Education revamps loan systems with 'share-in-savings' contract

Education revamps loan systems with 'share-in-savings' contract

By Tony Lee Orr

GCN Staff

The modernization of the Education Department's student loan systems won't cost the department a dime under an innovative contract.

Andersen Consulting of Chicago will integrate and simplify the Office of Student Financial Assistance's Central Data System under a share-in-savings contract, keeping a percentage of the savings created by the overhaul as its reward, SFA chief operating officer Greg Woods said late last month.


Five of the 12 functions performed by the Central Data System will be retired during integration of systems that now handle student loan processing.


The system upgrade is expected to save the department between $40 million and $50 million over four years, he said. Andersen will pocket a percentage of the savings, based on a sliding scale. The maximum the company will be paid is $14.4 million over a three-year period, Woods said.

Andersen will take 47 percent of the savings in fiscal 2001, 45 percent in fiscal 2002 and 41 percent in fiscal 2003, according to the department. Education will keep all the savings reaped during the final year of the project.

The integration of the system, which services student loans for the Federal Direct Loan Program, calls for the elimination of redundant editing and processing, Woods said. The contract, signed on July 19, will lead to the closure of one legacy system, he said.

Central to support

The Central Data System was originally designed to support a multiple loan servicer environment, supporting 4.5 million borrowers each year, Woods said.

Three years ago, Education postponed implementation of the multiservicer environment but maintained the system to keep the option viable, Woods said. Later, other functions, such as electronic debit accounting, were added.


Education's Greg Woods says the integration will eliminate redundancies.


The 12 main loan processing applications run on an IBM S/390 under OS/390. The data is stored in an IBM DB2 database. Through the systems upgrade, Education will retire five of the processes that other systems duplicate; the remaining seven applications will be integrated into other systems.

The editing, transaction routing, incoming contingent repayment waivers, system balancing, and loan origination and loan servicing images are all duplicated on other systems and will be retired.

School file updates and maintenance will be moved to the Loan Origination System, which resides on a Hewlett-Packard 9000 server running HP-UX. That system uses a database from Informix Corp. of Menlo Park, Calif.

The Direct Loan Servicing System will absorb data storage and transformation, incoming transactions, electronic debit accounting, interface support, and the routing of loan origination and loan consolidation information.

The system runs on a series of Compaq Alpha and Digital Equipment Corp. VAX servers, all running Open VMS and Oracle Rdb databases.

Delinquency reporting will be provided through a new data warehouse that will run on a Hewlett-Packard V-class server under HP-UX and will use an Oracle8i database.

The data warehouse will use MicroStrategies Version 6, a warehousing application from Micro Strategies Inc. of Denville, N.J. To extract data, Education will use PowerCenter Version 1.7 from Informatica of Palo Alto, Calif.

ACS Government Solutions Group Inc. of Rockville, Md., will oversee the data warehouse project.

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