Yesterday afternoon the Department of Education (ED) issued a press release that has garnered little national attention, yet may be very significant for the ARM industry. 

Per the press release: 

“Today, U.S. Secretary of Education Betsy DeVos announced her intent to appoint Dr. A. Wayne Johnson as Chief Operating Officer of Federal Student Aid (FSA). Dr. Johnson is a highly regarded leader with more than 30 years of experience in the financial services industry and holds a Ph.D. in higher education leadership. 

"Wayne is the right person to modernize FSA for the 21st Century,” said Secretary DeVos. “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." 

The term for this position is five years. It was left vacant when Mr. James Runcie, the former chief operating officer of the Education Department’s Office of Federal Student Aid, resigned in May. 

A May 24, 2017 article in BuzzFeed News noted: 

"I cannot in good conscience continue to be accountable as Chief Operating Officer given the risk associated with the current environment at the [Education] Department," the chief operating officer of federal student aid, James Runcie, wrote in his resignation memo, which was obtained by BuzzFeed News.” 

Dr. Johnson is uniquely qualified for this position. Johnson has previously held executive positions at VISA USA, Providian Financial, and First Data Corporation. Most recently, Johnson was also Founder, Chairman, and former CEO at First Performance Corporation and CEO of Reunion Financial Services Corporation / Reunion Student Loan Finance Corporation. In those prior positions Johnson has been involved in high volume, large scale operations that required a focus on technology, compliance, and customer service. 

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FSA needs expertise in all of those areas. The portfolio is huge. The federal student loan portfolio now approaches $1.4 trillion. Technology issues are rampant. Student borrowers constantly complain about fragmented information and multiple servicers of different loans for the same consumer that do not communicate. Customer service for these students needs to be improved – and improved dramatically. Compliance with regulations governing the industry should be a core part of the DNA of FSA.

However, Johnson brings additional skills and knowledge to the table. As noted in an article published yesterday in the Wall Street Journal:

“Dr. Johnson, who went back to earn his Ph.D. in educational leadership in his 60s, appears to have done his homework for the job. He wrote his dissertation on the weaknesses of the decision-making process students go through before they borrow tens of thousands of dollars to pay for college.

“There is more federal protection in place when you buy a car than there is when you sign up to take on student debt. It comes down to basic consumer protection.”

insideARM Perspective 

Dr. Johnson will be stepping into a position with significant challenges. FSA is under fire from multiple fronts. Among the critical issues that Johnson will need to deal with in the coming months are:

  • Allegations that FSA has been mismanaged in the past. See this May 25, NPR story.
  • A prior ED proposal to move to a single source model for servicing the massive ED portfolio. See this May 22, 2017 insideARM article on the issue.
  • The ED PCA RFP that has been mired in protests and litigation. See here for a link to an insideARM.com page that provides a history of our ED RFP related articles. 

Hopefully, Johnson’s diverse business background and understanding of large scale operations, student loans and customer service will provide the expertise needed to resolve these and many more issues at FSA.


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