WASHINGTON — James Runcie’s resignation as chief operating officer of the Office of Federal Student Aid was the subject of heated discussion at a House Oversight and Government Reform Committee meeting on Thursday.
Runcie abruptly resigned as COO on Tuesday night, a position he had held for the past seven years. In an email sent to his staff on Tuesday, obtained by the Washington Post, Runcie said his resignation was precipitated by Education Secretary Betsy DeVos’ request that he testify before Congress on Thursday regarding improper payments in student aid.
Runcie said in the email that Jay Hurt, chief financial officer at FSA, was prepared to testify in his stead and that he had not “heard a single compelling reason” from DeVos’ staff regarding why he should attend the hearing.
The hearing in question related to improper payments made in FSA’s Direct Loans and Pell grant programs. FSA manages a portfolio of student loans that now totals nearly $1.3 trillion and distributes approximately $125 billion in student aid annually.
According to the Department’s Office of Inspector General, revised estimates indicate that improper payments made in the Direct Loan program increased from $1.28 billion in 2015 to $3.86 billion in 2016. With regards to Pell, improper payments went from $562 million to $2.21 billion during the same period.
An improper payment, according to department terminology, is any student aid payment that should not have been made, was too high or too low, or was made in error. Some payments are the result of fraudulent activity, either by individuals misrepresenting themselves or by fraud rings.
A major source of improper payments, however, come from “unverified, self-reported financial data provided by aid applicants,” according to Justin Draeger, president of the National Association of Student Aid Administrators (NASFAA), who testified on Thursday.
The IRS Data Retrieval Tool was a recent effort to streamline the process of applying for federal financial aid. The data retrieval tool automatically filled in portions of the FAFSA form using IRS data, ensuring the veracity of the information applicants were submitting to FSA.
In March, however, the IRS determined that the tool was being hacked by individuals attempting to file fraudulent returns. As a result, the DRT was taken offline, and will not be up and running until October. In the meantime, students will have to fill in the FAFSA manually or submit signed paper copies of their IRS tax returns.
The DRT was a “win-win” for FSA, Hurt said on Thursday, adding that its absence will hinder FSA’s ability to reduce improper payments.
“We do expect that there will be some impact on improper payments,” Hurt said. “That’s a given. That’s what the DRT was meant to do.”
According to Kathleen Tighe, ED Inspector General, who testified on Thursday, ED is one of the five departments with the greatest share of responsibility for the $144 billion in improper payments the federal government made in 2016.
Tighe acknowledged that FSA was attempting to rectify some of its previous processes. “For the most part, I would say until this last year our recommendations made in IPERA reports weren’t always necessarily followed,” she said. “That changed this past year.” IPERA refers to three bills passed by Congress in an attempt to crack down on improper payments.
Committee members shed some light on the events leading up to Runcie’s resignation on Tuesday. Rep. Jim Jordan (R. Ohio) said that prior to Runcie’s resignation the committee was considering subpoenaing him to appear at Thursday’s hearing.
According to committee members, that option is still on the table. “I think, Mr. Chairman, we should go ahead and subpoena the guy, and bring him in here to answer some of these questions,” Jordan said.
Bonuses Runcie received over the past six years totaling $432,815 as FSA COO also underwent the committee’s scrutiny. Runcie received a $75,000 bonus in 2016 alone.
“Frankly, whoever was responsible, my guess it was Mr. Duncan, the former Secretary of Education, ultimately in allowing these bonus payments to be given to Mr. Runcie, should be in front of this committee as well,” Jordan said. “Why was he given this kind of bonus of tax payer dollars when billions of tax payer dollars going unaccounted for … under his watch?”
Runcie served under former Education Secretary John King, who served for the final year of the Obama presidency, and Arne Duncan, who reappointed him to the FSA COO post in 2015.
After the hearing adjourned, Rep. Mark Meadows (R-N.C.) told reporters that the committee gave Runcie 20 days to respond to their request that he testify, but rather than appear as a witness, Runcie had chosen to resign. Committee members would continue to discuss whether to subpoena Runcie for a future hearing, according to Meadows.
“In light of the testimony, I think there’s some gaps in potential issues that I think would be best answered by him,” Meadows said.
Staff writer Catherine Morris can be reached at [email protected]. A.K. Brunini contributed to this report.