Innovative Success Story: American Education Services

Innovative Systems Lends Quality & Compliance
to Student Loan Servicer

American Education Services (AES) is a not-for-profit, multifaceted student aid services organization. It manages nearly $43 billion in total assets and services, and close to four million students through its guaranty, servicing and financial aid processing systems. AES is the nation’s third largest student loan servicer and its ninth largest student loan holder.

Unlike for-profit organizations, AES “shareholders” are America’s students and families. The funds generated through its extensive operations are used to: improve higher education opportunities; lower the cost of financial assistance; streamline processes for the financial aid community; and empower students, families, schools and lenders through its industry-leading, Web-based technology.

AES operates regional offices in Pennsylvania, California, Delaware, Maryland, Ohio, West Virginia and Puerto Rico. These regional offices provide service to high schools, colleges and universities, and lending institutions across the nation.
The Compliance Mandate

For more than 40 years, AES has focused its efforts on creating affordable access to higher education for students and their families. AES strives to build unique and lasting relationships with its lending partners by offering a wide range of products and services for lenders as well as higher education administrators, establishing a collaborative network of financial aid professionals.

One of the ways that AES maintains its strong relationships with its more than 200 lenders is by providing offerings and services that continue to meet its partners’ changing needs. A clear example of this commitment to its lenders was the organization’s move to provide a comprehensive solution to new regulatory screening requirements facing the student lending community.

In discussing with their partners new regulations that require student loan lenders to screen applicants against the U.S. Treasury’s Office of Foreign Assets Control (OFAC) sanctions list, AES officials realized that they were in a position to implement a comprehensive compliance strategy to fulfill their own screening requirements, while at the same time assisting their lenders in meeting their respective obligations.

In order to move forward with its plan to institute this comprehensive compliance screening strategy, AES set out to understand what types of compliance offerings and services were available. Based on the review of the market, they determined that interdiction software would be necessary to satisfy their screening objectives, and initiated a formal evaluation and selection process.

Selecting a Compliance Solution
AES established an internal compliance project team, which consisted of both business and technology representatives, to evaluate available solutions. The group established three primary objectives to guide their software evaluation and selection process. First and foremost, they needed a solution that would satisfy the organization’s current compliance requirements, but they also wanted a solution that demonstrated a capacity to satisfy a breadth of compliance requirements so that their initial investment could be leveraged to help the organization meet new and changing requirements in the future.

Second, the group wanted a solution that was easy to use, so that both technology and business users would be able to work with the product and the results.

Finally, the cost of the total solution — including the software, implementation and ongoing use of the software — was a very important criterion for the group. Due to the multi-layered approach of the project, to satisfy its own internal screening requirements as well as to extend this mission critical service to its lenders, the team understood that the implementation environment would be complex. They determined that the cost of implementing and maintaining the software over time would be as important — if not more important — than the cost of the software alone.

After an exhaustive review of the different options available, the group selected Innovative Systems’ i/Lytics SECURE™ as the solution that best met these three important criteria.

Implementation: Key to Success
The overarching goal of the AES compliance program is to ensure that no grants or loans are extended to individuals on the OFAC sanctions list. In order to meet this objective, the compliance team first needed to make some very important decisions about their screening process, including the frequency of matching new and existing customers against the OFAC list, and as important, the rules for determining how the system would reliably identify matches.

The ISI delivery professionals assigned to the project were able to work hand-in-hand with the AES project team to help guide the important up-front process. The decision about how often and when the different databases would run the screening process against both new applicants and existing customers was easily determined and executed.
A key component of any successful screening process is establishing matching rules that accurately reflect the organization’s unique definition of a valid match so that when matches occur, there is legitimate reason to review and investigate. When matching rules don’t accurately reflect the organization’s precise definition of a valid match, either too many matches or too few matches may result — each with different sets of risks and costs associated with it.

ISI’s delivery professionals worked with the AES compliance team to define and establish the business rules to guide their match process, and then apply these rules to the compliance software system. After working with the results of this initial set-up, the AES team determined that their matching rules were too conservative and were generating unnecessary matches. ISI and AES worked together to quickly adjust the matching logic to achieve the critical balance between generating too many and too few matches.
Next, ISI worked with the AES project team to implement the i/Lytics SECURE compliance software into their processing environment, which included 15 independent databases — some on mainframe and others on open systems platforms. Before the new software went into operation, ISI’s delivery professionals worked with the AES team to improve the data quality within their different databases in order to optimize the screening process. In all, the total implementation and data clean-up effort took less than three weeks.

According to Matt Stefanski, an AES technical compliance specialist and part of the implementation team, “Overall, this was one of the smoothest new product implementations that I’ve ever seen. The ISI delivery professionals were very knowledgeable and experienced, and very easy to work with.”
Results

AES is successfully running i/Lytics SECURE to ensure compliance with its new regulatory screening requirements. In addition to fulfilling its own requirements, the organization has been able to extend the benefit of its compliance investment to its lending partners. By all measures, the project has been a success. The business users have easily transitioned to reviewing the results and reports generated by the new screening process.

“i/Lytics SECURE is working great,” said Diane Freundel, Assistant Vice President of Compliance and Contract Review. “We have been very pleased with the results, as have our lenders. In addition to the product’s ability to confidently minimize false-positives and their associated time and costs, we’re also taking advantage of the product’s ability to generate our own internal safe-lists and risk-lists, which helps us to make better business decisions as well as meet our compliance obligations.”

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