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

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

Federal Figuratively Speaking:

GAO-19-347: Posted: Jun 25, 2019. Publicly Released: Jul 25, https://paydayloanstennessee.com 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 an affordable repayment price. Monthly obligations can be as low as $0 but still count toward prospective loan forgiveness following the payment duration.

Our tips are for the Department of Education to accomplish more to confirm borrowers’ family and income size due to prospective mistake or fraudulence:

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

A lot more than 35,000 borrowers had authorized plans with atypical household sizes of 9 or higher

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

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

Extra Materials:

  • Highlights Web Page:
    • (PDF, 1 web page)
  • Complete Report:
    • View Report (PDF, 47 pages)
  • Accessible 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 possible fraudulence or mistake in earnings and family size information for borrowers with approved Income-Driven Repayment (IDR) plans. IDR plans base monthly premiums on a debtor’s earnings and family members size, expand repayment durations through the standard decade to as much as 25 years, and forgive staying balances at the conclusion of the duration.

Zero earnings. About 95,100 IDR plans were held by borrowers who reported zero earnings yet potentially earned sufficient wages in order to make student that is monthly re re payments. This analysis is dependant on wage information through the National Directory of brand new Hires (NDNH), a dataset that is federal contains quarterly wage information for newly employed and current employees. In accordance with GAO’s analysis, 34 % among these plans had been held by borrowers that has calculated yearly wages of $45,000 or higher, including some with predicted yearly wages of $100,000 or maybe more. Borrowers with your 95,100 IDR plans owed almost $4 billion in outstanding Direct Loans as of September 2017.

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

These outcomes suggest some borrowers may erroneously have misrepresented or reported their earnings or family members size. Because earnings and family members size are widely used to determine IDR monthly obligations, fraud or mistakes in these details can lead to the Department of Education (Education) losing thousands of loan repayments per debtor every year and possibly enhancing the ultimate price of loan forgiveness. Where appropriate, GAO is referring these leads to Education for further investigation.

Weaknesses in Education’s procedures to confirm borrowers’ family and income size information limitation 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 tax statements or spend stubs, Education generally accepts borrower reports of zero earnings and debtor reports of household size without confirming the info. 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 utilizing information it currently has got to identify anomalies in earnings and household size which will indicate prospective fraudulence or error. Although data matching and analytic methods may possibly not be enough to identify fraudulence or mistake, combining all of them with follow-up procedures to confirm information about IDR applications may help Education reduce steadily the danger of making use of fraudulent or erroneous information to 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 2018, almost half of the $859 billion in outstanding federal Direct Loans was being repaid by borrowers using IDR plans september. Prior GAO work discovered 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 will find indicators of potential fraudulence or mistake in earnings and household size information supplied by borrowers on IDR plans and (2) the degree 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 chance for fraudulence or error 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 when it comes to time that is same 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.

Exactly Exactly 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 guidelines.