The purpose of this evaluation is to identify the problems experienced in processing student loans in the 2000 academic year and find solutions to them. The objectives are to ensure that operational changes are developed and implemented that will enable fast and efficient delivery of student loans in the 2001 academic year. This evaluation is not a review of performance, individual cases, financing, or strategic policy (apart from certain operational policy and definitional issues). The emphasis in the report is on what DWI needs to do, but it is acknowledged that institutions will also have to work towards more effective delivery along with DWI.
The decision to transfer loans was based on the following concerns identified by government about the administration of student loans:
- the reluctance of some tertiary institutions to accept accountability for the administration of loans;
- the potential for inconsistent treatment of loan assessment of entitlement across institutions caused by the variety of systems and processes used;
- the variability of the internal controls within each tertiary institutions' loan application processes;
- the escalating cost of contracting loan assessment services from tertiary institutions, particularly in response to demands for tighter internal controls and improved services;
- the creation of perverse incentives due to the way some tertiary institutions used the availability of loans to market their courses. (In this context there was a need to reinforce that the fact that the student's liability was with the Crown not the institution);
- the lack of opportunity both to integrate the processing of loans and allowances and thereby achieve efficiencies by reducing duplication of effort in the collection of some assessment information, and to realise potential for improvement in workflow management.
It is difficult to compare processing for 2000 with processing under the previous system as comprehensive, national statistics are not available. However, statistics show that DWI was significantly behind the number of loan accounts established under SLAM for 1995-1998 (see Appendix 2) and only overtook past years' numbers in mid March/April. Many students, such as Maori, Pacific Island people, or ESOL groups (such as refugees) have particular difficulty applying by phone.
Both students and institutions experienced delays in processing of student loans for the 2000 academic year. For students, delays resulted in difficulties paying for rent, food, course materials and caused frustration, stress and hardship. For institutions, delays caused cashflow problems and uncertainty around the validity of the enrolment process. These delays also showed up shortcomings in contingency planning, such as adequate information on access to Special Needs Grants (SNGs).
The fundamental issue with the new system is one of systems design. Other issues, such as delays on the 0800 service, largely flow from this. Problems tended to snowball, with the system going into a vicious downward spiral during the main enrolment period, as evidenced by the call centre overload.
Two events impacted on this situation. The new full interest write-off policy impacted on the forecast demand for loans, and hence resource requirements. Given this policy had been signalled (although the detail was not clear), this event could perhaps have been better risk managed. Secondly, a systems error resulted in 22,000 pieces of correspondence being sent out between the 4th and 8th of February with incorrect information on enrolment details.
Fundamental systems errors such as this should not recur in 2001, although the cycle has not yet been completed with the transfer of loan debts to IRD at yearend. Similarly, a considerable number of students' details are now on the database, which should reduce workloads for the 2001 academic year. DWI, institutions, and students have been through a learning curve which should also assist smoother processing next year.
There were a number of contributory issues: the addition of student loans and allowances processing to the core business of benefit processing for the newly restructured department, with the risk of overload; the issues from processing student allowances in 1999 which needed to be resolved, thus reducing the time available for reviewing the student loans systems design; the changing responsibility within the Department of Work and Income (DWI) for Community Wage Student (CWS) also distracting attention; and various operational policy or definitional issues such as full time study status only becoming apparent with a nationalised loans system. Finally, the short interval between implementation of allowances and implementation of loans meant there was no time to pilot the loans system.
The systems design was based on a centralised model, with a national call and processing centre located at Palmerston North, which was responsible for virtually all functions: advice, applications, and processing (although outreach centres provided some limited services). Students were strongly encouraged to apply by phone via the call centre, and were no longer able to do so on campus unless applying for both a loan and allowance via the combination application form. The impact of this approach was a segmentation of the various services: advice about the process, advice about enrolment and its relationship to eligibility and entitlement, and verification of documentary evidence. The extent to which students would use the call centre to inquire about their loan status was severely underestimated.
DWI staff were present on campuses from September 1999 to March 2000, to assist with applications and answer queries from students about entitlement (although on line access to individual records was not available so that queries on loan status could not be answered). Staff numbers were increased from 70 in September 1999, to 120 in January 2000.
The reasons for selecting the centralised approach appear to stem from DWI's style of operating. The focus was on what needed to happen, from DWI's perspective, to process student loans without sufficiently acknowledging the interdependency of student loans and enrolment from both the students' and institutions' points of view.
The way the system was designed has been characterised by institutions as "our way". DWI designed a system without listening sufficiently to the concerns of and advice from institutions who had previously been responsible for administering part of the system (loans applications), and who would now be responsible for administering part of the new system (Verification of Study, or VOS). Where advice was offered by institutions on potential issues to be addressed, such as the likely timing of applications for loans just before or at enrolment, it appeared to be ignored.
A more co-operative and consultative style would have ensured the needs of students and institutions were better included in the systems design. The need to develop more effective relationships at more than one tier within institutions has now been recognised by DWI, but also needs to extend to student bodies and other key stakeholders. Similarly, greater information sharing on systems design and processes would assist institutions and make the total system operate more effectively.
