§ 1018. Performance-Based Organization for Delivery of Federal Student Financial Assistance

(a) Establishment and purpose

(1) Establishment

     There is established in the Department a Performance-Based Organization (hereafter referred to as the "PBO") which shall be a discrete management unit responsible for managing the operational functions supporting the programs authorized under subchapter IV of this chapter and part C of subchapter I of chapter 34 of title 42, as specified in subsection (b) of this section.

(2) Purposes

     The purposes of the PBO are—

     (A) to improve service to students and other participants in the student financial assistance programs authorized under subchapter IV of this chapter and part C of subchapter I of chapter 34 of title 42, including making those programs more understandable to students and their parents;

     (B) to reduce the costs of administering those programs;

     (C) to increase the accountability of the officials responsible for administering the operational aspects of these programs;

     (D) to provide greater flexibility in the management of the operational functions of the Federal student financial assistance programs;

     (E) to integrate the information systems supporting the Federal student financial assistance programs;

     (F) to implement an open, common, integrated system for the delivery of student financial assistance under subchapter IV of this chapter and part C of subchapter I of chapter 34 of title 42; and

     (G) to develop and maintain a student financial assistance system that contains complete, accurate, and timely data to ensure program integrity.

(b) General authority

(1) Authority of Secretary

     Notwithstanding any other provision of this part, the Secretary shall maintain responsibility for the development and promulgation of policy and regulations relating to the programs of student financial assistance under subchapter IV of this chapter and part C of subchapter I of chapter 34 of title 42. In the exercise of its functions, the PBO shall be subject to the direction of the Secretary. The Secretary shall—

     (A) request the advice of, and work in cooperation with, the Chief Operating Officer in developing regulations, policies, administrative guidance, or procedures affecting the information systems administered by the PBO, and other functions performed by the PBO;

     (B) request cost estimates from the Chief Operating Officer for system changes required by specific policies proposed by the Secretary; and

     (C) assist the Chief Operating Officer in identifying goals for the administration and modernization of the delivery system for student financial assistance under subchapter IV of this chapter and part C of subchapter I of chapter 34 of title 42.

(2) PBO functions

     Subject to paragraph (1), the PBO shall be responsible for administration of the information and financial systems that support student financial assistance programs authorized under this subchapter, excluding the development of policy relating to such programs but including the following:

     (A) The administrative, accounting, and financial management functions of the delivery system for Federal student assistance, including—

     (i) the collection, processing and transmission of applicant data to students, institutions and authorized third parties, as provided for in section 1090 of this title;

     (ii) design and technical specifications for software development and systems supporting the delivery of student financial assistance under subchapter IV of this chapter and part C of subchapter I of chapter 34 of title 42;

     (iii) all software and hardware acquisitions and all information technology contracts related to the delivery and management of student financial assistance under subchapter IV of this chapter and part C of subchapter I of chapter 34 of title 42;

     (iv) all aspects of contracting for the information and financial systems supporting student financial assistance programs under this subchapter; and

     (v) providing all customer service, training, and user support related to systems that support those programs.

     (B) Annual development of a budget for the operations and services of the PBO, in consultation with the Secretary, and for consideration and inclusion in the Department’s annual budget submission.

(3) Additional functions

     The Secretary may allocate to the PBO such additional functions as the Secretary and the Chief Operating Officer determine are necessary or appropriate to achieve the purposes of the PBO.

(4) Independence

     Subject to paragraph (1), in carrying out its functions, the PBO shall exercise independent control of its budget allocations and expenditures, personnel decisions and processes, procurements, and other administrative and management functions.

(5) Audits and review

     The PBO shall be subject to the usual and customary Federal audit procedures and to review by the Inspector General of the Department.

(6) Changes

(A) In general

     The Secretary and the Chief Operating Officer shall consult concerning the effects of policy, market, or other changes on the ability of the PBO to achieve the goals and objectives established in the performance plan described in subsection (c) of this section.

(B) Revisions to agreement

     The Secretary and the Chief Operating Officer may revise the annual performance agreement described in subsection (d)(4) of this section in light of policy, market, or other changes that occur after the Secretary and the Chief Operating Officer enter into the agreement.

(c) Performance plan and report

(1) Performance plan

(A) In general

     Each year, the Secretary and Chief Operating Officer shall agree on, and make available to the public, a performance plan for the PBO for the succeeding 5 years that establishes measurable goals and objectives for the organization.

(B) Consultation

     In developing the 5-year performance plan and any revision to the plan, the Secretary and the Chief Operating Officer shall consult with students, institutions of higher education, Congress, lenders, the Advisory Committee on Student Financial Assistance, and other interested parties not less than 30 days prior to the implementation of the performance plan or revision.

(C) Areas

     The plan shall include a concise statement of the goals for a modernized system for the delivery of student financial assistance under subchapter IV of this chapter and part C of subchapter I of chapter 34 of title 42 and identify action steps necessary to achieve such goals. The plan shall address the PBO’s responsibilities in the following areas:

(i) Improving service

     Improving service to students and other participants in student financial aid programs authorized under this subchapter, including making those programs more understandable to students and their parents.

(ii) Reducing costs

     Reducing the costs of administering those programs.

(iii) Improvement and integration of support systems

     Improving and integrating the information and delivery systems that support those programs.

(iv) Delivery and information system

     Developing an open, common, and integrated delivery and information system for programs authorized under this subchapter.

(v) Other areas

     Any other areas identified by the Secretary.

(2) Annual report

     Each year, the Chief Operating Officer shall prepare and submit to Congress, through the Secretary, an annual report on the performance of the PBO, including an evaluation of the extent to which the PBO met the goals and objectives contained in the 5-year performance plan described in paragraph (1) for the preceding year. The annual report shall include the following:

     (A) An independent financial audit of the expenditures of both the PBO and programs administered by the PBO.

     (B) Financial and performance requirements applicable to the PBO under the Chief Financial Officer Act of 1990 and the Government Performance and Results Act of 1993.

     (C) The results achieved by the PBO during the year relative to the goals established in the organization’s performance plan.

     (D) The evaluation rating of the performance of the Chief Operating Officer and senior managers under subsections (d)(4) and (e)(2) of this section, including the amounts of bonus compensation awarded to these individuals.

     (E) Recommendations for legislative and regulatory changes to improve service to students and their families, and to improve program efficiency and integrity.

     (F) Other such information as the Director of the Office of Management and Budget shall prescribe for performance based organizations.

(3) Consultation with stakeholders

     The Chief Operating Officer, in preparing the report described in paragraph (2), shall establish appropriate means to consult with borrowers, institutions, lenders, guaranty agencies, secondary markets, and others involved in the delivery system of student aid under this subchapter—

     (A) regarding the degree of satisfaction with the delivery system; and

     (B) to seek suggestions on means to improve the delivery system.

(d) Chief Operating Officer

(1) Appointment

     The management of the PBO shall be vested in a Chief Operating Officer who shall be appointed by the Secretary to a term of not less than 3 and not more than 5 years, and compensated without regard to chapters 33, 51, and 53 of title 5. The Secretary shall appoint the Chief Operating Officer within 6 months after October 7, 1998. The appointment shall be made on the basis of demonstrated management ability and expertise in information technology, including experience with financial systems, and without regard to political affiliation or activity.

(2) Reappointment

     The Secretary may reappoint the Chief Operating Officer to subsequent terms of not less than 3 and not more than 5 years, so long as the performance of the Chief Operating Officer, as set forth in the performance agreement described in paragraph (4), is satisfactory.

(3) Removal

     The Chief Operating Officer may be removed by—

     (A) the President; or

     (B) the Secretary, for misconduct or failure to meet performance goals set forth in the performance agreement in paragraph (4).

The President or Secretary shall communicate the reasons for any such removal to the appropriate committees of Congress.

(4) Performance agreement

(A) In general

     Each year, the Secretary and the Chief Operating Officer shall enter into an annual performance agreement, that shall set forth measurable organization and individual goals for the Chief Operating Officer.

(B) Transmittal

     The final agreement, and any revision to the final agreement, shall be transmitted to the Committee on Education and the Workforce of the House of Representatives and the Committee on Labor and Human Resources of the Senate, and made publicly available.

(5) Compensation

(A) In general

     The Chief Operating Officer is authorized to be paid at an annual rate of basic pay not to exceed the maximum rate of basic pay for the Senior Executive Service under section 5382 of title 5, including any applicable locality-based comparability payment that may be authorized under section 5304(h)(2)(B) of such title. The compensation of the Chief Operating Officer shall be considered for purposes of section 207(c)(2)(A) of title 18 to be the equivalent of that described under clause (ii) of section 207(c)(2)(A) of such title.

(B) Bonus

     In addition, the Chief Operating Officer may receive a bonus in an amount that does not exceed 50 percent of such annual rate of basic pay, based upon the Secretary’s evaluation of the Chief Operating Officer’s performance in relation to the goals set forth in the performance agreement described in paragraph (2).¹

¹ So in original. Probably should be paragraph "(4)."

(C) Payment

     Payment of a bonus under this ² subparagraph (B) may be made to the Chief Operating Officer only to the extent that such payment does not cause the Chief Operating Officer’s total aggregate compensation in a calendar year to equal or exceed the amount of the President’s salary under section 102 of title 3.

² So in original. The word "this" probably should not appear.

(e) Senior management

(1) Appointment

(A) In general

     The Chief Operating Officer may appoint such senior managers as that officer determines necessary without regard to the provisions of title 5 governing appointments in the competitive service.

(B) Compensation

     The senior managers described in subparagraph (A) may be paid without regard to the provisions of chapter 51 and subchapter III of chapter 53 of such title relating to classification and General Schedule pay rates.

(2) Performance agreement

     Each year, the Chief Operating Officer and each senior manager appointed under this subsection shall enter into an annual performance agreement that sets forth measurable organization and individual goals. The agreement shall be subject to review and renegotiation at the end of each term.

(3) Compensation

(A) In general

     A senior manager appointed under this subsection may be paid at an annual rate of basic pay of not more than the maximum rate of basic pay for the Senior Executive Service under section 5382 of title 5, including any applicable locality-based comparability payment that may be authorized under section 5304(h)(2)(C) of such title. The compensation of a senior manager shall be considered for purposes of section 207(c)(2)(A) of title 18 to be the equivalent of that described under clause (ii) of section 207(c)(2)(A) of such title.

(B) Bonus

     In addition, a senior manager may receive a bonus in an amount such that the manager’s total annual compensation does not exceed 125 percent of the maximum rate of basic pay for the Senior Executive Service, including any applicable locality-based comparability payment, based upon the Chief Operating Officer’s evaluation of the manager’s performance in relation to the goals set forth in the performance agreement described in paragraph (2).

(4) Removal

     A senior manager shall be removable by the Chief Operating Officer, or by the Secretary if the position of Chief Operating Officer is vacant.

(f) Student Loan Ombudsman

(1) Appointment

     The Chief Operating Officer, in consultation with the Secretary, shall appoint a Student Loan Ombudsman to provide timely assistance to borrowers of loans made, insured, or guaranteed under subchapter IV of this chapter and part C of subchapter I of chapter 34 of title 42 by performing the functions described in paragraph (3).

(2) Public information

     The Chief Operating Officer shall disseminate information about the availability and functions of the Ombudsman to borrowers and potential borrowers, as well as institutions of higher education, lenders, guaranty agencies, loan servicers, and other participants in those student loan programs.

(3) Functions of Ombudsman

     The Ombudsman shall—

     (A) in accordance with regulations of the Secretary, receive, review, and attempt to resolve informally complaints from borrowers of loans described in paragraph (1), including, as appropriate, attempts to resolve such complaints within the Department of Education and with institutions of higher education, lenders, guaranty agencies, loan servicers, and other participants in the loan programs described in paragraph (1)(A); ³ and

³ So in original. Par. (1) does not contain a subpar. (A).

     (B) compile and analyze data on borrower complaints and make appropriate recommendations.

(4) Report

     Each year, the Ombudsman shall submit a report to the Chief Operating Officer, for inclusion in the annual report under subsection (c)(2) of this section, that describes the activities, and evaluates the effectiveness of the Ombudsman during the preceding year.

(g) Personnel flexibility

(1) Personnel ceilings

     The PBO shall not be subject to any ceiling relating to the number or grade of employees.

(2) Administrative flexibility

     The Chief Operating Officer shall work with the Office of Personnel Management to develop and implement personnel flexibilities in staffing, classification, and pay that meet the needs of the PBO, subject to compliance with title 5.

(3) Excepted service

     The Chief Operating Officer may appoint, without regard to the provisions of title 5 governing appointments in the competitive service, not more than 25 technical and professional employees to administer the functions of the PBO. These employees may be paid without regard to the provisions of chapter 51 and subchapter III of chapter 53 of such title relating to classification and General Schedule pay rates.

(h) Establishment of fair and equitable system for measuring staff performance

     The PBO shall establish an annual performance management system, subject to compliance with title 5, and consistent with applicable provisions of law and regulations, which strengthens the organizational effectiveness of the PBO by providing for establishing goals or objectives for individual, group, or organizational performance (or any combination thereof), consistent with the performance plan of the PBO and its performance planning procedures, including those established under the Government Performance and Results Act of 1993, and communicating such goals or objectives to employees.

(i) Report

     The Secretary and the Chief Operating Officer, not later than 180 days after October 7, 1998, shall report to Congress on the proposed budget and sources of funding for the operation of the PBO.

(j) Authorization of appropriations

     The Secretary shall allocate from funds made available under section 1087h of this title such funds as are appropriate to the functions assumed by the PBO. In addition, there are authorized to be appropriated such sums as may be necessary to carry out the purposes of this part, including transition costs.

(Pub. L. 89–329, title I, § 141, as added Pub. L. 105–244, title I, § 101(a), Oct. 7, 1998, 112 Stat. 1604.)

References in Text

     The Chief Financial Officer Act of 1990, referred to in subsec. (c)(2)(B), probably means the Chief Financial Officers Act of 1990, Pub. L. 101–576, Nov. 15, 1990, 104 Stat. 2838. For complete classification of this Act to the Code, see Short Title of 1990 Amendment note set out under section 501 of Title 31, Money and Finance, and Tables.

     The Government Performance and Results Act of 1993, referred to in subsecs. (c)(2)(B) and (h), is Pub. L. 103–62, Aug. 3, 1993, 107 Stat. 285, which enacted section 306 of Title 5, Government Organization and Employees, sections 1115 to 1119, 9703, and 9704 of Title 31, Money and Finance, and sections 2801 to 2805 of Title 39, Postal Service, amended section 1105 of Title 31, and enacted provisions set out as notes under sections 1101 and 1115 of Title 31. For complete classification of this Act to the Code, see Short Title of 1993 Amendment note set out under section 1101 of Title 31 and Tables.

     The provisions of title 5 governing appointments in the competitive service, referred to in subsecs. (e)(1)(A) and (g)(3), are classified generally to section 3301 et seq. of Title 5, Government Organization and Employees.

     A prior section 1018, Pub. L. 89–329, title I, § 141, as added Pub. L. 100–418, title VI, § 6201, Aug. 23, 1988, 102 Stat. 1514, set out purpose of former part D of this subchapter as being the development of student literacy corps programs, prior to the general amendment of this subchapter by Pub. L. 102–325.

     Another prior section 1018, Pub. L. 89–329, title I, § 118, as added Pub. L. 96–374, title I, § 101(a), Oct. 3, 1980, 94 Stat. 1382, defined terms used in former part D of this subchapter, prior to the general amendment of this subchapter by Pub. L. 99–498.

     Pub. L. 105–244, title VIII, § 801, Oct. 7, 1998, 112 Stat. 1803, provided that:

     "(a) Study Required.—The Comptroller General and the Secretary of Education shall convene a study group including the Secretary of the Treasury, the Director of the Office of Management and Budget, the Director of the Congressional Budget Office, representatives of entities making loans under part B of title IV of the Higher Education Act of 1965 [20 U.S.C. 1071 et seq.], representatives of other entities in the financial services community, representatives of other participants in the student loan programs, and such other individuals as the Comptroller General and the Secretary may designate. The Comptroller General and Secretary, in consultation with the study group, shall design and conduct a study to identify and evaluate means of establishing a market mechanism for the delivery of loans made pursuant to such title IV [20 U.S.C. 1070 et seq.; 42 U.S.C. 2751 et seq.].

     "(b) Design of Study.—The study required under this section shall identify not fewer than 3 different market mechanisms for use in determining lender return on student loans while continuing to meet the other objectives of the programs under parts B and D of such title IV [20 U.S.C. 1071 et seq., 1087aa et seq.], including the provision of loans to all eligible students. Consideration may be given to the use of auctions and to the feasibility of incorporating income-contingent repayment options into the student loan system and requiring borrowers to repay through income tax withholding.

     "(c) Evaluation of Market Mechanisms.—The mechanisms identified under subsection (b) shall be evaluated in terms of the following areas:

"(1) The cost or savings of loans to or for borrowers, including parent borrowers.

"(2) The cost or savings of the mechanism to the Federal Government.

"(3) The cost, effect, and distribution of Federal subsidies to or for participants in the program.

"(4) The ability of the mechanism to accommodate the potential distribution of subsidies to students through an income-contingent repayment option.

"(5) The effect on the simplicity of the program, including the effect of the plan on the regulatory burden on students, institutions, lenders, and other program participants.

"(6) The effect on investment in human capital and resources, loan servicing capability, and the quality of service to the borrower.

"(7) The effect on the diversity of lenders, including community-based lenders, originating and secondary market lenders.

"(8) The effect on program integrity.

"(9) The degree to which the mechanism will provide market incentives to encourage continuous improvement in the delivery and servicing of loans.

"(10) The availability of loans to students by region, income level, and by categories of institutions.

"(11) The proposed Federal and State role in the operation of the mechanism.

"(12) A description of how the mechanism will be administered and operated.

"(13) Transition procedures, including the effect on loan availability during a transition period.

"(14) Any other areas the study group may include.

     "(d) Preliminary Findings and Publication of Study.—Not later than November 15, 2000, the study group shall make the group’s preliminary findings, including any additional or dissenting views, available to the public with a 60-day request for public comment. The study group shall review these comments and the Comptroller General and the Secretary shall transmit a final report, including any additional or dissenting views, to the Committee on Education and the Workforce of the House of Representatives, the Committee on Labor and Human Resources of the Senate, and the Committees on the Budget of the House of Representatives and the Senate not later than May 15, 2001."

     This section is referred to in section 1018a of this title.