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: 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 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 often as low as $0 but still count toward prospective loan forgiveness following the payment duration.

Our tips are when it comes to Department of Education to complete more to validate borrowers’ family and income size due to possible mistake or fraudulence:

Significantly more than 76,000 borrowers making no monthly premiums may have had enough income to cover one thing

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

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

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

Extra Materials:

  • Shows Web 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

Just What GAO Found

GAO identified indicators of prospective fraudulence or error in earnings and household size information for borrowers with authorized Repayment that is income-Driven( plans. IDR plans base monthly obligations on a debtor’s income and household size, expand repayment durations through the standard ten years to as much as 25 years, and forgive remaining balances at the conclusion of this duration.

Zero earnings. About 95,100 IDR plans were held by borrowers whom reported zero income yet potentially earned sufficient wages to create month-to-month education loan re payments. This analysis is founded on wage information through the nationwide Directory of brand new Hires (NDNH), a federal dataset that contains quarterly wage information for newly employed and current employees. Based on GAO’s analysis, 34 per cent of those plans had been held by borrowers that has projected yearly wages of $45,000 or even more, including some with calculated 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 according to household sizes of nine or even more, that have been atypical for IDR plans. Nearly 1,200 among these 40,900 plans had been authorized according to household sizes of 16 or higher, including two plans for various borrowers which were authorized employing a grouped household 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 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’ family and income size information restriction being able to detect potential fraud or mistake in IDR plans. While borrowers obtaining IDR plans must make provision for proof taxable earnings, such as for example tax statements or spend stubs, Education generally accepts borrower reports of zero earnings and borrower 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 making use of information it currently has got to identify anomalies in earnings and household size which could suggest fraud that is potential mistake. Although data matching and analytic methods is almost certainly not enough to identify fraudulence or mistake, combining these with follow-up procedures to confirm info on IDR applications may help Education lower the danger of utilizing fraudulent or erroneous information to determine month-to-month loan re re payments, and better protect the federal investment in figuratively speaking.

Why GAO Did This Research

At the time of September 2018, nearly 50 % of the $859 billion in outstanding federal Direct Loans had been paid back by borrowers making use of IDR plans. Prior GAO work discovered that while these plans may ease the duty of education loan financial obligation, they are able to carry high costs 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 supplied by borrowers on IDR plans and (2) the level 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 information for a subset of borrowers whom reported zero earnings with wage data 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 appropriate IDR policies and procedures from Education and interviewed officials from Education.

Just Exactly 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 data practices that are analytic follow-up procedures to validate debtor reports of zero earnings, and (3) implement data analytic methods and follow-up procedures to validate borrowers’ household size. Education generally consented with this guidelines.

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