Education Must Verify Borrowers‘ Information for Income-Driven Repayment Plans

Education Must Verify Borrowers‘ Information for Income-Driven Repayment PlansFederal Figuratively Speaking:

Federal Figuratively Speaking:

GAO-19-347: Published: Jun 25, 2019. Publicly Released: Jul 25, 2019.

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Seto J. Bagdoyan
(202) 512-6722
bagdoyans@gao.gov

Workplace of Public Affairs
(202) 512-4800
youngc1@gao.gov

To help relieve the duty of federal student education loans, borrowers can put on for Income-Driven Repayment plans. The plans utilize borrowers‘ taxable earnings and household size to find out a payment rate that is affordable. Monthly premiums is as low as $0 but still count toward prospective loan forgiveness following the payment duration.

Our guidelines are when it comes to Department of Education to complete more to confirm borrowers‘ earnings and household size as a result of prospective mistake or fraudulence:

Significantly more than 76,000 borrowers making no payments that are monthly have had enough earnings to cover one thing

A lot more than 35,000 borrowers had authorized plans with atypical family members sizes of 9 or higher

Exactly just How family members size impacts re payment quantities in some Income-Driven Repayment plans for a debtor with $40,000 in taxable earnings

Graphic showing that a borrower that is single re re payment is $182 but decreases to $74 with a household of 3 and $0 with a household of 5

Additional Materials:

  • Shows Web Web Page:
    • (PDF, 1 web page)
  • Complete Report:
    • View Report (PDF, 47 pages)
  • Available Variation:
    • (PDF, 50 pages)

Seto J. Bagdoyan
(202) 512-6722
bagdoyans@gao.gov

Workplace of Public Affairs
(202) 512-4800
youngc1@gao.gov

Exactly Exactly Exactly What GAO Found

GAO identified indicators of possible fraud or mistake in earnings and household size information for borrowers with authorized Income-Driven Repayment (IDR) plans. IDR plans base monthly obligations on a borrower’s earnings and household size, expand repayment durations through the standard decade to as much as 25 years, and forgive staying balances by the end of this duration.

Zero earnings. About 95,100 IDR plans were held by borrowers whom reported zero earnings yet possibly earned sufficient wages to produce month-to-month education loan re re payments. This analysis is dependant on wage information through the nationwide Directory of brand new Hires (NDNH), a dataset that is federal contains quarterly wage information for newly employed and existing workers. In accordance with GAO’s analysis, 34 per cent of those plans had been held by borrowers that has predicted yearly wages of $45,000 or even more, including some with calculated yearly wages of $100,000 or higher. Borrowers with one of these 95,100 IDR plans owed almost $4 billion in outstanding loans that are direct of September 2017.

Family size. About 40,900 IDR plans were authorized centered on household sizes of nine or higher, that have been atypical for IDR plans. Nearly 1,200 of those 40,900 plans had been authorized predicated on family members sizes of 16 or even more, including two plans for various borrowers which were authorized employing family members measurements of 93. Borrowers with atypical family members sizes of nine or maybe more owed nearly $2.1 billion in outstanding Direct Loans as of September 2017.

These outcomes suggest some borrowers may erroneously have misrepresented or reported their earnings or family members size. Each year and potentially increasing the ultimate cost of loan forgiveness because income and family size are used to determine IDR monthly payments, fraud or errors in this information can result in the Department of Education (Education) losing thousands of dollars of loan repayments per borrower. Where appropriate, GAO is referring these leads to Education for further investigation.

Weaknesses in Education’s procedures to validate borrowers‘ earnings and household size information restriction its capability to detect potential fraudulence or error in IDR plans. While borrowers obtaining IDR plans must make provision for evidence of taxable earnings, such as tax statements or spend stubs, Education generally accepts borrower reports of zero earnings and debtor reports of household size without confirming the data. Although Education will not actually have usage of federal resources of data to verify debtor reports of zero earnings, the division could pursue such access or get personal information sources for this function. In addition, Education have not methodically implemented other data analytic methods, such as for example utilizing information it already needs to identify anomalies in income and household size that will suggest possible fraudulence or mistake. Although data matching and analytic methods may possibly not be adequate to identify fraudulence or error, combining all of them with follow-up procedures to validate informative data on IDR applications may help Education reduce steadily the threat of utilizing fraudulent or information that is erroneous determine month-to-month loan payments, and better protect the federal investment in student education loans.

Why GAO Did This Research

At the time of 2018, almost half of the $859 billion in outstanding federal Direct Loans was being repaid by borrowers using IDR plans september. Prior GAO work discovered that while these plans may relieve the duty of education loan financial obligation, they are able to carry high charges for the government that is federal.

This report examines (1) whether you will find indicators of possible fraudulence or mistake in family and income size information supplied by borrowers on IDR plans and (2) the degree to which Education verifies these details. GAO obtained Education information on borrowers with IDR plans authorized from January 1, 2016 through September 30, 2017, the most up-to-date information available, and evaluated the chance for fraudulence or mistake in IDR plans for Direct Loans by (1) matching Education IDR plan data for the subset of borrowers whom reported zero earnings with wage information from NDNH for the exact same time frame and (2) analyzing Education IDR plan information on borrowers‘ family members sizes. In addition, GAO reviewed appropriate IDR policies and procedures from Education and interviewed officials from Education.

Just Exactly What GAO Recommends

GAO advises that Education (1) proceed the link obtain information to validate earnings information for borrowers whom report zero earnings on IDR plan applications, (2) implement data analytic methods and follow-up procedures to confirm debtor reports of zero earnings, and (3) implement information analytic methods and follow-up procedures to confirm borrowers‘ family size. Education generally consented with this tips.