Department of Education Cancels NextGen

[UPDATE 4/15/20: Please see this post regarding the article below.]

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Remember the Department of Education’s NextGen project? Well, it’s been canceled. At least, part of it has.

I know.

Let’s go back to the beginning for a minute and cover a few of the big contributors to how we got here.

Dr. A. Wayne Johnson

In June 2017 Education Secretary Betsy DeVos announced her intent to appoint Wayne Johnson as Chief Operating Officer for Federal Student Aid. Previously, he held positions at VISA USA, Providian Financial, and First Data Corporation, and was CEO of First Performance Corporation and Reunion Student Loan Finance Corporation. DeVos said at the time,

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"Wayne is the right person to modernize FSA for the 21st Century. He actually wrote the book on student loan debt and will bring a unique combination of CEO-level operating skills and an in-depth understanding of the needs and issues associated with student loan borrowers and their families. He will be a tremendous asset to the Department as we move forward with a focus on how best to serve students and protect taxpayers." 

NextGen was Wayne’s brainchild. And then, he announced in October 2019 that he would be leaving his post to seek an appointment to the U.S. Senate. The conservative Republican is running against 20 others for the special Senate election in November to fill the balance of the term of retired Sen. Johnny Isakson. 

On March 25, 2020, candidate Johnson said he thinks the student loan benefit package in response to COVID-19 should be extended from 6 months to 12 months. He added, “The national response to the coronavirus was never the time to talk about canceling student debt. Debt forgiveness is just one part of a real, bipartisan plan. We need to do more than just cancel student loan debt on a piecemeal basis; we need to cancel the Federal student loan program and chart a new course to pay for secondary education in Georgia and around the country.”

The years-long litigation saga between large private collectors (PCAs) and the Department of Education (ED)

It all started in 2014 when the five-year 2009 ED contract for debt collectors ended. New small business contracts were awarded on schedule, but the large-firm contracts were delayed, awarded, protested, underwent a “do-over,” and then A LOT of litigation. To get out of it, in May 2018 ED ultimately canceled the whole solicitation. ED’s justification? Large PCAs would no longer be needed because the whole process is going to be reimagined as part of the NextGen system and process that was announced in 2017.

The PCAs ultimately lost their battle against ED in August 2019.

The litigation that moved to NextGen

The NextGen plan would put all federal student loan servicers on a common technology platform with a single database. The PCAs filed a complaint, saying ED had improperly bundled pre-and post-default servicing in the same procurement, which is a) illegal and b) makes it impossible for debt collectors to compete for work unless they can either a) provide all services required by the full student loan cycle (which, it’s argued, no company is capable of) or b) establish a viable teaming arrangement as a subcontractor (which, it’s argued, is both challenging and would cause a conflict of interest). This article provides a great background on the twists and turns.

Meanwhile, NextGen is a REALLY BIG PROJECT on a very tight timeline. Really big government projects often don’t go as planned, even under the best of circumstances. This one, remember, lost its champion last October. Also, along the way, the details of the solicitation have changed multiple times and deadlines were postponed.

The latest official action in the solicitation was recorded on November 12, 2019. Then, things went quiet (although sources tell insideARM there was a lot going on behind the scenes).

Suddenly, on April 2, 2020, Nelnet announced that ED had notified the company that its proposal in response to the Enhanced Processing Solution (EPS) component of NextGen has been deemed “outside of the competitive range and will receive no further consideration for an award.” EPS is the technology system and certain processing functions the Department plans to use to 43 million student loan customers. The company said it requested a debriefing by ED and that they intend to file a protest challenging the decision.

Nelnet has been the only announcement so far, however, we have to assume others may have received a similar notice.

And finally, on April 3, 2020, ED canceled the solicitation. Here’s what it says on the procurement site:

“Cancellation of Solicitation Number 91003119R0007, Optimal Processing Solution (OPS). The solicitation is canceled in accordance with FAR 5.207 (f) effective with this notice. On December 19, 2019, the Fostering Undergraduate Talent by Unlocking Resources for Education (FUTURE Act) (H.R. 5363) became law. While FSA is still assessing the requirements and implications of the FUTURE Act, it is clear the legislation will have a significant impact on FSA’s business processes and the scope of the OPS requirements necessitating FSA’s cancellation of this solicitation.”

insideARM Perspective

There are other portions of NextGen. This cancelation applies to solicitation R0007. Who knows what will happen with the other pieces. A lot of money has been spent responding and then re-responding and then re-responding to these solicitations.

Yet again, we’re left wondering how a major decision by the Department of Education will affect both borrowers and student loan collectors. At least for now, it seems the small PCAs that were awarded contracts in 2014 will continue to have work…well, that is, if they are still around after the COVID-19-related prohibition on outbound collection efforts expires.