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

Federal Figuratively Speaking:

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 help ease the responsibility of federal student education loans, borrowers can use for Income-Driven Repayment plans. The plans utilize borrowers’ taxable earnings and household size to find out a reasonable repayment price. Monthly obligations is as low as $0 and still count toward prospective loan forgiveness following the payment period.

Our suggestions are for the Department of Education to do more to validate borrowers’ family and income size due to possible mistake or fraudulence:

A lot more than 76,000 borrowers making no monthly premiums may have had enough earnings to pay for one thing

A lot more than 35,000 borrowers had authorized plans with atypical household sizes of 9 or even more

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

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

Extra Materials:

  • Shows 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

Just What GAO Found

GAO identified indicators of prospective fraudulence or mistake in income and household size information for borrowers with authorized Income-Driven Repayment (IDR) plans. IDR plans base payments that are monthly a debtor’s earnings and household size, extend repayment durations through the standard ten years to as much as 25 years, and forgive remaining balances by the end of the duration.

Zero income. About 95,100 IDR plans were held by borrowers whom reported zero earnings yet possibly earned sufficient wages to help make month-to-month education loan re re payments. This analysis is founded 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 the plans had been held by borrowers that has calculated yearly wages of $45,000 or even more, including some with believed yearly wages of $100,000 or even more. Borrowers with your 95,100 IDR plans owed nearly $4 billion in outstanding loans that are direct of September 2017.

Family size. About 40,900 IDR plans were approved predicated on household sizes of nine or maybe more, that have been atypical for IDR plans. Very nearly 1,200 of the 40,900 plans had been authorized according to family members sizes of 16 or maybe more, including two plans for various borrowers that have been authorized employing a grouped family members size of 93. Borrowers with atypical household sizes of nine or higher owed very nearly $2.1 billion in outstanding Direct Loans as of September 2017.

These outcomes indicate some borrowers may have misrepresented or mistakenly reported their earnings or household size. Because earnings and household size are acclimatized to determine IDR monthly obligations, fraudulence or errors in these details can lead to the Department of Education (training) losing 1000s of dollars of loan repayments www.titlemax.us per debtor every year and possibly increasing the ultimate price of loan forgiveness. Where appropriate, GAO is referring these leads to Education for further investigation.

Weaknesses in Education’s procedures to confirm borrowers’ earnings and household size information limitation its capacity to detect potential fraud or mistake in IDR plans. While borrowers obtaining IDR plans must make provision for evidence of taxable earnings, such as for example taxation statements or pay stubs, Education generally accepts borrower reports of zero borrower and income reports of household size without confirming the data. The department could pursue such access or obtain private data sources for this purpose although Education does not currently have access to federal sources of data to verify borrower reports of zero income. In addition, Education have not methodically implemented other information analytic methods, such as for example utilizing information it currently needs to identify anomalies in income and household size that will suggest possible fraudulence or mistake. Although data matching and analytic methods might not be enough to identify fraudulence or mistake, combining these with follow-up procedures to validate info on IDR applications may help Education lessen the danger of utilizing fraudulent or erroneous information to determine month-to-month loan re payments, and better protect the federal investment in figuratively speaking.

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 student loan financial obligation, they could carry high prices for the government that is federal.

This report examines (1) whether you will find indicators of possible fraudulence or mistake in earnings and household 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 data available, and evaluated the chance 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 information from NDNH for the time that is same 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.

Just What GAO Recommends

GAO advises that Education (1) obtain information to validate earnings information for borrowers who report zero earnings on IDR plan applications, (2) implement information analytic techniques and follow-up procedures to confirm debtor reports of zero earnings, and (3) implement information analytic methods and follow-up procedures to validate borrowers’ family members size. Education generally consented with your guidelines.