Education hires ACS for loan services

Affiliated Computer Services Inc. has won a contract that could be worth more than $2 billion over 10 years to process Education Department student loans, the company said Thursday.

The Common Services for Borrowers contract is worth $1 billion over five years and has five one-year options worth another $1 billion. The contract begins Jan. 1.

The contract integrates a number of separate services, including comprehensive loan servicing, consolidation and portfolio management services that will allow the department to increase service quality while lowering overall program costs, the company said.

ACS has been providing business process management services, including systems development, integration, operations and customer service, to the Education Department's direct-loan program since 1993. With the new contract, the department will modernize the servicing system and shift the contract to a performance-based arrangement.

ACS will service a portfolio of more than $95 billion in loans to more than 9 million student aid borrowers.

Included on ACS' team of subcontractors are EDS Inc. of Plano, Texas; Pearson Government Solutions, a division of NCS Pearson Inc. of Bloomington, Minn.; Raytheon Co. of Lexington, Mass.; and more than 30 small and minority-owned businesses.

This contract is not part of a deal ACS announced in August to sell its federal business to Lockheed Martin Corp. and acquire Lockheed Martin's commercial business. The deal is expected to close by the end of November, an ACS spokesman said.

ACS also is holding onto the unit handling the company's troubled contracts at Hanscom Air Force Base, Mass.

Based in Dallas, ACS reported 2002 revenue of $3.1 billion. The company employs more than 40,000 people.

In its own announcement, EDS said its subcontracting agreement with ACS is valued at approximately $180 million over the initial five years.

Patience Wait writes for Washington Technology magazine.

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