Student Aid Skirmish

Republicans in Congress press issue of improper payments by Department of Education and suggest possible subpoena of former student aid chief.

May 26, 2017
Representative Mark Walker, Republican of North Carolina, speaks at the House oversight subcommittee hearing.

WASHINGTON -- GOP lawmakers said Thursday they had planned to subpoena the former chief of federal student aid, Jim Runcie, to testify before a House of Representatives oversight subcommittee and may still do so.

Runcie resigned from the Department of Education effective Wednesday rather than testify at a hearing on improper payments by the department. In a resignation memo and other correspondence leaked to the media, he also cited broader disagreements with the direction of the department under Secretary Betsy DeVos as reasons for his departure.

“No wonder American taxpayers are fed up with the federal government,” said Representative Jim Jordan, an Ohio Republican. “I think we should subpoena the guy and bring him in here to answer some of these questions.”

The oversight subcommittees on government operations and intergovernmental affairs met to review the progress the Department of Education is making toward accurately estimating improper payments to students and colleges and reducing them in the future. The Federal Direct Student Loan program and the Pell Grant program have among the highest rates of improper payments among federal government programs.

But Republican members were as interested in Runcie’s absence -- he had been scheduled to testify before his resignation -- as they were in the comments of the witnesses who did show up to testify, including Federal Student Aid Chief Financial Officer Jay Hurt.

Representative Mark Meadows, a North Carolina Republican, said that Runcie’s decision to not testify was a “slap in the face” to taxpayers.

Congress and federal watchdogs periodically review programs at each agency where significant amounts of improper payments may occur. At the Department of Education, that can involve both overpayments of aid to students who shouldn’t receive it, underpayments or payments without proper documentation. Those faulty payments could also include federal loan money not returned by an institution after a student’s withdrawal. The department has been out of compliance with federal law seeking to cut down on those payments for three successive years after missing certain compliance requirements. And a May report from its Office of Inspector General found that those payments have gone up.

According to testimony from Inspector General Kathleen Tighe, the improper payment rate was 7.85 percent for the Pell program and 3.98 percent for the Direct Loan program in fiscal year 2016 -- both well above targets established by the department in an annual financial report.

While targeted fraud from outside groups is a persistent problem for financial aid administrators, many improper payments are a result of error. The IRS data retrieval tool, along with the use of prior-prior year income data, was designed to remove errors in the financial aid application process. However, the suspension of the tool in March over cybersecurity concerns will likely hinder progress this year in eliminating errors that lead to improper payments.

Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators, told lawmakers that to the extent the process could be automated and the data retrieval tool could be made available to students again, it would be a big step toward addressing errors contributing to faulty payments.

At least part of the higher rates of improper payments for the last fiscal year was a change in methodology for estimating those payments. After switching its approach to those estimates in 2014, the department arrived at much lower rates -- and was dinged by a report from the Office of Inspector General, which argued the change was made to improve results. Department officials at the time rejected that allegation.

As Republicans zeroed in on the payments issue, Democrats sought to shift the focus to the failures of student loan servicers and the potential consequences of massive cuts to the department proposed in the White House budget. Representative Val Butler Demings, a Florida Democrat, questioned how those cuts would affect the department’s oversight capabilities.

Tighe said one of the department’s management challenges has been overseeing the various entities under its purview, whether contractors or grantees.

“It’s going to be challenge for the department, if resources are cut in these areas, to maintain sufficient oversight and monitoring that is needed,” she said.

Republican lawmakers repeatedly pressed Hurt about whether Runcie, his former boss, would have been the appropriate official to answer many of their questions about the payments or whether he should have received large performance bonuses in light of what they called “abysmal numbers” -- questions he declined to answer.

Hurt told lawmakers one challenge to improvements is that the department does not have the resources to adequately arrive at an accurate assessment of those payments without taking resources away from finding and addressing improper payments.

“The only way to produce a statistically accurate number is to divert our resources from actually finding improper payments,” he said.

But pressed by lawmakers on the number identified in the IG report, Hurt conceded that the overall rate of 4.85 percent for faulty payments at the department was “a bad number.”

Meadows, in comments to reporters, said he thought it was still important for the subcommittee to hear from Runcie. He said he didn’t believe the issues reducing improper payments was one of limited resources.

“This is not a new problem,” he said. “This is a problem that has existed when resources were very robust within the Department of Education. So I don’t see it as a resource issue as much as a management issue.”


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