oversight

Student Financial Aid Information: Systems Architecture Needed to Improve Programs' Efficiency

Published by the Government Accountability Office on 1997-07-29.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United States General Accounting Office

GAO               Report to Congressional Requesters




July 1997
                  STUDENT FINANCIAL
                  AID INFORMATION
                  Systems Architecture
                  Needed to Improve
                  Programs’ Efficiency




GAO/AIMD-97-122
                   United States
GAO                General Accounting Office
                   Washington, D.C. 20548

                   Accounting and Information
                   Management Division

                   B-277329

                   July 29, 1997

                   The Honorable James M. Jeffords
                   Chairman, Committee on Labor and Human Resources
                   United States Senate

                   The Honorable William F. Goodling
                   Chairman, Committee on Education and the Workforce
                   House of Representatives

                   The Honorable Howard McKeon
                   Chairman, Subcommittee on Postsecondary Education,
                     Training and Life-Long Learning
                   Committee on Education and the Workforce
                   House of Representatives

                   As requested, we are reporting to you on the Department of Education’s
                   National Student Loan Data System (NSLDS). This national database on title
                   IV (student financial aid) programs1 is designed to track loan and grant
                   data, provide a research database, and support functions such as
                   prescreening of aid applicants for eligibility and student enrollment status.
                   Because of concerns surrounding the Department’s ability to improve the
                   reliability and efficiency of student financial aid information and delivery
                   systems, you asked that we assess its progress toward integrating NSLDS
                   with other student financial aid databases, as required by law. Appendix I
                   describes our objective, scope, and methodology in more detail.


                   The Department of Education has made limited progress in integrating
Results in Brief   NSLDS with the other student financial aid databases that support title IV
                   programs. Neither NSLDS nor the other systems were designed for efficient
                   access to reliable student financial aid information. Many of the systems
                   are incompatible and lack data standards and common identifiers.
                   Inhibiting movement toward a fully functional, real-time, integrated system
                   is the absence of a systems architecture—a structure for effectively
                   incorporating major systems development into an existing information
                   systems environment. The Department to date has not devoted the time or
                   effort necessary to develop such an architecture; hence, its past and
                   current systems development activities have no single, guiding framework.



                   1
                    Title IV of the Higher Education Act of 1965, as amended. These programs make billions of dollars in
                   loans and grants available to postsecondary education students each year.



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             Without a systems architecture and the ability to easily integrate its
             systems, the Department continues to acquire independent systems to
             support specific student financial aid programs—programs that cannot
             easily share information. Accordingly, the cost of developing and
             maintaining these stand-alone systems continues to mount. While
             developing such stand-alone systems has served immediate program needs
             on a limited basis, this approach undermines the goal of sharing student
             financial aid information across programs.


             The Department of Education’s Office of Postsecondary Education (OPE)
Background   administers student financial aid programs under title IV of the Higher
             Education Act of 1965, as amended (HEA). Through these programs,
             students have access to billions of dollars in loans and grants for
             postsecondary education each year. Four major types of student aid are
             currently in use: the Federal Family Education Loan Program (FFELP),2 the
             William D. Ford Federal Direct Loan Program (FDLP), the Federal Pell
             Grant Program, and campus-based programs.3 These programs together
             will make available more than $47 billion to about 8 million students
             during the 1998-99 academic year—about 80 percent of it in student loans.

             Prior to the 5-year phase-in of FDLP, the two largest postsecondary student
             aid programs were FFELP and the Pell Grant Program. FFELP provides
             student loans, through private lending institutions, that are guaranteed
             against default by approximately 36 guaranty agencies4 and insured by the
             federal government. The Pell Grant Program provides grants to
             economically disadvantaged students.

             Over the years, both FFELP and the Pell Grant Program have encountered
             waste, fraud, and abuse. The structure of FFELP creates the potential for
             large losses due to abuse, given the limited financial risks for program
             participants—schools, lenders, and guaranty agencies—as well as the
             unreliable student aid data generally provided by guaranty agencies. In
             fiscal year 1995, the federal government paid out over $2.5 billion to make
             good its guarantee on defaulted student loans. The Pell program has also


             2
              FFELP was formerly the Guaranteed and Stafford Student Loan programs.
             3
              The campus-based programs include the Federal Work-Study Program, the Federal Perkins Loan
             Program, and the Federal Supplemental Educational Opportunity Grant Program.
             4
              State and private nonprofit guaranty agencies act as agents of the federal government, providing a
             variety of services, including payment of defaulted claims, collection of some defaulted loans,
             default-avoidance activities, and counseling to schools and students.



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experienced abuse, such as students’ receiving grants while attending two
or more schools concurrently.

As we recently reported,5 the Department’s loan programs continue to be
at risk for waste, fraud, and abuse. The Department has not yet succeeded
in protecting the financial interests of taxpayers and has not resolved
long-standing management problems. For example, inadequate
Department oversight contributed to abuses on the part of some schools
participating in federal student aid programs. These abuses include
instances in which schools received Pell grant funds for ineligible
students.

In addition, the Department’s data quality and management controls are
inadequate. For example, because poor quality and unreliable FFELP
student loan data remain in the Department’s systems, Education staff
cannot obtain complete, accurate, and reliable FFELP data necessary for
reporting on its financial position. The Department’s Office of Inspector
General was unable to express an opinion on its fiscal year 1994 FFELP
principal financial statements, taken as a whole, because student loan data
on which the Department based its expected costs incurred on
outstanding guaranteed loans were not reliable. For the same reason,
Education received a disclaimer of audit opinion on the 1995 financial
statements. The Department’s chief financial officer, in Education’s
March 1997 annual accountability report (covering fiscal year 1996),
presents unaudited 1996 financial statements, and says that the audited
statements—with auditor’s report—should be available about July 31,
1997.

In 1986 and 1992, the Congress tried to help overcome these long-standing
problems. In reauthorizing the title IV programs, the HEA amendments of
1986 authorized the Secretary of Education to establish NSLDS to ensure
accurate information on student loan indebtedness and institutional
lending practices, and to improve compliance with repayment and
loan-limitation provisions. Because the 1986 amendments contained a
provision that the Department could not require guaranty agencies to use
the system before guaranteeing new loans, the system was not developed.
The 1989 Budget Reconciliation Act, however, allowed the Department to
require guaranty agencies to use such a system before approving new
loans. The 1992 reauthorization amendments expanded the scope of NSLDS
by requiring the Department to integrate NSLDS with databases of the other
title IV systems. The 1992 amendments also stated that NSLDS should allow

5
 High-Risk Series: Student Financial Aid (GAO/HR-97-11, February 1997).



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for the monitoring of information on student enrollment status, current
loan holders and servicers, and internship and residency status. They also
said that borrowers should be able to use the system to identify current
loan holders and servicers.

In response to these legislative mandates, in January 1993 the Department
awarded a 5-year, $39-million contract for development and maintenance
of NSLDS. The system was aimed at providing information on students
across programmatic boundaries. Loan information was to be transmitted
to NSLDS on a regular basis by schools, guaranty agencies, and other
Departmental databases. In so doing, Education hoped that NSLDS would
serve the needs of students and schools, as well as guaranty agencies and
the Department. It was planned to be used to assist in determining
students’ aid eligibility throughout repayment periods and also serve as an
overall financial aid history file on program participants.

Education also anticipated that NSLDS would enable it to help reduce the
number of loans given to ineligible students. A student in default on any
previous student loan is generally ineligible to receive additional federal
aid until the default is resolved. Education planned for NSLDS to identify
ineligible applicants by checking for defaults on previous student loans.
The ability to check that cumulative loan limits were not exceeded was
also envisioned for NSLDS, along with verification that the student did not
receive a prior Pell Grant overpayment.

The Department reports that as of February 6, 1997, NSLDS contained about
71 million open loan and grant records from guaranty agencies (FFELP),
direct loan servicers (FDLP), and schools (campus-based, i.e., Perkins and
the Pell program). As figure 1 illustrates, a significant portion of data
stored in NSLDS—about 70 percent—relates to FFELP guaranteed loans.




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Figure 1: Approximate Number and
Percentage of Open Loan and Grant
Records in NSLDS by Program, as of
February 6, 1997
                                     FFELP      70%
                                                            50 million
                                                                                              Perkins     6%
                                                                               4 million
                                                                               4 million
                                                                                               FDLP     6%
                                                                         13 million


                                                                                     Pell Grant 18%



                                     Source: Department of Education.




                                     To help federal agencies better manage information systems projects such
                                     as NSLDS, the Congress recently enacted the Clinger-Cohen Act of 1996.6 In
                                     response to the act’s mandates, the Department of Education has
                                     established the position of chief information officer (CIO). While day-to-day
                                     management of student financial aid information systems resides with the
                                     Office of Postsecondary Education, the CIO provides technical advice on
                                     the direction of the Department’s information resources.


                                     In responding to the HEA amendments of 1992, the Department of
Education Has Made                   Education implemented an approach that falls short of full integration.
Limited Progress in                  The Department opted to establish NSLDS as a data repository that would
Integrating NSLDS                    only receive and store information from other title IV systems. However,
                                     the lack of uniformity in how the systems handle their information—no
With Other Databases                 common student or institutional identifiers or data standards—has
                                     complicated data matching between systems. Hence, NSLDS cannot
                                     effectively be updated without expensive conversion “workaround”
                                     programs.




                                     6
                                     The Clinger-Cohen Act of 1996 (formerly known as the Information Technology Management Reform
                                     Act of 1996), P.L. 104-106, Division E.



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                             Past Departmental studies, as well as those conducted by the Advisory
                             Committee on Student Financial Assistance,7 have consistently addressed
                             the need for integration8 of student financial aid databases, citing reduced
                             management efficiency, compromised system integrity, and escalating
                             costs as resulting from the lack of integration. The benefits of integration
                             are many, and include such areas as improved quality through reduced
                             development changes, streamlined operations, formalized
                             communications, and cost reductions through increased productivity and
                             decreased data redundancy. The National Institute of Standards and
                             Technology measures the effectiveness of integration by assessing
                             “whether a user can get the right data, at the right place, at the right time,
                             in the right form, and at the right cost.”9

                             In recognition of the need for integration to address long-standing
                             problems and improve the availability and quality of data on title IV
                             program participants, the 1992 HEA amendments required that the
                             Department, by January 1, 1994, integrate NSLDS with other databases
                             containing information on student financial aid program participants. To
                             assist in achieving this integration, the amendments also required the
                             Department to (1) establish common identifiers so that codes used to
                             identify institutions and students were consistent across programs, and
                             (2) standardize data reporting formats, including definitions of terms, to
                             permit the direct comparison of data.


Department’s Approach        In response to the HEA amendments, the Department, through a contractor,
Falls Short of Integration   designed and implemented NSLDS to receive and store student financial aid
                             data from title IV programs in one central database. At the same time, the
                             Department maintains multiple internal program-specific systems, many of
                             which individually store the same data for their respective title IV
                             programs. Under this approach, each system would periodically supply
                             NSLDS with data from each of its respective title IV programs.




                             7
                              The Congress created the Advisory Committee on Student Financial Assistance when it enacted the
                             HEA amendments of 1986. The Advisory Committee serves as an independent public advisory
                             committee to the Department of Education and the Congress.
                             8
                              Information integration is defined by the National Institute of Standards and Technology as
                             establishment of the appropriate computer hardware/software, methodology, and organizational
                             environment to provide a unified and shared information management capability for a complex
                             business enterprise (Information Management Directions: The Information Challenge, special
                             publication 500-167, September 1989).
                             9
                              Special publication 500-167, September 1989.



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The Department’s implementation of this approach has not achieved full
integration because it has not created a seamless information exchange
environment that would allow for a complete, accurate, real-time student
financial aid record. Preventing this is the fact that most of the title IV
systems and NSLDS are not readily compatible—they cannot easily
communicate with each other. These systems, operated by several
different contractors, have a variety of architectural characteristics,
including different types of hardware, operating systems, application
languages, and database management systems. In addition to the
Department’s internal systems, thousands of schools or their agents, and
the numerous guaranty agencies, also use disparate systems to send data
to NSLDS.

With these differing architectural characteristics, accommodations must
be made through the use of computer programs to bridge the gap between
NSLDS and the other data providers’ systems by converting data into
mutually recognizable formats. For example, in order for most of the
Department’s major systems to send information to NSLDS, each data
provider must first develop and execute software to extract data from its
respective databases. The data must then be processed by complex
formatting, editing, and error correction programs specifically designed
for each data provider type before NSLDS can be updated. Developing and
maintaining these programs is work that may itself introduce errors and
would not be required in a fully integrated environment. Education and its
data providers have over 300 data formatting and editing programs that are
subject to potential modification as new requirements are identified. This
has contributed to escalation in the estimated cost of the 5-year contract
for NSLDS—from the original $39 million estimate to now about $83 million.
Figure 2 shows the increase in estimated costs.




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Figure 2: Escalation of NSLDS Contract Costs
                                                                                                          $83
Millions                                                                                             million
                                                                   PROJECTED
$80
                                                                  contract costs




                                                                                            113%
$60

                                                    ACTUAL
                                              contract costs




$40
                                                                                                      $39
                                                                                                     million

                                                                INITIAL contract cost

$20




 $0
   1/93           7/93     1/94      7/94     1/95      7/95     1/96      7/96     1/97      7/97
           4/93       10/93     4/94     10/94     4/95     10/95     4/96     10/96     4/97     10/97

                                                      Source: Department of Education.




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                          Department officials acknowledge that integrating NSLDS and other title IV
                          systems has not been fully achieved. They believe, however, that given the
                          complexities of the title IV environment and statutory requirements, they
                          had little time to consider viable alternatives in designing and
                          implementing NSLDS.


Common Identifiers Have   The use of common identifiers or data naming conventions across systems
Not Been Established      is well established as an aid to data sharing and understandability.
                          However, the Department has not fully implemented the use of common
                          identifiers for students and institutions, as required by law. This lack of
                          common identifiers makes it difficult to track students across programs.
                          All applicants for federal student aid are required by law to provide their
                          Social Security numbers, which the Department considers its common
                          student identifier. Yet positive identification of student records across
                          systems is still a cumbersome process because each system requires
                          additional and often different data fields beyond the Social Security
                          number to access records. For example, to identify, access, and update a
                          specific student record, systems use inconsistent combinations of various
                          data elements, such as date of birth and the first two to three letters of
                          either the first or last name.

                          Identifying institutions can also be problematic because multiple
                          identifiers are often used. For example, institutions may be assigned
                          different identification numbers for each title IV program in which its
                          students participate. Despite the 1992 HEA amendments’ requirement for
                          common institutional identifiers by July 1, 1993, current Department plans
                          do not call for the development and implementation of such common
                          identifiers until the 1999-2000 academic year.


Lack of Title IV Data     Data standards are used to govern the conventions for identifying, naming,
Standards Complicates     and formatting data. Having such standards in place helps ensure that the
Data Matching             data being collected and maintained within an organization are structured
                          and stored so as to be accessible, understandable, and comparable
                          —meaning the exact same thing—to everyone in the organization.

                          Although the 1992 HEA amendments required Education to establish
                          standard reporting formats and data definitions, the Department has only
                          partially done so. Specifically, the Department has not established a
                          common data dictionary for its title IV programs. Instead, while each
                          program and supporting system uses the reporting formats specified for



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NSLDS, the Department permits each program to use its own data
dictionary10 for its own system. One example of how the lack of data
standards can affect program operations can be seen in the differences in
how student enrollment status is stored in NSLDS, compared with how it is
stored in the system that supports the Pell Grant program. Properly
determining enrollment status is important because students generally
begin repaying loans following a 6-month grace period after leaving
school. Because NSLDS and the Pell system report enrollment status in
different formats—alpha versus numeric—and use different definitions,
exact comparisons cannot be made and queries may well produce
inconsistent responses; this can lead to misinterpretations of a student’s
true enrollment status. Problems such as these resulting from data
inconsistencies between systems and NSLDS can take school officials
weeks or months to resolve—if they are even detected.

Another example of inconsistencies linked to the lack of data standards
involves conflicts in the acceptability of data formats between NSLDS and
the software provided by the Department for data exchange.11 While the
NSLDS software accepts either past, present, or future dates, the exchange
software’s edits were designed to reject dates that have already
passed—therefore not allowing a roster to be sent to NSLDS. This problem
has made it difficult for schools to process students’ enrollment status
information or update NSLDS accurately. In order to process rosters for
students with past graduation dates (e.g., graduate students), schools were
instructed to insert fictitious future graduation dates in order to pass the
exchange software edit. The Department has agreed to pay an additional
$343,000 in NSLDS labor costs for temporary workaround software
solutions to correct design conflicts between the exchange software and
NSLDS.


The lack of data standards also contributes to problems with data quality
and reliability. For example, several of the school officials we spoke with
chose not to use the NSLDS electronic financial aid transcript function to
obtain student financial aid history information on transfer students.
These officials still request paper transcripts from the student’s previous
school(s) because they consider the electronic data unreliable.



10
 A data dictionary is a repository of information describing the characteristics of data used to design,
monitor, document, protect, and control data in information systems and databases.
11
 This software, known as EDExpress, enables schools to initiate student aid applications and perform
edits and corrections on applicant data, including student enrollment status. It links schools to
communications software that provides access to NSLDS.



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                       The Department has long recognized the significant problems with title IV
                       data reliability. It has reported data unreliability as a material weakness
                       under the Federal Managers’ Financial Integrity Act. Plans are now
                       underway to address this issue through a major project initiated last
                       December to reconcile NSLDS data with data in the program-specific
                       databases. This effort started with the guaranty agencies—the largest
                       group of data providers in terms of loan volume. The Department then
                       plans to reconcile data coming from its internal systems, then the schools
                       that report Perkins loan data—all of which are also problematic. For
                       example, the 2,700 schools that participate in the Perkins Loan Program
                       are also required to provide data to NSLDS; however, not all schools yet do
                       so—about 7 percent do not.


                       As computer-based information systems have become larger and more
Systems Architecture   complex over the last 10 years, the importance of and reliance on what is
Essential to           called a systems architecture has correspondingly increased. Simply put,
Overcoming Lack of     an architecture is the blueprint to guide and constrain the development
                       and evolution of a collection of related systems. This is done first in logical
Integration            terms, such as defining the organization’s functions, providing high-level
                       descriptions of its information systems and their interrelationships, and
                       specifying how and where information flows. Second, this blueprint
                       explains operations in technical terms, such as specifying hardware,
                       software, data communications, security, and performance characteristics.
                       Figure 3 displays the key logical and technical components of a systems
                       architecture.




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Figure 3: Key Logical and Technical Components of a Systems Architecture


                                                        Agency Mission


                                                   Concept of Operations

 LOGICAL                                             Business Functions
 Architecture


                                                       Information Flows



                   System          System             System            System            System             System
                     A               B                  C                 D                 E                  Z



                                       Hardware Characteristics and Standards
                                 (e.g., expandability, reliability, maintainability, fault tolerance)



                                       Software Characteristics and Standards
                          (e.g., reliability, testability, flexibility, maintainability, portability, reusability,
                      adherence to open systems standards, standards for the languages to be used;
                    institutionalized process standards or methodologies for designing, coding, testing,
                                                 and documenting software projects)

 TECHNICAL
 Architecture                    Communications Characteristics and Standards
                            (e.g., reliability, availability, standards for communications protocols)


                                          Data Characteristics and Standards
                         (e.g., standards for data formats and naming conventions; data dictionary)



                                       Security Characteristics and Standards
                     (e.g., hardware and software solutions to address security requirements that are
                               based on a security policy and security concept of operations)


                                    Performance Characteristics and Standards
                       (e.g., ability to meet operational requirements, response-time requirements,
                                                     availability, reliability)




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A systems architecture is important because, in guiding and constraining a
project’s development or modernization, it can help significantly to avoid
inconsistent system design and development decisions, and their
concomitant increased costs and performance shortfalls. Leading public
and private organizations are using systems architectures to guide
mission-critical system acquisition, development, and maintenance. The
Congress has also recognized the importance of such architectures in
improving the effectiveness and efficiency of federal information systems.
The Clinger-Cohen Act of 1996 requires, among other provisions, that
Department-level CIOs develop, maintain, and facilitate the implementation
of integrated systems architectures.12

Experts in academia have also championed the systems architecture
approach. The Software Engineering Institute of Pittsburgh’s Carnegie
Mellon University includes the development and evolution of a systems
architecture as a key process area in its Systems Engineering Capability
Maturity Model.13

Implementation of a systems architecture within Education could
dramatically help the Department overcome its continuing problems in
integrating NSLDS and the other title IV systems. For example, at the logical
level, the Department would get a clear picture of the factors contributing
to “stovepipe” design which inhibits movement of information between
systems. Then, at the technical level, reaching agreement on data
characteristics and standards, including establishing a departmentwide
data dictionary, would enable Education to ensure that aggregated data in
NSLDS are presented uniformly. Further, since one of the purposes of the
technical architecture is to ensure that systems are interoperable,14 having
such an architecture would reduce the continuing need for the
Department to implement expensive workarounds.

Despite the importance of having a systems architecture, the Department
of Education has not devoted the time or effort necessary to develop such
a blueprint. According to OPE officials, several factors accounted for this,
including the Department’s focus on responding to legislative mandates,
and its lack—until recently—of a CIO. The Department reports that work
on a systems architecture has begun; the technical portion of it has been

12
  Section 5125.
13
   A Systems Engineering Capability Maturity Model,SM Version 1.1, Software Engineering Institute,
Carnegie Mellon University (SECMM-95-01, CMU/SEI-95-MM-003, November 1995).
14
 Interoperability is the ability of disparate systems to work together efficiently and effectively over a
network.



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                      drafted, and the logical portion is planned for completion by June 30, 1998.
                      Based on our preliminary review of the Department’s draft architecture, it
                      appears that Education is underestimating what is required to develop and
                      implement a departmentwide systems architecture. For example, the
                      complexity of the current computing environment will make it even more
                      difficult to implement a standard systems architecture across the
                      Department than what is described in the draft architecture. We also note
                      that the technical component is being drafted before the logical is
                      completed. The logical component should be developed first because it is
                      derived from a strategic information systems planning process that clearly
                      defines the organization’s mission and concepts of operations. It then
                      defines the business functions required to carry out the mission and the
                      information needed to perform the functions.


                      Despite the compelling need for a comprehensive systems architecture
Acquisition of        that would enable the eventual integration of title IV systems, the
Stand-Alone Systems   Department continues the practice of acquiring and maintaining multiple,
Continues While       independent stovepipe systems through the use of multiple contractors.
                      The Department currently manages nine major systems, supported by 16
Problems and Costs    contracts, to administer student financial aid programs. Table 1 lists these
Mount                 systems. The systems range from legacy mainframes, several originally
                      developed over 15 years ago, to a recently developed client-server system.
                      Over the past 5 years the information technology budget has tripled,
                      costing the Department over $1 billion. As illustrated in figure 4, the fiscal
                      year 1994 actual costs to maintain these systems was $106 million, and is
                      expected to climb to $317 million in fiscal year 1998. For the most part,
                      these systems operate independently and cannot communicate or share
                      data directly with one another.




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Figure 4: Student Financial Aid
Systems Costs From Fiscal Year 1994
Through Fiscal Year 1998               Millions



                                                                                                                           $317

                                        $300
                                                                                                         $283




                                                                                          $215

                                        $200



                                                                          $152



                                                         $106
                                        $100




                                           $0

                                                      FY 94 Actual    FY 95 Actual     FY 96 Actual   FY 97 Budget   FY 98 Budget (est)
                                       FDLP               $17             $51              $95           $138              $170
                                       CPS*               $46             $49              $50             $51               $51
                                       FFELPS             $23             $22              $23             $28               $30
                                       NSLDS**            $11             $18              $21             $27               $28
                                       Misc Sys***         $4              $7              $20             $28               $27
                                       PGRFMS              $5              $5               $6             $11               $11


                                      * includes the multiple data entry systems (MDES)
                                      ** revised to reflect a more recent estimate (as of 6/97) for FY 98 Budget
                                      ***includes: TIVWAN, EASI, PEPS, and CBS

                                       Source: Department of Education.




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Table 1: Student Financial Aid
Systems and Contractors          System                                           Acronym Contractor
                                 Campus-based System                              CBS          Universal Automation Labs, Inc.
                                 Central Processing System                        CPS          National Computer Systems
                                 Federal Direct Loan Program                      FDLP
                                 — Loan Origination System                                     Computer Data Systems, Inc. (old)
                                                                                               Electronic Data Systems (new)

                                 — Loan Servicing Systems                                      Computer Data Systems, Inc. (old)
                                                                                               Electronic Data Systems (new)
                                                                                               Raytheon/E-Systems, Inc. (new)
                                                                                               Education Loan Servicing Center,
                                                                                                  Inc. (new)
                                 Federal Family Education Loan                    FFELPS       Raytheon/E-Systems, Inc.
                                 Program Systema
                                 Multiple data-entry systems                      MDES         INET and American College Testing
                                 National Student Loan Data System                NSLDS        Raytheon/E-Systems, Inc.
                                 Pell Grant Recipient and Financial               PGRFMS       Planning Research Corp., Inc.
                                 Management System
                                 Postsecondary Education Participants PEPS                     Computer Business Machines, Inc.
                                 Systemb                                                       (new), and Madentech (old)
                                 Project Easy Access for Students and             EASI         Price Waterhouse
                                 Institutionsc
                                 Title IV Wide Area Network                       TIVWAN       National Computer Systems
                                 a
                                  In support of the Federal Family Education Loan Program (FFELP), the Department maintains an
                                 internal system—FFELPS (Federal Family Education Loan Program System). This system is used
                                 to pay interest and claims to lenders and guaranty agencies, and to support collections on
                                 defaulted loans. FFELP is also supported by guaranty agency systems, whose costs are not
                                 included in the Department’s ADP budget.
                                 b
                                     PEPS is replacing the Institutional Data System.
                                 c
                                 Project EASI is currently still in the developmental stage.

                                 Source: Department of Education.



                                 Many of Education’s student financial aid systems, including NSLDS, were
                                 developed independently over time by multiple contractors in response to
                                 new functions, programs, or mandates, rather than as part of a long-range
                                 system design strategy. As a consequence, a de facto, highly
                                 heterogeneous systems environment has evolved that relies heavily on
                                 contractors to develop and maintain critical student financial aid systems
                                 whenever the need arises. In carrying out this strategy, the Department
                                 has established and maintained long-term arrangements with a limited
                                 number of contractors to develop and operate these systems. These




                                 Page 17                                       GAO/AIMD-97-122 Student Financial Aid Information
              B-277329




              contractors operate the systems in their own disparate hardware and
              software environments.

              A recent example of the complexities and risks inherent in the
              Department’s stovepipe approach is the development of the systems that
              support FDLP. As part of its planned systems design, the Department now
              has multiple contractors performing various aspects of the direct lending
              process. The Department recently awarded separate contracts to three
              vendors for new stand-alone systems to service direct loans. In addition to
              its original servicer, the total cost of these four systems contracts is
              estimated to be at least $1.6 billion through fiscal year 2003. This will
              result in four different servicing systems for the same loan program,
              creating opportunities for problems stemming from a lack of system
              interoperability.

              For many years, the Department has been advised that it should migrate
              away from its stovepipe approach. The Advisory Committee on Student
              Financial Assistance reported in March 1995, August 1995, June 1996, and
              again in May 1997, that deficiencies in the overall delivery system for
              student financial aid result from the lack of a fully functional, title IV-wide
              recipient database that could integrate all program operations.

              The Department has stated that it recognizes the need for an integrated
              title IV systems environment. In fact, in 1995 the Department, under OPE’s
              Office of Student Financial Assistance Programs, began an initiative
              known as Project EASI. This project was originally designed to focus on
              reengineering the Department’s current processes and developing an
              integrated system that included all participants in the student financial aid
              community. However, as we reported in February 1997,15 Project EASI has
              had a checkered past, has undergone a tentative start, and has been
              loosely defined. In addition, top management’s commitment to the project
              has been uncertain. Accordingly, it is unclear whether the project will
              achieve its original goal of process redesign and systems integration.


              The Department of Education continues its slow pace toward compliance
Conclusions   with the 1992 HEA amendments to integrate its student financial aid
              information systems. Moreover, the Department will likely be unable to
              correct long-standing problems resulting from a lack of integration across
              its student financial aid systems until a sound systems architecture is
              established and effectively implemented. Further, unless this happens,

              15
                GAO/HR-97-11, February 1997.



              Page 18                           GAO/AIMD-97-122 Student Financial Aid Information
                         B-277329




                         problems and maintenance costs with its nine separate information
                         systems will probably escalate, as will the likelihood of acquiring new
                         stand-alone systems.


                         Given the importance, cost, and magnitude of student financial aid and the
Recommendations          information systems structure needed to support this aid, we recommend
                         that the Secretary of Education direct the Department’s chief information
                         officer to

                     •   develop and enforce a departmentwide systems architecture by June 30,
                         1998, that includes, but is not limited to (1) a high-level description of the
                         organization’s mission, functional requirements, information requirements,
                         systems, and information flows among systems and (2) specific
                         information technology and communications standards and approaches
                         that address critical hardware, software, communications, data
                         management, security, and performance characteristics; and
                     •   ensure that the developed systems architecture addresses the title IV
                         systems integration, common identifiers, and data standards deficiencies.

                         We also recommend that the Secretary of Education direct that as of
                         July 1, 1998, the Department’s information technology investments
                         conform to the developed architecture and that funding for all projects be
                         predicated on such conformance; unless careful, thorough, and
                         documented analysis supports an exception.


                         In its comments on a draft of this report, the Department of Education
Agency Comments          agreed with our recommendation to establish a departmentwide systems
and Our Evaluation       architecture within the next year. However, Education stated that our
                         observation that the Department has made “limited progress” in
                         integrating NSLDS with other title IV financial aid systems fails to consider
                         the complexities that faced NSLDS developers and the funds saved. Indeed,
                         it is the complexity of Education’s systems environment that highlights the
                         need for the systems architecture.

                         We believe the progress made by the Department in integrating its student
                         financial aid systems is limited. Schools still often rely on paper
                         documents to process financial aid loan applications, students do not have
                         real-time access to their loan status information, and loan data are not
                         reported to NSLDS in a prompt manner. Although progress has been made
                         in identifying applicants who have previously defaulted and initial efforts



                         Page 19                          GAO/AIMD-97-122 Student Financial Aid Information
B-277329




have been made to reconcile errors in NSLDS, the number of known errors
in the system remains significantly high. Further, the limited ability to
share data among systems has cost and efficiency consequences—both
critical factors in systems integration decisions. Thus, the lack of
integration results in lost opportunities to achieve programmatic savings.

In many ways, the Department’s student financial aid delivery system is
similar to functions performed by the banking industry, such as making
loans, reporting account status, and collecting payments. In today’s
technological age, automated teller machines are commonplace and
heterogeneous financial institutions can deduct funds from depositors’
accounts anywhere in the world in seconds with a high degree of
accuracy. Given this environment, the gap between the capabilities of the
private sector and those of the Department of Education is quite apparent.

It does appear that the Department is beginning to recognize the need for
an integrated title IV systems environment, as we stated in this report. We
are encouraged by the initiatives outlined in the agency’s response aimed
at improving the operations of such a complex heterogeneous systems
environment. Coordination and continued emphasis by top management of
these far-reaching initiatives will be essential to ensure their success. Our
evaluation of the Department’s comments and their full text are reprinted
as appendix II.


We are sending copies of this report to the Secretary of Education, the
Director of the Office of Management and Budget, appropriate
congressional committees, and other interested parties. Copies will also be
made available to others upon request. Please contact me at (202) 512-6253
or by e-mail at willemssenj.aimd@gao.gov if you have any questions
concerning this report. Major contributors to the report are listed in
appendix III.




Joel C. Willemssen
Director, Information Resources Management




Page 20                         GAO/AIMD-97-122 Student Financial Aid Information
Page 21   GAO/AIMD-97-122 Student Financial Aid Information
Contents



Letter                                                                                               1


Appendix I                                                                                          24

Objective, Scope, and
Methodology
Appendix II                                                                                         26

Comments From the
Department of
Education
Appendix III                                                                                        29

Major Contributors to
This Report
Related GAO Products                                                                                32


Table                   Table 1: Student Financial Aid Systems and Contractors                      17


Figures                 Figure 1: Approximate Number and Percentage of Open Loan and                 5
                          Grant Records in NSLDS by Program, as of February 6, 1997
                        Figure 2: Escalation of NSLDS Contract Costs                                 8
                        Figure 3: Key Logical and Technical Components of a Systems                 12
                          Architecture
                        Figure 4: Student Financial Aid Systems Costs From Fiscal Year              16
                          1994 Through Fiscal Year 1998




                        Page 22                       GAO/AIMD-97-122 Student Financial Aid Information
Contents




Abbreviations

ADP        automated data processing
CBS        Campus-based System
CIO        chief information officer
CPS        Central Processing System
EASI       Easy Access for Students and Institutions
FDLP       Federal Direct Loan Program
FFELP[S]   Federal Family Education Loan Program [System]
HEA        Higher Education Act
HR         high risk
IDS        Institutional Data System
MDES       multiple data-entry systems
NSLDS      National Student Loan Data System
OIG        Office of Inspector General
OPE        Office of Postsecondary Education
PEPS       Postsecondary Education Participants System
PGRFMS     Pell Grant Recipient and Financial Management System
TIVWAN     Title IV Wide Area Network


Page 23                      GAO/AIMD-97-122 Student Financial Aid Information
Appendix I

Objective, Scope, and Methodology


              Integrating NSLDS with other title IV databases was mandated by the
              Congress in 1992 in section 485B(g) of the Higher Education Act of 1965,
              as amended. Our objective was to assess the Department’s progress
              toward integrating NSLDS with other student financial aid systems. To
              achieve our objective we examined NSLDS’ history, contract, and technical
              documentation related to the title IV systems. In addition to examining
              records, in order to gain a better understanding of the title IV environment,
              we conducted interviews with Department officials responsible for title IV
              systems integration, contract employees responsible for NSLDS
              development and operations, and members of the education community
              affected by NSLDS.

              To research NSLDS history, we examined sections of the 1986, 1989, and
              1992 amendments to the Higher Education Act. We analyzed those
              sections related to the creation of NSLDS and its intended functionality. In
              addition, we reviewed prior GAO, OIG, and Department of Education
              internal reports showing deficiencies in title IV programs and the need for
              an integrated title IV database.

              We examined NSLDS contract files, and reviewed the original request for
              proposals, statement of work, task orders through May 1997, and contract
              amendments. In addition, we discussed the NSLDS contracting process with
              officials from the Department’s chief financial officer’s office.

              The technical documentation we reviewed on the title IV systems included
              data dictionaries from the major systems, NSLDS program code and
              program manuals, and FDLP and FFELPs software programs, which convert
              data from their respective databases into a format suitable for input into
              NSLDS. To determine the number of programs used in the NSLDS update
              process, we requested that Raytheon/E-Systems—the responsible
              contractor—provide all programs used to update the NSLDS database. Using
              a code analyzer developed by pi Technologies Group, we scanned the
              NSLDS code to quantify the number of programs, lines of code, and
              integration interoperability with other systems.

              To assess the Department’s actions to integrate NSLDS, we identified the
              organizational components involved in developing and operating NSLDS. We
              interviewed numerous officials from the Department’s Office of
              Postsecondary Education, including the director of the program systems
              service and the director of the NSLDS division.




              Page 24                         GAO/AIMD-97-122 Student Financial Aid Information
Appendix I
Objective, Scope, and Methodology




To assess NSLDS’ current operations we interviewed staff from
Raytheon/E-Systems. We discussed the methods by which information is
transmitted into NSLDS, and how users gain access to this information.

To assess the education community’s perspectives on NSLDS and its
usefulness, we visited and interviewed officials from the Advisory
Committee on Student Financial Assistance, the National Student Loan
Clearinghouse, the National Council of Higher Education Loan Programs,
Inc.; and financial aid officials from four state colleges, two universities,
two community colleges, and one private college. The schools were
selected from a list of NSLDS schools and contacts provided by the NSLDS
contractor.

We performed our work at Department of Education headquarters in
Washington, D.C. We visited schools in Washington, D.C., Virginia, and
Maryland. Our work was performed from November 1996 through
June 1997 in accordance with generally accepted government auditing
standards. The Department of Education provided written comments on a
draft of this report, which are included as appendix II.




Page 25                             GAO/AIMD-97-122 Student Financial Aid Information
Appendix II

Comments From the Department of
Education

Note: GAO comments
supplementing those in the
report text appear at the
end of this appendix.




See comment 1.




See comment 2.




See comment 3.




See comment 4.




                             Page 26   GAO/AIMD-97-122 Student Financial Aid Information
                 Appendix II
                 Comments From the Department of
                 Education




See comment 5.




                 Page 27                           GAO/AIMD-97-122 Student Financial Aid Information
               Appendix II
               Comments From the Department of
               Education




               The following are GAO’s comments on the letter from the Department of
               Education dated July 21, 1997.


               1. We are encouraged by the Department’s statement that the Secretary is
GAO Comments   in full support of Project EASI. However, given the project’s problems to
               date, it is unclear whether Project EASI will achieve its original goal of title
               IV process redesign and systems integration. As we stated in our report,
               implementation of a systems architecture within Education could
               dramatically help the Department overcome its continuing problems in
               integrating its title IV systems.

               2. In our report, we recognize the complexity of the heterogeneous
               systems environment that supports student financial aid delivery. As
               noted, this environment has been a major factor impeding progress in
               integrating NSLDS and other title IV systems. Accordingly, a systems
               architecture is needed to guide future systems development.

               3. While we view OPE’s short-term proposal to contract by function rather
               than by program as a positive step towards improving the operation of
               Education’s title IV information systems, we are concerned about the
               long-term capability of the Department to develop, implement, and enforce
               a departmental systems architecture which encompasses the diverse
               needs of title IV systems. In finalizing this draft architecture, the
               Department should ensure that it meets the requirements of the
               Clinger-Cohen Act of 1996 which mandates Department-level chief
               information officers to develop, maintain, and facilitate the
               implementation of integrated systems architectures. The Department
               should also ensure that the departmentwide systems architecture
               addresses the recommendations contained in this report.

               4. Conducting an assessment on the benefits of NSLDS or validating the
               accuracy of the reported savings was not within the scope of work for this
               report. However, in our recent high risk report,1 we did cite NSLDS benefits
               as reported by the Deputy Secretary of Education.

               5. We revised the report to reflect the Department’s most recent estimate
               of the NSLDS budget.




               1
                GAO/HR-97-11.



               Page 28                           GAO/AIMD-97-122 Student Financial Aid Information
Appendix III

Major Contributors to This Report


                        David B. Alston, Assistant Director
Accounting and          Leonard J. Latham, Technical Assistant Director
Information             M. Yvonne Sanchez, Senior Information Systems Analyst-in-Charge
Management Division,    Glenn R. Nichols, Senior Business Process Analyst
                        Charles S. Stanley, Staff Evaluator
Washington, D.C.        Michael P. Fruitman, Communications Analyst


                        Paula N. Denman, Senior Evaluator
Health, Education,
and Human Services
Division, Washington,
D.C.
                        Julie A. Schneiberg, Senior Information Systems Analyst
Atlanta Regional
Office




                        Page 29                        GAO/AIMD-97-122 Student Financial Aid Information
Page 30   GAO/AIMD-97-122 Student Financial Aid Information
Page 31   GAO/AIMD-97-122 Student Financial Aid Information
Related GAO Products


              Department of Education: Multiple, Nonintegrated Systems Hamper
              Management of Student Financial Aid Programs (GAO/T-HEHS/AIMD-97-132,
              May 15, 1997).

              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, March 16, 1993).

              Department of Education: Management Commitment Needed To Improve
              Information Resources Management (GAO/IMTEC-92-17, April 20, 1992).




(511217)      Page 32                          GAO/AIMD-97-122 Student Financial Aid Information
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