An Open Letter to ED's Arne Duncan: Fix Your Debt Collection Bid Process

Dear Arne,

The sky is falling.

The current Department of Education (ED) initiative to procure Private Collection Agency (PCA) services is off track, with long-term negative effects for many college students and tens of thousands of workers and their families if not corrected soon.  I addressed this letter to you because I assume you are directly involved in the procurement, since it contemplates such an important function at ED. And I have written this letter not only to frame the problem, but also to offer solutions you will read below.

To use a more colloquial euphemism, your procurement is leading ED toward a Federal student loan default cliff.  Time is simply running out. If it runs out, the result will be a massive spike in uncollected student loan defaults with no vendors under contract even attempting to get those loans in repayment.  This would no doubt greatly detract from FSA’s ability to fulfill its purported role as “Proud Sponsor of the American Mind.” (Gee, and all this time, I thought it was us taxpayers.)

To put things into proper perspective, today is the 482nd day since your procurement started in early February of last year.  Below is a list of some other historical events that shows how many days were needed to complete each.

• U.S. Constitutional Convention (May 25, 1787 to September 17, 1787): 115 Days
• Establishment of ED as Federal Department (October 17, 1979 to May 4, 1980): 199 Days
• World War II in Western Europe (June 6, 1944 to May 7, 1945): 336 Days
• Incomplete ED PCA Procurement (February 7, 2013 to June 22, 2014): 482 Days and Counting
• U.S. Involvement in World War I (April 6, 1917 to November 11, 1918): 584 Days

It says here that if you do not make awards to PCAs by the first half of September, it will have taken longer for your department to procure a service it has been outsourcing for decades than it took our Founding Fathers to establish our system of government, the Carter administration to create ED itself, and our military to defeat Germany in two world wars. (It felt like hyperbole to include the duration of time between Kennedy’s inaugural address and the first Moon landing, at 3,102 days, so I left it off the list, FYI.  I do, however, reserve the right to make mention of this again in 2021 if the procurement is not completed by then.)

I watched with great enjoyment your recent interview with Stephen Colbert. In the beginning of the interview, Colbert ironically asks, “Why do we have a Department of Education?”  On national television, you appropriately answered, “Because we need to be able to read the Constitution.” Had the audience been, say, the tens of thousands of people whose livelihood depends on getting delinquent Federal student loans in repayment (a number that includes family members of workers), who may be laid off this time next year, at great cost to them and at even greater cost to the unemployment and social service organizations that will need to step in to provide benefits for these newly-unemployed persons, you might have answered, “Because Federal student loan borrowers need to be able to read their origination docs.”

But, as we all know, reading a promissory note is one thing; honoring its terms is quite something else.  That is why it should be no surprise your default portfolio increased by more than $4 billion in the six months ending March 31, 2014, to $60 billion, even after accounting for $5.3 billion in collections and rehabilitations over the same period (Source: www.mygovwatch.com). The tsunami of defaulted student loan volume brought on by the Health Care and Education Reconciliation Act of 2010 is hardly in sight of shore yet, but is already poised to test your PCA vendors in a way never before seen.

As you must have heard, the duration of the procurement is not the only complaint people have had.  You have faced a half dozen protests (including one lawsuit) so far, and a single award has yet to be made.  And those actions have largely been successful when viewed from the vantage point of the aggrieved party; most that protested or sued your department because they were not invited to compete were recently rewarded with an invitation to compete.  So even though the PCA incumbents who were forced to protest to secure an invitation should have been invited on merit in the first place, you have created a precedent here, one similar to something that happened in my home last week. My four-year old demanded a chocolate peanut butter cup from me, after I had just given one to his younger brother.  Once my older son screamed loudly enough, I decided it was best to just give him the candy.

Arne, I realize anyone can state a problem.  That’s the easy part.  I am here to offer up a couple solutions.  Solutions that get contracts in place quickly.  Ones that avoid more time-consuming litigation with those who would not otherwise win an award.  Ones that would stimulate the national economy to the tune of more than $600 million.  And ones that will co-opt the good bits of your Race to the Top initiative and apply them to this procurement.

Leave no PCA behind. Hire everyone.