Size of ED Portfolio Drawing Interest in Collector Conference

The opportunity to work on a massive $23.2 billion portfolio is drawing registrants to the U.S. Department of Education’s pre-solicitation conference this month on its student loan contract.

About 100 collection agencies have already registered for the event, according to Richard Galloway, one of ED’s leaders for its Federal Student Aid (FSA) program, and he expects that 150 will attend the event in Washington D.C. on Jan 22 (“Dept. of Ed. Gears Up for Collection Contract Conference,” Jan. 4).

The department names participants in two categories – unrestricted for the large agencies, and small business for privately held firms with annual revenues under $6.5 million.

But opportunities exist for other providers as well. Subcontracting has always been a big part of the ED student loan collection contract. “Many of our primary vendors use subcontractors for services like skiptracing and legal collections,” said Galloway.

A subcontractor faces a lighter certification process than firms in the unrestricted and small business categories because the primary vendors take full responsibility for the subcontractors’ work. “ED does not maintain a direct relationship with subcontractors,” Galloway said. However, subcontractors must meet basic criteria, like data security requirements.

The size of the FSA portfolio is what is creating interest for collectors, large, small and in between. The portfolio grew to $23.2 billion at the start of fiscal 2008 in October, up from $20.7 billion in fiscal 2007, according to Dwight Vigna, director of ED’s default resolution group.

Vigna noted that the portfolio has always increased yearly, but has recently presented a new wrinkle. “We’re seeing dollar amounts rising, but the number of borrowers defaulting remains flat,” he told insideARM. Vigna speculated that this may be tied to rising education costs manifesting in a higher average debt per defaulter.

Currently 17 private agencies work the FSA collection contract that was initially awarded in 2004 and begun in February 2005. Since then, the 17 have collected more than $2.8 billion.

A firm needs to be on the General Service Administration’s Schedule 520-4 in order to be considered in the unrestricted and small business categories. Subcontractors don’t need to be on the 520-4 schedule. The GSA schedule is a list of approved vendors to the federal government that have gone through an extensive certification process.

Because of the expected turnout, the one day conference will mainly consist of presentations by ED to the attendees, although there will be opportunities to have questions answered, says Galloway.

Interested parties are required to register for the conference by January 17 at http://fsaconferences.ed.gov/conferences/pcaprocurement.html.

The day after the conference, ED is holding its quarterly collection vendor meeting in Washington. At the meeting, principally set up for the current 17 agencies on the contract, ED will discuss issues specific to the contract work environment. FSA encourages those agencies attending the Jan. 22 conference to stay for the quarterly meeting.