Technology Developments

1. Technology Developments Karl Ross Education Finance Council - Technology Conference May 5, 2003

2. Latest Developments • COTS/ERP • E-Sign • Authentication/Authorization/Security • XML/COD • Industry/USDE Standards • Real-Time Architectures • Customer Service Channel Expansion • Web Services/Meteor

3. Discussion Agenda • Technology Trends • Business Goals • Issues in Reaching Those Goals

4. Technology Trends • Digital Everything • Device Convergence • Authentication • Integration • COTS • Speed

5. Technology Trends • Digital Everything • Redefines “Data” in Data Exchange • Enables Data Processing • Device Convergence • Very little in our industry • Except - Integration with other services

6. Technology Trends • Integration • Solve the Competition Dilemma • Limit the need for mega-system projects • Faster delivery of functionality • COTS • Allows focus on real business • Simpler convergence / standard-setting • Third-party provider becomes “Customer”

7. Technology Trends • Speed • The ultimate enabler • Overcomes poor technology • Allows for better security • Authentication • Can do for the FAO what ATM did for the bank employee

8. Business Goals • Faster - All electronic, including error/exception handling • Better - Easier, Simpler, More Flexible • Cheaper - Little or no manual intervention, no paper! The technology exists to support those goals Choose Architectures that minimize critical path players, and points of failure Support standards - This will enable choice and support the business goals

9. Promissory Notes FFEL Funds FFEL Origination Records Loan Payments Loan applications and corrections Student Bills LENDER FFELP Consolidation Applications Defaulted Loans Loan Payments Loan and Portfolio Information Loan Insurance Confirmation Bills Guarantor AGENCY INTERNAL Student Aid Reports REVENUE Financial Aid SERVICE Interest, Defaulted Defaulted Applications AEA and Special FISL Loan Info Allowances Loans Reinsurance ISIR Admission Application, aid package acceptance Financial aid, aid package, admission package Defaulted Perkins Loans Address Info Institutional Eligibility Applications Lender and Direct Loan GA Info FFELP Consolidation FAFSA PEPS: Loan Applications Info School Title IV Info eligibility, MDE: CPS: Pre-screening Program Reviews, Loans Repayments Imaging & Application Demographic School Info & Audits for NATIONAL Corrections Processing Info FFELP: Default Rates Consolidation COLLECTION Defaulted Debt SERVICE Defaulted Collection, STATE GRANT GA & Lender ISIR FISL Loans AND Payments Loans Student for SCHOLARSHIP Updated Loan Eligibility Consolidation NSLDS: AGENCY Info Info Student Loan Database, State Default Rates, Grant Enrollment Tracking Defaulted Award Student Financial COLLECTION Direct Aid Reports Financial Aid Transcripts, AGENCY Loans Enrollment Information Perkins Loan Info Payment Authorizations Direct SCHOOL Loan Pell Grant Origination Notices, PGR/FMS: Info Statements of Account Pell Grant Booked Processing Loans & Direct Loan Origination Notices, Adjustments Disbursement Records & CDS: Adjustments LOS/LCS: Direct Loan Direct Loan Accounting Campus Based Applications Origination and and Consolidation Disbursement Information U.S. Department CBS: Updated of Education, LSS: Campus Based Loan Info Direct Loan Office of Student Program Processing Servicing Drawdown Financial Assistance Fund Subsidiary and Payment Authorization Ledger Direct Loan Programs Authorizations Information Direct Loan Repayments Aid Application Promissory Direct Loan Info Notes Fund Aid Origination and Disbursement Authorization Aid Repayment ED OFFICE OF DIRECT LOAN CHIEF FINANCIAL FEDERAL RESERVE SERVICING AGENCY OFFICER Program Management and Oversight 3/25/99 Old Architecture

10. Architecture Goal User Internet State Capital Source Guarantor Dept of Ed

11. How Do “We” Get There • Enabling Technologies • XML • Web Services • Transport Mechanisms • Standards • Industry-wide • Data, Description, Discovery • Transport, Network • Security

12. Standards Setting - The Key Process • Open • Learning from past disappointments • DCE, CORBA, Messaging, EDI • Universal • X is always X, Use existing standards when possible • Keep Data Standards Away from Transport Standards and Away from Architecture Standards • Governed • Single Entity, if possible • Solid Change Control

13. We Are Part Way There • Common Record • Common Origination and Disbursement • Common Line • Common Account Maintenance • Common Claim Initiative

14. Common Record Source - Dept. of Education

15. Interim Architecture - I User Internet Pass-Through Data Aggregator (Gatekeeper) State Capital Source Guarantor Dept of Ed

16. Interim Architecture - II User Internet Data Aggregator + Major Business Contact (Gatekeeper) State Capital Source Guarantor Dept of Ed

17. Business Issues • Legal Considerations • Gatekeeper Issues • Security • Human “Frailties”

18. Legal • GLB+ • USA Patriot+ • Privacy Laws • Wet Signatures • Indemnification

19. Gatekeeper Issues • Adds Costs • Adds Layer of Complexity • Restricts Competition • Not Faster, Cheaper - Better? • Security and Privacy Issues

20. Security • Perceptions Can be More Important • With data at multiple sites and moving at light speed, can we avoid problems and liability? • Risk is the Key • Cannot have 100% Security • Risk = Probability of Occurrence X Cost of Occurrence

21. Human “Frailties” • Inability to Effectively Merge Business Goals with Technology • 250 Meg/person/year Added Information • Need for Physical Accommodation • Device Size and Sound • Input Device Problems • “Need” for Hardcopy • Not 24X7 “Real Time”

22. Cautions • DCE/CORBA/Java • Death of the Legacy Systems • Last Mile Panaceas - CLECs/Cable • Network Applications - Client Server, N-Tier, Network Computers • TQM, ISO - “Management” Solutions

23. Cautions