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

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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

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

To help ease the duty of federal student education loans, borrowers can use for Income-Driven Repayment plans. The plans utilize borrowers’ taxable income and household size to ascertain a reasonable repayment price. Monthly obligations 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 as a result of possible 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

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

Just exactly just How household size impacts re re re 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 payment could be $182 but decreases to $74 with a family group of 3 and $0 with a household of 5

Extra Materials:

  • Shows 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

Just What GAO Found

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

Zero earnings. About 95,100 IDR plans were held by borrowers who reported zero income yet potentially earned enough wages in order to make month-to-month education loan re re payments. This analysis will be based upon wage information through the nationwide Directory of brand new Hires (NDNH), a dataset that is federal contains quarterly wage information for newly employed and current employees. https://missouripaydayloans.net In accordance with GAO’s analysis, 34 percent of the plans had been held by borrowers that has approximated yearly wages of $45,000 or higher, including some with predicted yearly wages of $100,000 or even more. 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 authorized according to household sizes of nine or higher, that have been atypical for IDR plans. Nearly 1,200 of those 40,900 plans had been authorized centered on family members sizes of 16 or higher, including two plans for various borrowers that have been authorized employing a grouped family members measurements of 93. Borrowers with atypical household sizes of nine or maybe more owed very 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 members size. Because earnings and household size are acclimatized to determine IDR monthly payments, fraudulence or mistakes in these details can lead to the Department of Education (training) losing thousands of loan repayments per borrower every year and potentially enhancing the ultimate price of loan forgiveness. Where appropriate, GAO is referring these total brings about Education for further investigation.

Weaknesses in Education’s procedures to validate borrowers’ earnings and household size information limitation its power to detect potential fraudulence or mistake in IDR plans. While borrowers obtaining IDR plans must definitely provide proof taxable earnings, such as for instance taxation statements or spend stubs, Education generally accepts borrower reports of zero borrower and income reports of family size without confirming the knowledge. 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 systematically implemented other information analytic methods, such as for instance making use of information it currently needs to identify anomalies in income and household size that could suggest fraud that is potential mistake. Although data matching and analytic methods may possibly not be adequate to identify fraudulence or mistake, combining these with follow-up procedures to validate informative data on IDR applications may help Education lessen the danger of making use of fraudulent or information that is erroneous determine month-to-month loan re payments, and better protect the federal investment in figuratively speaking.

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 unearthed that while these plans may relieve the responsibility of education loan financial obligation, they are able to carry high prices for the authorities.

This report examines (1) whether you can find indicators of possible fraudulence or mistake in family 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 most up-to-date 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 whom reported zero earnings with wage information from NDNH for the time that is same 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.

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 practices that are analytic follow-up procedures to validate debtor reports of zero earnings, and (3) implement information analytic methods and follow-up procedures to validate borrowers’ family members size. Education generally consented with this tips.

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