Education Needs to Verify Borrowers’ Information for Income-Driven Repayment Plans

Education Needs to Verify Borrowers’ Information for Income-Driven Repayment PlansFederal Student Education Loans:

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 relieve the duty 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 payment rate that is affordable. Monthly obligations is often as low as $0 and still count toward prospective loan forgiveness following the payment duration.

Our guidelines are for the Department of Education to accomplish more to validate borrowers’ earnings and household size due to possible mistake or fraudulence:

A lot 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 household sizes of 9 or even more

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

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

Extra Materials:

  • Features Web Page:
    • (PDF, 1 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 earnings and household size information for borrowers with approved Income-Driven Repayment (IDR) plans. IDR plans base monthly obligations on a debtor’s earnings and family members size, expand repayment durations through the standard ten years to as much as 25 years, and forgive staying balances by the end of that duration.

Zero earnings. About 95,100 IDR plans were held by borrowers whom reported zero earnings yet possibly earned sufficient wages to produce student that is monthly 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 current workers. In accordance with GAO’s analysis, 34 per cent of the plans had been held by borrowers that has projected yearly wages of $45,000 or even more, including some with projected yearly wages of $100,000 or even 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 predicated 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 family members sizes of 16 or even more, including two plans for various borrowers which were approved using family members size of 93. Borrowers with atypical family members sizes of nine or higher owed very nearly $2.1 billion in outstanding loans that are direct of September 2017.

These results suggest some borrowers may erroneously have misrepresented or reported their earnings or family members size. Because earnings and family members size are accustomed to determine IDR monthly obligations, fraudulence or mistakes in these details may result in the Department of Education (training) losing a fantastic read 1000s of dollars of loan repayments per debtor each year and possibly enhancing the ultimate price of loan forgiveness. Where appropriate, GAO is referring these results to Education for further investigation.

Weaknesses in Education’s procedures to confirm borrowers’ earnings and household size information restriction its capability 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 household size without confirming the details. Although Education doesn’t now have usage of federal sourced elements of data to confirm debtor reports of zero earnings, the division could pursue such access or get personal information sources for this function. In addition, Education hasn’t methodically implemented other information analytic methods, such as for example making use of 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 confirm info on IDR applications may help Education reduce steadily the risk of making use of 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, very nearly 1 / 2 of the $859 billion in outstanding federal Direct Loans had been repaid by borrowers utilizing IDR plans. Prior GAO work discovered that while these plans may relieve the responsibility of student loan financial obligation, they are able to carry high charges for the government that is federal.

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

Just Just Exactly What GAO Recommends

GAO suggests 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 validate debtor reports of zero earnings, and (3) implement information analytic techniques and follow-up procedures to confirm borrowers’ family members size. Education generally agreed with this tips.

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