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.

  1. Share This:

Extra Materials:

  • Features Web Web Page:
    • (PDF, 1 web 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

To help relieve the responsibility of federal student education loans, borrowers can put on for Income-Driven Repayment plans. The plans utilize borrowers’ taxable earnings and family size to find out an inexpensive repayment price. 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 verify borrowers’ earnings and family size as a result of possible mistake or fraudulence:

A lot more than 76,000 borrowers making no monthly premiums may have had enough earnings to cover something

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

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

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

Extra Materials:

  • Features Web Page:
    • (PDF, 1 page)
  • Complete Report:
    • View Report (PDF, 47 pages)
  • Available Variation:
    • (PDF, 50 pages)

Seto J. Bagdoyan
(202) 512-6722
bagdoyans@gao.gov

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Just Exactly What GAO Found

GAO identified indicators of possible fraudulence or mistake in earnings 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 family members size, expand repayment durations from the standard ten years to as much as 25 years, and forgive staying balances at the conclusion of that duration.

Zero earnings. About 95,100 IDR plans were held by borrowers whom reported zero earnings yet possibly earned sufficient wages to create student that is monthly re re payments. This analysis is dependent on wage information through the nationwide Directory of brand new Hires (NDNH), a federal dataset that phone number for paydayloanpennsylvania.com contains quarterly wage data for newly employed and current workers. Relating to GAO’s analysis, 34 % among these plans had been held by borrowers that has projected yearly wages of $45,000 or maybe more, including some with calculated yearly wages of $100,000 or higher. Borrowers by using these 95,100 IDR plans owed almost $4 billion in outstanding Direct Loans as of September 2017.

Family size. About 40,900 IDR plans were approved considering family members sizes of nine or maybe more, that have been atypical for IDR plans. Very nearly 1,200 among these 40,900 plans had been authorized according to family members sizes of 16 or even more, including two plans for different borrowers which were approved employing a grouped household measurements of 93. Borrowers with atypical household sizes of nine or even more owed very nearly $2.1 billion in outstanding loans that are direct of September 2017.

These outcomes suggest some borrowers may have misrepresented or erroneously 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 total leads to Education for further investigation.

Weaknesses in Education’s procedures to validate borrowers’ income and household size information restriction its power to detect potential fraudulence or mistake in IDR plans. While borrowers applying for IDR plans must make provision for evidence of taxable earnings, such as for instance taxation statements or pay stubs, Education generally accepts borrower reports of zero income and debtor reports of household size without confirming the knowledge. Although Education will not actually have access to federal sourced elements of information to verify debtor reports of zero earnings, the division could pursue such access or get personal data sources for this specific purpose. In addition, Education have not methodically implemented other information analytic practices, such as for instance using information it currently has got to detect anomalies in earnings and household size that will suggest possible fraudulence or 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 informative data on IDR applications may help Education reduce steadily the chance of utilizing fraudulent or information that is erroneous determine month-to-month 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 1 / 2 of the $859 billion in outstanding federal Direct Loans had been paid back by borrowers making use of IDR plans. Prior GAO work unearthed that while these plans may relieve the responsibility of education loan debt, 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 family and income size information given 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 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 exact same period of time 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 whom report zero earnings on IDR plan applications, (2) implement information practices that are analytic follow-up procedures to validate debtor reports of zero income, and (3) implement information analytic methods and follow-up procedures to validate borrowers’ family size. Education generally consented with this guidelines.

Laisser un commentaire

Votre adresse de messagerie ne sera pas publiée. Les champs obligatoires sont indiqués avec *