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

Federal Figuratively Speaking:

Federal Figuratively Speaking:

GAO-19-347: Posted: Jun 25, 2019. Publicly Released: Jul 25, 2019.

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  • Features Web Page:
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  • Complete Report:
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Seto J. Bagdoyan
(202) 512-6722
bagdoyans@gao.gov

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

To 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 an inexpensive repayment price. Monthly obligations is often as low as $0 but still count toward potential loan forgiveness following the repayment period.

Our guidelines are when it comes to Department of Education to complete more to confirm borrowers’ family and income size due to prospective mistake or fraudulence:

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

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

Exactly How household size affects re re payment quantities in a few Income-Driven Repayment plans for a borrower with $40,000 in taxable earnings

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

Extra Materials:

  • Features Page:
    • (PDF, 1 web page)
  • Comprehensive 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

Exactly What GAO Found

GAO identified indicators of prospective fraud 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 household size, extend repayment durations through the standard ten years to as much as 25 years, and forgive remaining balances at the conclusion of the duration.

Zero income. About 95,100 IDR plans were held by borrowers whom reported zero income yet possibly earned sufficient wages to help make month-to-month education loan 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 hired and current employees. Based on GAO’s analysis, 34 per cent of those plans were held by borrowers that has believed yearly wages of $45,000 or even more, including some with projected 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 according to family members sizes of nine or even more, that have been atypical for IDR plans. 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 different borrowers that were authorized utilizing household size of 93. Borrowers with atypical household sizes of nine or higher owed nearly $2.1 billion in outstanding Direct Loans as of September 2017.

These outcomes suggest some borrowers may have misrepresented or mistakenly reported their income 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 brings about Education for further investigation.

Weaknesses in Education’s procedures to confirm borrowers’ family and income size information restriction being able to detect potential fraudulence or mistake in IDR plans. While borrowers obtaining 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 borrower and income reports of household size without confirming the details. Although Education will not now have usage of federal resources of data to validate debtor reports of zero earnings, the division could pursue such access or get personal information sources for this specific purpose. In addition, Education has not yet methodically implemented other information analytic methods, such as for example utilizing information it currently needs to identify anomalies in earnings and family size which will suggest possible fraudulence or mistake. Although data matching and analytic methods is almost certainly not enough to identify fraudulence or error, combining all of them with follow-up procedures to validate info on IDR applications may help Education lessen the threat 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 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 paydayloansohio.net GAO work discovered that while these plans may relieve the responsibility of education loan financial obligation, they could carry high costs for the government that is federal.

This report examines (1) whether you can find indicators of prospective 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 approved 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 data for a subset of borrowers who reported zero earnings with wage information from NDNH when it comes to exact same time frame 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 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 analytic techniques and follow-up procedures to validate 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 your tips.


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