James Runcie, who led the Office of Federal Student Aid for the past seven years as chief operating officer, abruptly resigned from his position on Tuesday night.
FSA manages the federal government’s $1.2 trillion student loan portfolio and disburses Pell grants. Although it is housed within the Department of Education, FSA maintains some autonomy and flexibility as a federal performance-based organization.
In an email sent to his staff, obtained by the Washington Post, Runcie explained that his resignation was precipitated by conflicts with Education Secretary Betsy DeVos. According to Runcie’s email, DeVos had requested that Runcie testify before a House Oversight Committee hearing on improper payment of student loans on Thursday.
Runcie said that he declined to testify, stating that Jay Hurt, FSA chief financial officer, would be the appropriate person to comment on such matters. “In less dire circumstances, I would consider testifying as I have done on five previous occasions,” he wrote.
Runcie explained that new processes under DeVos’ leadership had constrained FSA’s ability to “deliver on its mission” and manage all of the activities that FSA is responsible for. Under DeVos, decisions that were previously made at the FSA level now required Department approval, which hindered FSA’s efficacy, in Runcie’s view.
“Once at the Department level, the decision making framework and process is not clear to anyone at FSA and the cycle time continues to increase risk for our work streams and stakeholders,” Runcie wrote.
In statement on Wednesday, House Oversight Committee Chairman Jason Chaffetz said that it was “disappointing” that Runcie had chosen to resign rather than testify before Congress.
“Under his leadership federal student aid systems are less secure, performance has suffered, and improper payments have increased,” Chaffetz said. He called on the Secretary to appoint someone who “values security and competency over politics” to the role. Last
Runcie was an Obama-era hold out, first appointed to the position in 2011 and then quietly reappointed in late December 2015 in one of outgoing Arne Duncan’s last acts as Education Secretary. The FSA COO is appointed to a term of three to five years, so Runcie’s term ostensibly could have lasted up until 2020.
According to the Department, Matthew Sessa, deputy chief operating officer, will lead FSA “until further notice.” The FSA COO is appointed by the Education Secretary, so DeVos will now have the final say over who will lead the agency.
“The thing that we are most concerned about as advocates for borrowers is the Trump administration’s track record so far of appointing individuals to important positions that have outside financial interests and conflicts of interest,” Colleen Campbell, associate director of postsecondary education at the Center for American Progress said on Wednesday. “We’re concerned that someone could be appointed into the Office of Federal Student Aid that has either discreet or overt connections with federal contractors such as loan servicers or for-profit colleges.”
The appointment of a new FSA COO is particularly sensitive because the Department just released an amended contract solicitation agreement on Friday. The new contract would award FSA’s student loan portfolio to a single loan servicer.
“With Jim Runcie’s exit from FSA, it is now critically important that we get the right person to fill the role of Chief Operating Officer,” Justin Draeger, National Association of Student Financial Aid Administrators (NASFAA) president, said in a statement sent to Diverse.
In a report published on May 16, NASFAA concluded that organizational and structural changes are needed at FSA. The report found that there is too little oversight over FSA, and recommended that the education secretary take on more of a supervisory role over its workings. In addition, the report called for an independent, seven-member oversight board that would report directly to the public, the Secretary, and to Congress.
“As the Secretary thinks about the next person, she has an opportunity to more fully engage stakeholders in the selection process to ensure a successful and collaborative partnership between FSA and the higher education community,” Draeger said.
Draeger is slated to testify at the House Oversight Committee hearing today, along with Kathleen Tighe, ED Inspector General.
Staff writer Catherine Morris can be reached at [email protected].