application

Digital and Customer Care

Servicing Servicers provide a full suite of services to borrowers in repayment, including platforms (in green blocks) under various brands (logos)

Enterprise Data Management and

Analytics Platform Servicers

(EDMAPS)

Serves as the data warehouse for all customer information within FSA systems

PHEAA First Data

Nelnet

*Default servicing is not in scope for the USDS procurement

Great Lakes

Draft: Internal – Confidential – Deliberative – Pre-Decisional

UNIFIED SERVICING AND DATA SOLUTION – NOTIONAL TARGET STATE

Digital Platform StudentAid.gov

Customer Care Platform A customer relationship management tool that supports customer service representatives and FSA staff

BPO Vendors

Provide FSA-branded information via general contact centers, at-risk borrower outreach, manual forms processing, and specialty program administration

• Dashboard

• Aid Summary

• Loan Simulator

• MPN

• Entrance and Exit Counseling

• Consolidation Application

• PSLF Help Tool

• Feedback

• IDR Application

• Deferment and Forbearance requests

• Discharge Applications

• TEACH Grant Application

• IDR and PSLF forgiveness payment count tracking

• Repayment and account management

Digital and Customer Care

Debt Management and Collection System (DMCS)

BPO Vendors

Default Servicing BPOs and DMCS provide default collections support

Servicing FSA-branded servicers operate platforms and contact centers and report data to EDMAPS

Multiple servicers and platforms*

Federal Tax Information (FTI)

Module

Stores, processes, and shares relevant information for IDR and TPD program administration

Enterprise Data Management and Analytics Platform Servicers (EDMAPS) Serves as the data warehouse for all customer information, including servicing information

Enterprise API Gateway – Provides a conduit for information from other data systems into EDMAPS and DCC

*the number of servicers is not pre-determined, but there will be more than one

Marketing and Communications Platform Provides FSA with the ability to send personalized emails to customers

*Default servicing is not in scope for the USDS procurement

SETTING EXPECTATIONS FOR GO-LIVE

• BPOs will take over the bulk of servicing work for specialty programs (e.g. PSLF, TEACH, and TPD) in addition to non-servicing and default work

• Removes the existing drawbacks to specialty servicing while mitigating risks associated with the original Next Gen strategy

• This will require investment in DCC, BPO, EDMAPS and other FSA systems

CYBERSECURITY APPROPRIATELY LEVERAGE

THE BPO VENDORS

• Servicers’ sites will remain live, but borrowers will sign in using the FSA ID

• Servicers will implement co-branding with FSA at first, the customer experience will become more FSA-forward as we build functionality on

StudentAid.gov

• This will require investment in improving the FSA ID

SINGLE SIGN ON

• FSA will provide specific requirements so servicers can comply with modern cybersecurity standards

• We have identified what is necessary for Authority to

Operate (ATO) versus what we can sequence in after go-live as recent requirements (e.g. EO

14028) have been fully defined by ED

SINGLE SIGN ON

EXPERIENCE

Servicers will be expected to implement on servicer sites:

1) Single Sign On with FSA ID on servicer sites

2) Global standardized headers and footers (including FSA logo and direct links to SA.gov functionality)

3) Standard templates on email, paper, and CSR greetings

4) Standard components, including alert space for direct FSA communications

5) User interface standards, including top task support within dashboards and FSA graphics & illustrations utilization

ACCOUNTABILITY

USDS PRICING STRUCTURE

To create greater transparency around operational costs, pricing has been broken down into several categories:

• System

• Contact center/back office

• Cybersecurity

• Postage/paper/printing/mailings

• Website and mobile functionality

• User authentication

• Specialty Tasks like the image repository and guarantor loan rehabilitation support

• Loan consolidation origination and consolidation adjustments

• Future development and enhancement projects

System and contact center/back office work accounts for ~75% of the cost of USDS

USDS PRICING APPLIES LESSONS OF THE PAST AND

TARGETS KEY GOALS FOR THE FUTURE

Goal Problem in Legacy Solution in USDS

Performance improvement

Has not been successful in driving servicers to improve overall borrower outcomes, especially for at-risk populations.

Drives servicers to invest in innovative strategies on how best to reach at-risk borrowers and help them successfully manage their student loans.

Increased cost transparency

Structure makes it difficult to assess and report on the individual cost drivers and overall reasonability of servicer cost models.

USDS pricing allows FSA to benefit from vendor economies of scale and to discontinue specific elements as responsibility shifts from USDS vendors to FSA.

Ensure a stable servicing environment

Does not provide sufficient avenues to drive necessary investments in things like cybersecurity and performance improvement.

Supports substantial additional cybersecurity requirements, higher performance expectations, and increased compliance costs.

CENTERING ACCOUNTABILITY

FSA will build on the progress made in the two-year servicing extensions by adding additional accountability metrics to ensure vendors who promote better customer outcomes are rewarded for their work and those that do not meet expectations experience consequences.

Financial incentives for servicers who serve at-risk borrowers well

Financial disincentives for servicers who fail to meet SLAs

New borrowers are allocated to servicers who keep borrowers current

USING PRICING TO DRIVE PERFORMANCE

USDS Servicers that successfully keep at-risk borrowers current will receive a performance incentive from FSA

CUI//SSEL

• At-risk borrowers will be identified using a risk model developed and maintained by FSA’s Data Team. This model can be calibrated and scaled to target borrowers who would benefit from high-touch loan servicing.

• The performance incentive will be set at FSA’s discretion.

• FSA will establish a performance goal that the servicers need to meet that in order to qualify for the performance incentive. Failing to meet or exceed the performance goal will mean servicers will receive a reduced performance incentive.

ENHANCED SERVICE LEVEL AGREEMENTS (SLAs)

• Customer Satisfaction – No lower than 70%. Most servicers are historically in the 63-73% range.

• Call Abandon Rate – No higher than 4%. Before the payment pause, abandon rates averaged 7% and was much higher for some servicers.

• Interaction Quality Monitoring – No lower than 95%. This measures a servicer’s performance in helping borrowers navigate their options. Measured by FSA sampling recorded calls.

• Borrower Request Processing Accuracy – No lower than 95%. This measures a servicer’s ability to execute a borrower’s request correctly the first time.

Failure to meet SLAs will result in a financial penalty of up to 20% of the servicer’s invoice for the contact center/back-office processing line item

FUTURE ALLOCATION METRICS

Borrower Segments (Weights) Original Contracts Extensions USDS Contracts

Graduated <3 years ago 20% - -

Graduated >3 years ago 20% - -

Not Graduated <3 years ago 20% - -

Not Graduated >3 years ago 20% - -

PLUS and Consolidation 20% 15% -

Previously Defaulted - 20% -

At Risk Borrowers - 35% 50%

Other Borrowers - 30% 50%

Portfolio Metrics Original Contracts Extensions USDS Contracts

Current Borrowers 30% 20% 60%

Delinquent (31-90 days) 15% 10% 15%

Delinquent (>90 days) 15% 5% 15%

SERVICE LEVEL OBJECTIVES (SLO)

• FSA is proposing over 130 service level objectives that USDS servicers would be required to meet

• Most SLO’s include timeliness requirements (e.g., responding to borrowers or FSA in timely fashion) or complying with rigorous financial standards

• Failure to meet a SLO would result in corrective action plans (CAPs) and possibly the withholding of monthly invoice payments for improper servicing

NEXT STEPS

GETTING TO GO-LIVE

Issue RFP

FSA issues a formal Request For

Proposal (RFP)

Evaluate Proposals

FSA evaluates prospective vendors on established criteria

Vendors Obtain ATO (Authority to Operate)

FSA grants awardee(s) an ATO ahead of Go-Live.

An ATO is the authorization to operate an information system on behalf of a federal agency.

Award Contracts

Contract awards are based on offerors’ ability to meet requirements, past performance, and pricing. After awards, FSA begins development with the servicers.

Investment in StudentAid.gov & Other Systems

Requires technological investments and funding to expand functionality on StudentAid.gov

QUESTIONS