 
      CHAPTER 28--HIGHER EDUCATION RESOURCES AND STUDENT ASSISTANCE
 
                    SUBCHAPTER I--GENERAL PROVISIONS
 
  Part D--Administrative Provisions for Delivery of Student Financial 
                               Assistance
 
Sec. 1018. Performance-Based Organization for delivery of 
        Federal student financial assistance
        

(a) Establishment and purpose

                          (1) Establishment

        There is established in the Department a Performance-Based 
    Organization (hereafter referred to as the ``PBO'') which shall be a 
    discrete management unit responsible for managing the operational 
    functions supporting the programs authorized under subchapter IV of 
    this chapter and part C of subchapter I of chapter 34 of title 42, 
    as specified in subsection (b) of this section.

                            (2) Purposes

        The purposes of the PBO are--
            (A) to improve service to students and other participants in 
        the student financial assistance programs authorized under 
        subchapter IV of this chapter and part C of subchapter I of 
        chapter 34 of title 42, including making those programs more 
        understandable to students and their parents;
            (B) to reduce the costs of administering those programs;
            (C) to increase the accountability of the officials 
        responsible for administering the operational aspects of these 
        programs;
            (D) to provide greater flexibility in the management of the 
        operational functions of the Federal student financial 
        assistance programs;
            (E) to integrate the information systems supporting the 
        Federal student financial assistance programs;
            (F) to implement an open, common, integrated system for the 
        delivery of student financial assistance under subchapter IV of 
        this chapter and part C of subchapter I of chapter 34 of title 
        42; and
            (G) to develop and maintain a student financial assistance 
        system that contains complete, accurate, and timely data to 
        ensure program integrity.

(b) General authority

                     (1) Authority of Secretary

        Notwithstanding any other provision of this part, the Secretary 
    shall maintain responsibility for the development and promulgation 
    of policy and regulations relating to the programs of student 
    financial assistance under subchapter IV of this chapter and part C 
    of subchapter I of chapter 34 of title 42. In the exercise of its 
    functions, the PBO shall be subject to the direction of the 
    Secretary. The Secretary shall--
            (A) request the advice of, and work in cooperation with, the 
        Chief Operating Officer in developing regulations, policies, 
        administrative guidance, or procedures affecting the information 
        systems administered by the PBO, and other functions performed 
        by the PBO;
            (B) request cost estimates from the Chief Operating Officer 
        for system changes required by specific policies proposed by the 
        Secretary; and
            (C) assist the Chief Operating Officer in identifying goals 
        for the administration and modernization of the delivery system 
        for student financial assistance under subchapter IV of this 
        chapter and part C of subchapter I of chapter 34 of title 42.

                          (2) PBO functions

        Subject to paragraph (1), the PBO shall be responsible for 
    administration of the information and financial systems that support 
    student financial assistance programs authorized under this 
    subchapter, excluding the development of policy relating to such 
    programs but including the following:
            (A) The administrative, accounting, and financial management 
        functions of the delivery system for Federal student assistance, 
        including--
                (i) the collection, processing and transmission of 
            applicant data to students, institutions and authorized 
            third parties, as provided for in section 1090 of this 
            title;
                (ii) design and technical specifications for software 
            development and systems supporting the delivery of student 
            financial assistance under subchapter IV of this chapter and 
            part C of subchapter I of chapter 34 of title 42;
                (iii) all software and hardware acquisitions and all 
            information technology contracts related to the delivery and 
            management of student financial assistance under subchapter 
            IV of this chapter and part C of subchapter I of chapter 34 
            of title 42;
                (iv) all aspects of contracting for the information and 
            financial systems supporting student financial assistance 
            programs under this subchapter; and
                (v) providing all customer service, training, and user 
            support related to systems that support those programs.

            (B) Annual development of a budget for the operations and 
        services of the PBO, in consultation with the Secretary, and for 
        consideration and inclusion in the Department's annual budget 
        submission.

                      (3) Additional functions

        The Secretary may allocate to the PBO such additional functions 
    as the Secretary and the Chief Operating Officer determine are 
    necessary or appropriate to achieve the purposes of the PBO.

                          (4) Independence

        Subject to paragraph (1), in carrying out its functions, the PBO 
    shall exercise independent control of its budget allocations and 
    expenditures, personnel decisions and processes, procurements, and 
    other administrative and management functions.

                        (5) Audits and review

        The PBO shall be subject to the usual and customary Federal 
    audit procedures and to review by the Inspector General of the 
    Department.

                             (6) Changes

        (A) In general

            The Secretary and the Chief Operating Officer shall consult 
        concerning the effects of policy, market, or other changes on 
        the ability of the PBO to achieve the goals and objectives 
        established in the performance plan described in subsection (c) 
        of this section.

        (B) Revisions to agreement

            The Secretary and the Chief Operating Officer may revise the 
        annual performance agreement described in subsection (d)(4) of 
        this section in light of policy, market, or other changes that 
        occur after the Secretary and the Chief Operating Officer enter 
        into the agreement.

(c) Performance plan and report

                        (1) Performance plan

        (A) In general

            Each year, the Secretary and Chief Operating Officer shall 
        agree on, and make available to the public, a performance plan 
        for the PBO for the succeeding 5 years that establishes 
        measurable goals and objectives for the organization.

        (B) Consultation

            In developing the 5-year performance plan and any revision 
        to the plan, the Secretary and the Chief Operating Officer shall 
        consult with students, institutions of higher education, 
        Congress, lenders, the Advisory Committee on Student Financial 
        Assistance, and other interested parties not less than 30 days 
        prior to the implementation of the performance plan or revision.

        (C) Areas

            The plan shall include a concise statement of the goals for 
        a modernized system for the delivery of student financial 
        assistance under subchapter IV of this chapter and part C of 
        subchapter I of chapter 34 of title 42 and identify action steps 
        necessary to achieve such goals. The plan shall address the 
        PBO's responsibilities in the following areas:
            (i) Improving service

                Improving service to students and other participants in 
            student financial aid programs authorized under this 
            subchapter, including making those programs more 
            understandable to students and their parents.
            (ii) Reducing costs

                Reducing the costs of administering those programs.
            (iii) Improvement and integration of support systems

                Improving and integrating the information and delivery 
            systems that support those programs.
            (iv) Delivery and information system

                Developing an open, common, and integrated delivery and 
            information system for programs authorized under this 
            subchapter.
            (v) Other areas

                Any other areas identified by the Secretary.

                          (2) Annual report

        Each year, the Chief Operating Officer shall prepare and submit 
    to Congress, through the Secretary, an annual report on the 
    performance of the PBO, including an evaluation of the extent to 
    which the PBO met the goals and objectives contained in the 5-year 
    performance plan described in paragraph (1) for the preceding year. 
    The annual report shall include the following:
            (A) An independent financial audit of the expenditures of 
        both the PBO and programs administered by the PBO.
            (B) Financial and performance requirements applicable to the 
        PBO under the Chief Financial Officer Act of 1990 and the 
        Government Performance and Results Act of 1993.
            (C) The results achieved by the PBO during the year relative 
        to the goals established in the organization's performance plan.
            (D) The evaluation rating of the performance of the Chief 
        Operating Officer and senior managers under subsections (d)(4) 
        and (e)(2) of this section, including the amounts of bonus 
        compensation awarded to these individuals.
            (E) Recommendations for legislative and regulatory changes 
        to improve service to students and their families, and to 
        improve program efficiency and integrity.
            (F) Other such information as the Director of the Office of 
        Management and Budget shall prescribe for performance based 
        organizations.

                 (3) Consultation with stakeholders

        The Chief Operating Officer, in preparing the report described 
    in paragraph (2), shall establish appropriate means to consult with 
    borrowers, institutions, lenders, guaranty agencies, secondary 
    markets, and others involved in the delivery system of student aid 
    under this subchapter--
            (A) regarding the degree of satisfaction with the delivery 
        system; and
            (B) to seek suggestions on means to improve the delivery 
        system.

(d) Chief Operating Officer

                           (1) Appointment

        The management of the PBO shall be vested in a Chief Operating 
    Officer who shall be appointed by the Secretary to a term of not 
    less than 3 and not more than 5 years, and compensated without 
    regard to chapters 33, 51, and 53 of title 5. The Secretary shall 
    appoint the Chief Operating Officer within 6 months after October 7, 
    1998. The appointment shall be made on the basis of demonstrated 
    management ability and expertise in information technology, 
    including experience with financial systems, and without regard to 
    political affiliation or activity.

                          (2) Reappointment

        The Secretary may reappoint the Chief Operating Officer to 
    subsequent terms of not less than 3 and not more than 5 years, so 
    long as the performance of the Chief Operating Officer, as set forth 
    in the performance agreement described in paragraph (4), is 
    satisfactory.

                             (3) Removal

        The Chief Operating Officer may be removed by--
            (A) the President; or
            (B) the Secretary, for misconduct or failure to meet 
        performance goals set forth in the performance agreement in 
        paragraph (4).

    The President or Secretary shall communicate the reasons for any 
    such removal to the appropriate committees of Congress.

                      (4) Performance agreement

        (A) In general

            Each year, the Secretary and the Chief Operating Officer 
        shall enter into an annual performance agreement, that shall set 
        forth measurable organization and individual goals for the Chief 
        Operating Officer.

        (B) Transmittal

            The final agreement, and any revision to the final 
        agreement, shall be transmitted to the Committee on Education 
        and the Workforce of the House of Representatives and the 
        Committee on Labor and Human Resources of the Senate, and made 
        publicly available.

                          (5) Compensation

        (A) In general

            The Chief Operating Officer is authorized to be paid at an 
        annual rate of basic pay not to exceed the maximum rate of basic 
        pay for the Senior Executive Service under section 5382 of title 
        5, including any applicable locality-based comparability payment 
        that may be authorized under section 5304(h)(2)(B) of such 
        title. The compensation of the Chief Operating Officer shall be 
        considered for purposes of section 207(c)(2)(A) of title 18 to 
        be the equivalent of that described under clause (ii) of section 
        207(c)(2)(A) of such title.

        (B) Bonus

            In addition, the Chief Operating Officer may receive a bonus 
        in an amount that does not exceed 50 percent of such annual rate 
        of basic pay, based upon the Secretary's evaluation of the Chief 
        Operating Officer's performance in relation to the goals set 
        forth in the performance agreement described in paragraph 
        (2).\1\
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    \1\ So in original. Probably should be paragraph ``(4).''
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        (C) Payment

            Payment of a bonus under this \2\ subparagraph (B) may be 
        made to the Chief Operating Officer only to the extent that such 
        payment does not cause the Chief Operating Officer's total 
        aggregate compensation in a calendar year to equal or exceed the 
        amount of the President's salary under section 102 of title 3.
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    \2\ So in original. The word ``this'' probably should not appear.
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(e) Senior management

                           (1) Appointment

        (A) In general

            The Chief Operating Officer may appoint such senior managers 
        as that officer determines necessary without regard to the 
        provisions of title 5 governing appointments in the competitive 
        service.

        (B) Compensation

            The senior managers described in subparagraph (A) may be 
        paid without regard to the provisions of chapter 51 and 
        subchapter III of chapter 53 of such title relating to 
        classification and General Schedule pay rates.

                      (2) Performance agreement

        Each year, the Chief Operating Officer and each senior manager 
    appointed under this subsection shall enter into an annual 
    performance agreement that sets forth measurable organization and 
    individual goals. The agreement shall be subject to review and 
    renegotiation at the end of each term.

                          (3) Compensation

        (A) In general

            A senior manager appointed under this subsection may be paid 
        at an annual rate of basic pay of not more than the maximum rate 
        of basic pay for the Senior Executive Service under section 5382 
        of title 5, including any applicable locality-based 
        comparability payment that may be authorized under section 
        5304(h)(2)(C) of such title. The compensation of a senior 
        manager shall be considered for purposes of section 207(c)(2)(A) 
        of title 18 to be the equivalent of that described under clause 
        (ii) of section 207(c)(2)(A) of such title.

        (B) Bonus

            In addition, a senior manager may receive a bonus in an 
        amount such that the manager's total annual compensation does 
        not exceed 125 percent of the maximum rate of basic pay for the 
        Senior Executive Service, including any applicable locality-
        based comparability payment, based upon the Chief Operating 
        Officer's evaluation of the manager's performance in relation to 
        the goals set forth in the performance agreement described in 
        paragraph (2).

                             (4) Removal

        A senior manager shall be removable by the Chief Operating 
    Officer, or by the Secretary if the position of Chief Operating 
    Officer is vacant.

(f) Student Loan Ombudsman

                           (1) Appointment

        The Chief Operating Officer, in consultation with the Secretary, 
    shall appoint a Student Loan Ombudsman to provide timely assistance 
    to borrowers of loans made, insured, or guaranteed under subchapter 
    IV of this chapter and part C of subchapter I of chapter 34 of title 
    42 by performing the functions described in paragraph (3).

                       (2) Public information

        The Chief Operating Officer shall disseminate information about 
    the availability and functions of the Ombudsman to borrowers and 
    potential borrowers, as well as institutions of higher education, 
    lenders, guaranty agencies, loan servicers, and other participants 
    in those student loan programs.

                     (3) Functions of Ombudsman

        The Ombudsman shall--
            (A) in accordance with regulations of the Secretary, 
        receive, review, and attempt to resolve informally complaints 
        from borrowers of loans described in paragraph (1), including, 
        as appropriate, attempts to resolve such complaints within the 
        Department of Education and with institutions of higher 
        education, lenders, guaranty agencies, loan servicers, and other 
        participants in the loan programs described in paragraph (1)(A); 
        \3\ and
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    \3\ So in original. Par. (1) does not contain a subpar. (A).
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            (B) compile and analyze data on borrower complaints and make 
        appropriate recommendations.

                             (4) Report

        Each year, the Ombudsman shall submit a report to the Chief 
    Operating Officer, for inclusion in the annual report under 
    subsection (c)(2) of this section, that describes the activities, 
    and evaluates the effectiveness of the Ombudsman during the 
    preceding year.

(g) Personnel flexibility

                       (1) Personnel ceilings

        The PBO shall not be subject to any ceiling relating to the 
    number or grade of employees.

                   (2) Administrative flexibility

        The Chief Operating Officer shall work with the Office of 
    Personnel Management to develop and implement personnel 
    flexibilities in staffing, classification, and pay that meet the 
    needs of the PBO, subject to compliance with title 5.

                        (3) Excepted service

        The Chief Operating Officer may appoint, without regard to the 
    provisions of title 5 governing appointments in the competitive 
    service, not more than 25 technical and professional employees to 
    administer the functions of the PBO. These employees may be paid 
    without regard to the provisions of chapter 51 and subchapter III of 
    chapter 53 of such title relating to classification and General 
    Schedule pay rates.

(h) Establishment of fair and equitable system for measuring staff 
        performance

    The PBO shall establish an annual performance management system, 
subject to compliance with title 5, and consistent with applicable 
provisions of law and regulations, which strengthens the organizational 
effectiveness of the PBO by providing for establishing goals or 
objectives for individual, group, or organizational performance (or any 
combination thereof), consistent with the performance plan of the PBO 
and its performance planning procedures, including those established 
under the Government Performance and Results Act of 1993, and 
communicating such goals or objectives to employees.

(i) Report

    The Secretary and the Chief Operating Officer, not later than 180 
days after October 7, 1998, shall report to Congress on the proposed 
budget and sources of funding for the operation of the PBO.

(j) Authorization of appropriations

    The Secretary shall allocate from funds made available under section 
1087h of this title such funds as are appropriate to the functions 
assumed by the PBO. In addition, there are authorized to be appropriated 
such sums as may be necessary to carry out the purposes of this part, 
including transition costs.

(Pub. L. 89-329, title I, Sec. 141, as added Pub. L. 105-244, title I, 
Sec. 101(a), Oct. 7, 1998, 112 Stat. 1604.)

                       References in Text

    The Chief Financial Officer Act of 1990, referred to in subsec. 
(c)(2)(B), probably means the Chief Financial Officers Act of 1990, Pub. 
L. 101-576, Nov. 15, 1990, 104 Stat. 2838. For complete classification 
of this Act to the Code, see Short Title of 1990 Amendment note set out 
under section 501 of Title 31, Money and Finance, and Tables.
    The Government Performance and Results Act of 1993, referred to in 
subsecs. (c)(2)(B) and (h), is Pub. L. 103-62, Aug. 3, 1993, 107 Stat. 
285, which enacted section 306 of Title 5, Government Organization and 
Employees, sections 1115 to 1119, 9703, and 9704 of Title 31, Money and 
Finance, and sections 2801 to 2805 of Title 39, Postal Service, amended 
section 1105 of Title 31, and enacted provisions set out as notes under 
sections 1101 and 1115 of Title 31. For complete classification of this 
Act to the Code, see Short Title of 1993 Amendment note set out under 
section 1101 of Title 31 and Tables.
    The provisions of title 5 governing appointments in the competitive 
service, referred to in subsecs. (e)(1)(A) and (g)(3), are classified 
generally to section 3301 et seq. of Title 5, Government Organization 
and Employees.


                            Prior Provisions

    A prior section 1018, Pub. L. 89-329, title I, Sec. 141, as added 
Pub. L. 100-418, title VI, Sec. 6201, Aug. 23, 1988, 102 Stat. 1514, set 
out purpose of former part D of this subchapter as being the development 
of student literacy corps programs, prior to the general amendment of 
this subchapter by Pub. L. 102-325.
    Another prior section 1018, Pub. L. 89-329, title I, Sec. 118, as 
added Pub. L. 96-374, title I, Sec. 101(a), Oct. 3, 1980, 94 Stat. 1382, 
defined terms used in former part D of this subchapter, prior to the 
general amendment of this subchapter by Pub. L. 99-498.


       Study of Market Mechanisms in Federal Student Loan Programs

    Pub. L. 105-244, title VIII, Sec. 801, Oct. 7, 1998, 112 Stat. 1803, 
provided that:
    ``(a) Study Required.--The Comptroller General and the Secretary of 
Education shall convene a study group including the Secretary of the 
Treasury, the Director of the Office of Management and Budget, the 
Director of the Congressional Budget Office, representatives of entities 
making loans under part B of title IV of the Higher Education Act of 
1965 [20 U.S.C. 1071 et seq.], representatives of other entities in the 
financial services community, representatives of other participants in 
the student loan programs, and such other individuals as the Comptroller 
General and the Secretary may designate. The Comptroller General and 
Secretary, in consultation with the study group, shall design and 
conduct a study to identify and evaluate means of establishing a market 
mechanism for the delivery of loans made pursuant to such title IV [20 
U.S.C. 1070 et seq.; 42 U.S.C. 2751 et seq.].
    ``(b) Design of Study.--The study required under this section shall 
identify not fewer than 3 different market mechanisms for use in 
determining lender return on student loans while continuing to meet the 
other objectives of the programs under parts B and D of such title IV 
[20 U.S.C. 1071 et seq., 1087aa et seq.], including the provision of 
loans to all eligible students. Consideration may be given to the use of 
auctions and to the feasibility of incorporating income-contingent 
repayment options into the student loan system and requiring borrowers 
to repay through income tax withholding.
    ``(c) Evaluation of Market Mechanisms.--The mechanisms identified 
under subsection (b) shall be evaluated in terms of the following areas:
        ``(1) The cost or savings of loans to or for borrowers, 
    including parent borrowers.
        ``(2) The cost or savings of the mechanism to the Federal 
    Government.
        ``(3) The cost, effect, and distribution of Federal subsidies to 
    or for participants in the program.
        ``(4) The ability of the mechanism to accommodate the potential 
    distribution of subsidies to students through an income-contingent 
    repayment option.
        ``(5) The effect on the simplicity of the program, including the 
    effect of the plan on the regulatory burden on students, 
    institutions, lenders, and other program participants.
        ``(6) The effect on investment in human capital and resources, 
    loan servicing capability, and the quality of service to the 
    borrower.
        ``(7) The effect on the diversity of lenders, including 
    community-based lenders, originating and secondary market lenders.
        ``(8) The effect on program integrity.
        ``(9) The degree to which the mechanism will provide market 
    incentives to encourage continuous improvement in the delivery and 
    servicing of loans.
        ``(10) The availability of loans to students by region, income 
    level, and by categories of institutions.
        ``(11) The proposed Federal and State role in the operation of 
    the mechanism.
        ``(12) A description of how the mechanism will be administered 
    and operated.
        ``(13) Transition procedures, including the effect on loan 
    availability during a transition period.
        ``(14) Any other areas the study group may include.
    ``(d) Preliminary Findings and Publication of Study.--Not later than 
November 15, 2000, the study group shall make the group's preliminary 
findings, including any additional or dissenting views, available to the 
public with a 60-day request for public comment. The study group shall 
review these comments and the Comptroller General and the Secretary 
shall transmit a final report, including any additional or dissenting 
views, to the Committee on Education and the Workforce of the House of 
Representatives, the Committee on Labor and Human Resources of the 
Senate, and the Committees on the Budget of the House of Representatives 
and the Senate not later than May 15, 2001.''

                  Section Referred to in Other Sections

    This section is referred to in section 1018a of this title.
