WHY WAS THIS FUNDED?

The federal government is required by law to manage and recover money lent through federal student loan programs, and it needs a contractor with the technology and staff to handle that at a large scale. The Department of Education uses contracts like this to carry out those legal obligations.

WHAT PUBLIC PROBLEM IS IT TRYING TO SOLVE?

Millions of Americans have borrowed federal student loans, and some borrowers stop making payments or default, meaning the government does not get repaid money that taxpayers funded in the first place. This system is meant to track that debt and help recover funds so the loan program can continue operating.

WHO BENEFITS?

Federal student loan borrowers in default are directly affected, as this system determines how the government contacts them and pursues repayment. Taxpayers also benefit indirectly when defaulted loan money is recovered, since the student loan program is funded with public dollars.

WHAT ARE THE RISKS?

A contract of this size running for over 13 years carries risks of cost overruns, limited competition, and reduced incentives for the contractor to perform efficiently. There are also concerns about how debt collection practices affect borrowers, particularly those facing financial hardship.

WHAT HAPPENS IF FUNDING IS REMOVED?

Without this contract, the Department of Education would lose the system and staff used to track and collect on defaulted student loans, potentially leaving billions of dollars in debt unmanaged. The government would need to quickly find another way to handle debt collection, which could cause significant delays and financial losses.

ARGUMENTS FOR

• •The federal government is legally obligated to recover defaulted loan funds, and having a dedicated system and contractor helps fulfill that responsibility efficiently.
• •Recovering defaulted student loan money helps protect taxpayers who funded those loans and keeps the federal student aid program financially sustainable.
• •MAXIMUS has experience running large government programs, which may reduce the learning curve and operational errors compared to building a system from scratch.

ARGUMENTS AGAINST

• •A single long-term contract worth nearly $893 million with one company limits competition and may result in the government paying more than necessary over time.
• •Debt collection systems can put significant pressure on borrowers who are already struggling financially, raising concerns about fairness and consumer protection.
• •The length and size of the contract make it difficult for the government to change course quickly if the contractor underperforms or if policy priorities around student debt change.