ED Update: 2008 Contract Stakes are Higher

When the new contract to collect federally-backed student loans is awarded in September by the U.S. Department of Education, it will most likely be the last time new collection agencies are brought into the fold for quite a while, according to ED officials speaking Tuesday at the department’s pre-solicitation conference in Washington, D.C.

“This contract will run longer than the current contract,” said Mike Whisler, contracting officer for ED’s collection contract. “We really want this to be it for a while.”

Already a three-year-long affair, the newly-extended length of the contract is the result of new rules that will allow ED to extend a collector’s tenure on the contract for up to 24 months in 6 month increments.

Officials said that there may be a “refresh” competition for additional collection contractors in 2012 or 2014, but Whisler said that even that process will not approach the scope of the current contract competition.

Collection agencies working on the current contract also have the potential to be extended an additional six months. The contract is due to expire in March 2009, but some agencies may be asked to stay on longer if they do not win a place on the 2008 contract. There will be significant overlap between the two contracts with the 2008 winners receiving placements in January 2009, according to Richard Galloway, contracting officer’s representative for ED’s Federal Student Aid department. The overlap will allow the overflow accounts to be collected as the 2008 contract winners are brought up to speed, said Galloway.

The winners of the 2008 contract will be ramped-up in a more gradual way than ever before, explained Galloway.

Another change coming to the ED will see the department’s evaluation system add another scoring criterion – Service Quality Measure. Currently, collectors are scored based on performance in three categories: dollars collected (70 percent of score), accounts serviced (20 percent), and administrative resolutions (10 percent).

Service Quality Measure is based on ED’s current Customer Service Bonus measure and will gauge how well collectors interact with debtors. The new weighs of the scores were not revealed at the conference, but Galloway said that dollars collected would “probably account for somewhere close to two-thirds of the total score.”