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

Federal Student Education Loans:

Federal Figuratively Speaking:

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

  1. Share This:

Extra Materials:

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

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

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

To help relieve the burden of federal figuratively speaking, borrowers can put on for Income-Driven Repayment plans. The plans utilize borrowers’ taxable earnings and household size to ascertain a payment rate that is affordable. Monthly obligations is as low as $0 but still count toward prospective loan forgiveness following the payment duration.

Our suggestions are for the Department of Education to accomplish more to confirm borrowers’ family and income size as a result of prospective mistake or fraud:

Significantly more than 76,000 borrowers making no monthly obligations may have had enough earnings to pay for one thing

Significantly more than 35,000 borrowers had authorized plans with atypical family members sizes of 9 or maybe more

Just exactly just How household size impacts re payment amounts in a few Income-Driven Repayment plans for a debtor with $40,000 in taxable earnings

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

Additional Materials:

  • Features Web Page:
    • (PDF, 1 web web page)
  • Comprehensive 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 fraudulence or mistake in earnings and household size information for borrowers with approved Income-Driven Repayment (IDR) plans. IDR plans base payments that are monthly a debtor’s earnings and family members size, expand repayment periods through the standard ten years to as much as 25 years, and forgive staying balances at the conclusion of that duration.

Zero earnings. About 95,100 IDR plans were held by borrowers whom reported zero income yet possibly earned sufficient wages which will make monthly education loan 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. Based on GAO’s analysis, 34 % of those plans had been held by borrowers that has approximated annual wages of $45,000 or higher, including some with approximated yearly wages of $100,000 or maybe more. Borrowers with your 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. Very nearly 1,200 of those 40,900 plans had been authorized predicated on household sizes of 16 or even more, including two plans for various borrowers which were authorized employing a grouped family members size of 93. Borrowers with atypical household sizes of nine or higher 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. Because earnings and household size are accustomed to determine IDR monthly obligations, fraudulence or mistakes in these details can lead to the Department of Education (training) losing 1000s of dollars of loan repayments per debtor every year and possibly enhancing the ultimate price of loan forgiveness. Where appropriate, GAO is referring these total brings about Education for further investigation.

Weaknesses in Education’s processes to confirm borrowers’ earnings and household size information limitation its power to detect potential fraudulence or mistake in IDR plans. While borrowers obtaining IDR plans must definitely provide evidence of taxable earnings, such as for instance taxation statements or spend stubs, Education generally accepts borrower reports of zero earnings and debtor reports of family size without confirming the data. Although Education will not now have usage of federal sourced elements of information to confirm debtor reports of zero earnings, the division could pursue such access or get personal information sources for this specific purpose. In addition, Education hasn’t methodically implemented other information analytic methods, such as for example utilizing information it currently needs to identify anomalies in earnings and household size that could suggest fraud that is potential mistake. Although data matching and analytic methods may possibly not be enough to identify fraudulence or mistake, combining all of them with follow-up procedures to validate informative data on IDR applications may help Education lessen the threat of utilizing fraudulent or information that is erroneous determine month-to-month loan re payments, and better protect the federal investment in student education loans.

Why GAO Did This Research

At the time of September 2018, nearly 1 / 2 of the $859 billion in outstanding federal Direct Loans was being paid back by borrowers making use of IDR plans. Prior GAO work unearthed that while these plans may relieve the duty of education loan financial obligation, they are able to carry high prices for the government.

This report examines (1) whether you will find indicators of prospective fraudulence or error in family and income size information given by borrowers on IDR plans and (2) the degree to which Education verifies these records. 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 danger 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 when it comes to exact same period of time and (2) analyzing Education IDR plan information on borrowers’ family members sizes. In addition, GAO reviewed IDR that is payday loans georgia for you review relevant and procedures from Education and interviewed officials from Education.

Just What GAO Recommends

GAO advises that Education (1) obtain information to validate earnings information for borrowers whom report zero earnings on IDR plan applications, (2) implement information practices that are analytic follow-up procedures to confirm debtor reports of zero earnings, and (3) implement data analytic techniques and follow-up procedures to validate borrowers’ household size. Education generally consented with this suggestions.