The Department of Education (ED) announced yesterday that Kathleen Smith will serve as the deputy chief operating officer, responsible for managing the daily operations of Federal Student Aid (FSA) and its 1,300 employees and $1.4 trillion student loan portfolio.

Last week ED announced that A. Wayne Johnson -- who was named Chief Operating Officer of the Office of Federal Student Aid (FSA) in June 2017 -- will now lead a new unit called the Office of Strategy and Transformation, and that James Manning, Acting Under Secretary, has assumed the duties of Acting Chief Operating Officer of FSA.

From 2009 to 2014, Smith served as chief of staff at the U.S. Department of Education in the Office of Postsecondary Education. Prior to that, she served as an Education policy advisor on the Senate Committee on Health Education, Labor and Pensions. From 2013 to 2015 Ms. Smith was a Senior Vice President at AccessLex Institute, a nonprofit organization that works to improve access for minorities to a quality legal education. Prior to that, she served for more than four years as Chief of Staff in the Office of Postsecondary Education.

insideARM Perspective

These moves come as a new chapter begins for FSA. A long legal battle over the Unrestricted Private Collection Agency contract award has just concluded (though many expect a new round of litigation to begin).

Meanwhile, ED is trying to modernize the operation that manages the $1.4 trillion federal student loan portfolio. This is a challenge that has eluded former ED leaders; any organization with 1300 employees and legacy systems takes creativity and courage to turn around. Last fall Johnson announced his intention to introduce a Next Generation Processing and Servicing Environment to bring the customer servicing capabilities of FSA into the 21st century. In December Johnson issued a Request for Advanced Market Research Information regarding his envisioned system. 

In another move to reduce costs and modernize the system, yesterday The Hill reported that ED will be launching a pilot program to put financial aid funds that are in excess of tuition on debit cards. They say this will allow officials to track how federal aid is being spent. As reported by The Hill, the program draft reads, “Any ability to restrict purchases or merchant access using Federal financial aid funds must be aligned with government approved use of funds.” Students would also receive text messages about the long-term “ramification” of spending the funds.

Given the abundance of students with loan balances in excess of their ability to pay, this seems reasonable -- both for taxpayers, and  to borrowers. On the other hand, consumer advocates say this gives ED unreasonable control over how the money is spent.  


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