Education Department Resumes Search for Student Loan Processor

The U.S. Department of Education is resuming its plan to build a new student loan processing system five months after changes in federal law forced it to abandon the previous attempt.

The department’s Office of Federal Student Aid (FSA) released a request for information on Sept. 14 that outlined its requirements for a new Award Eligibility Determination (AED) system. The AED will replace the agency’s aging central processing systems used to calculate the amount of federal student aid prospective borrowers qualify for. The new system will offer FSA greater flexibility to develop new capabilities and a secure connection with the Internal Revenue Service, which supplies tax information as part of the loan award process, according to the RFI.

“AED will consolidate the fragmented student aid processing landscape by streamlining redundant technical processes, reducing miscommunication across different vendor systems, and providing a consistent customer experience,” according to the RFI.

The AED solicitation will replace FSA’s previous attempt at a modern loan processing platform, the NextGen Optimal Processing Solution (OPS). FSA canceled the five-year, $1.7 billion OPS acquisition in early April 2020 after a new federal law, known as the FUTURE Act (PL 116-91), overhauled regulations on data sharing between the IRS and FSA.

Federal tax information (FTI) stored by the IRS is integral to the student loan award process. An applicant’s tax status informs decisions about their eligibility for student aid and programs such as income-based repayment. However, accessing the data can be a challenge, as all FTI must be stored under strict security guidelines outlined in IRS Special Publication 1075.

To comply with the law, the AED RFI calls for partnering with the IRS to build a secure data exchange system linking the two agencies’ data environments using software tools called application programming interfaces (APIs). The winning AED vendor will be responsible for integrating the system with the data exchange, as well as the department’s customer-facing website and mobile application, its identity management and data analytics platforms, and the department’s third-party loan servicers, according to an attached document detailing proposed requirements.

The AED contract will also entail a multi-year effort to migrate and reformat data from FSA’s COBOL-based legacy environment to the new system. The winning vendor will be required to develop a transition plan and coordinate with the incumbent contract holder, General Dynamics Corp. The predecessor, Application and Eligibility Determination System (AEDS) II, has generated $157 million since February 2015. In July 2020, FSA extended General Dynamics’s contract through the end of fiscal 2023 to allow for additional time to revise the follow-on contract and ensure continuity during the migration process.

Education Department officials request that interested parties submit feedback on the RFI and attached requirements no later than Monday, Sept. 28.

To contact the analyst on this story: Chris Cornillie in Washington at ccornillie@bgov.com

To contact the editors responsible for this story: Daniel Snyder at dsnyder@bgov.com; Jill Oleson at joleson@bloombergindustry.com