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

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

Federal Figuratively Speaking:
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Federal Student Education Loans:

GAO-19-347: Posted: 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 relieve the responsibility of federal figuratively speaking, borrowers can use for Income-Driven Repayment plans. The plans utilize borrowers’ taxable earnings and household size to find out a reasonable repayment rate. Monthly premiums is as low as $0 but still count toward prospective loan forgiveness following the payment duration.

Our suggestions are when it comes to Department of Education to complete more to validate borrowers’ family and income size as a result of possible mistake or fraudulence:

Significantly more than 76,000 borrowers making no payments that are monthly have had enough income to cover something

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

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

Graphic showing that a solitary debtor’s re re payment could be $182 but decreases to $74 with a household of 3 and $0 with a family group of 5

Extra Materials:

  • Shows Web Page:
    • (PDF, 1 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

Just Just What GAO Found

GAO identified indicators of possible fraudulence or mistake in earnings and household size information for borrowers with authorized Repayment that is income-Driven( plans. IDR plans base payments that are monthly a debtor’s earnings and household size, expand repayment durations from the standard ten years to as much as 25 years, and forgive staying balances at the conclusion of the duration.

Zero earnings. About 95,100 IDR plans were held by borrowers whom reported zero earnings yet potentially earned sufficient wages in order to make monthly education loan re payments. This analysis is founded on wage information through the nationwide Directory of New Hires (NDNH), a dataset that is federal contains quarterly wage information for newly hired and existing workers. In accordance with GAO’s analysis, 34 % among these plans had been held by borrowers who’d projected yearly wages of $45,000 or even more, including some with believed yearly wages of $100,000 or higher. 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 family members sizes of nine or higher, that have been atypical for IDR plans. Nearly 1,200 of the 40,900 plans had been authorized predicated on household sizes of 16 or higher, including two plans for various borrowers that have been authorized employing a grouped family members size of 93. Borrowers with atypical family members 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 widely used to determine IDR monthly obligations, fraud or mistakes in these details may result in the Department of Education (Education) losing 1000s of dollars of loan repayments per borrower every year and possibly increasing the ultimate price of loan forgiveness. Where appropriate, GAO is referring these total leads to Education for further investigation.

Weaknesses in Education’s procedures to confirm borrowers’ earnings and household size information restriction being able to detect potential fraudulence or mistake in IDR plans. While borrowers obtaining IDR plans must make provision for evidence of taxable income, such as taxation statements or spend stubs, Education generally accepts borrower reports of zero income and debtor reports of household size without confirming the data. Although Education will not now have usage of federal sourced elements of information to confirm debtor reports of zero income, the department could pursue such access or get personal information sources for this specific purpose. In addition, Education has not yet methodically implemented other data 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 might not be adequate to identify fraudulence or mistake, combining all of them with follow-up procedures to validate informative data on IDR applications may help Education lower the threat of utilizing fraudulent or information that is erroneous determine monthly loan re re payments, and better protect the federal investment in student education loans.

Why GAO Did This Research

At the time of September 2018, nearly half the $859 billion in outstanding federal Direct Loans had been paid back by borrowers utilizing IDR plans. Prior GAO work discovered that while these plans may ease the responsibility of student loan financial obligation, they are able to carry high charges for the government.

This report examines (1) whether you will find indicators of possible fraudulence or mistake in earnings and household 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 danger for fraudulence or mistake in IDR plans for Direct Loans by (1) matching Education IDR plan information for a subset of borrowers whom reported zero earnings with wage data from NDNH for the exact same time frame and (2) analyzing Education IDR plan information on borrowers’ family members sizes. In addition, GAO reviewed IDR that is relevant and procedures from Education and interviewed officials from Education.

What GAO Recommends

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