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

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

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

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To help relieve the duty of federal figuratively speaking, borrowers can put on for Income-Driven Repayment plans. The plans utilize borrowers’ taxable income and family size to find out a reasonable repayment price. Monthly premiums is as low as $0 and still count toward prospective loan forgiveness following the payment period.

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

A lot more than 76,000 borrowers making no payments that are monthly have had enough earnings to cover one thing

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

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

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

Exactly Exactly What GAO Found

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

Zero earnings. About 95,100 IDR plans were held by borrowers whom reported zero earnings yet potentially earned sufficient wages to help make student that is monthly re re payments. This analysis is dependent 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. In accordance with GAO’s analysis, 34 % of those plans had been held by borrowers who’d approximated yearly wages of $45,000 or even more, including some with calculated yearly wages of $100,000 or even more. Borrowers by using these 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 authorized predicated on family members sizes of nine or even more, that have been atypical for IDR plans. Very nearly 1,200 among these 40,900 plans were authorized centered on household sizes of 16 or higher, including two plans for various borrowers that have been authorized utilizing a grouped family members size of 93. Borrowers with atypical family members sizes of nine or higher owed nearly $2.1 billion in outstanding loans that are direct of September 2017.

These outcomes suggest some borrowers may have misrepresented or mistakenly reported their earnings or household 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’ income and household size information restriction being able to detect potential fraudulence or mistake in IDR plans. While borrowers obtaining IDR plans must definitely provide evidence of taxable earnings, such as for example tax statements or spend stubs, Education generally accepts borrower reports of zero earnings and debtor reports of household size without verifying the details. 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 has not yet methodically implemented other information analytic methods, such as for instance using information it currently has got to identify anomalies in earnings and household size that will suggest potential fraudulence or mistake. Although data matching and analytic methods might not be adequate to identify fraudulence or mistake, combining these with follow-up procedures to validate info on IDR applications may help Education decrease the threat of making use of fraudulent or erroneous information to determine monthly loan re re payments, and better protect the federal investment in student education loans.

Why GAO Did This Study

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 unearthed that while these plans may relieve the duty of education loan financial obligation, they are able to carry high charges for the government.

This report examines (1) whether you can find indicators of prospective fraudulence or mistake in family virginiacashadvance for you promo code and income size information given 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 newest information 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 who reported zero earnings with wage information from NDNH for the time that is same and (2) analyzing Education IDR plan information on borrowers’ family sizes. In addition, GAO reviewed appropriate IDR policies and procedures from Education and interviewed officials from Education.

Just What GAO Recommends

GAO suggests that Education (1) obtain information to confirm 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 information analytic methods and follow-up procedures to confirm borrowers’ family members size. Education generally consented with this guidelines.