Third-party Servicer Program Reviews

Third-party Servicer Program Reviews

The Higher Education Act of 1965, as amended (HEA), allows institutions of higher education to outsource any aspect of the institution’s participation in federal student aid programs, including, but not limited to, services and functions necessary

  • for the institution to remain eligible to participate in the federal student aid programs,
  • to determine a student’s eligibility for federal student aid,
  • to account for federal student aid funds,
  • to deliver federal student aid to students, or
  • to perform any other aspect of the administration of the federal student aid programs.

A third-party servicer may be an individual, a state, or a private, profit or non-profit organization that enters into a contract with an eligible institution to administer, through manual or automated processing, any aspect of the institution’s participation in any federal student aid programs. When contracting with an institution, a third-party servicer and/or its contractors must comply with the various Title IV requirements applicable to its servicing agreement with the school. A third-party servicer is jointly and severally liable with the institution for any violation of Title IV requirements resulting from the functions performed by the third-party servicer.

The Title IV regulations authorize the U.S. Department of Education (ED) to provide oversight of third-party servicers. As part of its oversight duties, Federal Student Aid (FSA) routinely conducts program reviews to confirm that third-party servicers and the schools that they contract with meet FSA requirements for institutional eligibility, financial responsibility, and administrative capability. During program reviews, reviewers evaluate the third-party servicers’ and schools’ compliance with FSA requirements, assess liabilities for errors in performance, and identify actions the third-party servicers and their partner schools must take to improve future administrative capabilities.

After completing a program review, FSA issues a Final Program Review Determination (FPRD), which is a report that includes each specific finding, the third party servicer’s response, and ED’s final determination.

The FPRD also

  • identifies liabilities, if any, calculated based on the findings of the program review;
  • provides instructions for the payment of liabilities, as appropriate;
  • notifies the third-party servicer of its right to appeal the existence and amount of any liabilities identified, as appropriate; and
  • closes the program review, if appropriate.

The FPRD may or may not require additional action by the third-party servicer.

Future FPRDs will be posted regularly.

Below are the FPRDs issued to third-party servicers by ED:

  1. Commerce Bank: issued February 2016
  2. US Bank: issued May 2017
  3. Wells Fargo: issued June 2017
  4. Nelnet Business Solutions, Incorporated: issued September 2017
  5. Student Aid Administrators: issued August 2018
  6. Educational Management Services, Incorporated: issued August 2018
  7. Alliance Aid for Student Aid Processing: issued September 2018
  8. Higher One/Customers Bank: issued September 2018