Federal Student Education Loans:

Federal Figuratively Speaking:

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
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To help ease the duty of federal figuratively speaking, borrowers can use for Income-Driven Repayment plans. The plans utilize borrowers’ taxable earnings and household size to ascertain a reasonable repayment rate. Monthly obligations is often as low as $0 but still count toward prospective loan forgiveness following the payment duration.

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

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

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

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

Extra Materials:

• Features Web Web Web Page:
  • (PDF, 1 web web web page)
• Complete 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 What GAO Found

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

Zero earnings. About 95,100 IDR plans were held by borrowers whom reported zero earnings yet possibly earned sufficient wages which will make monthly education loan re payments. This analysis is dependant on wage information through the nationwide Directory of brand new Hires (NDNH), a federal dataset that contains quarterly wage information for newly employed and existing workers. Based on GAO’s analysis, 34 % of the plans had been held by borrowers that has projected annual wages of $45,000 or even more, including some with approximated yearly wages of $100,000 or higher. Borrowers with one of 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 even more, that have been atypical for IDR plans. Nearly 1,200 of those 40,900 plans had title max loans been approved predicated on household sizes of 16 or even more, including two plans for different borrowers that have been authorized employing household measurements of 93. Borrowers with atypical family members sizes of nine or maybe 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 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 brings about Education for further investigation.

Weaknesses in Education’s procedures to validate 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 proof taxable earnings, such as for instance tax statements or spend stubs, Education generally accepts borrower reports of zero borrower and income reports of household size without confirming the data. Although Education will not actually have usage of federal sourced elements of information to confirm debtor reports of zero earnings, the division could pursue such access or get personal data sources for this specific purpose. In addition, Education has not yet systematically implemented other information analytic methods, such as for instance utilizing information it currently needs to identify anomalies in earnings and family size that will suggest fraud that is potential mistake. Although data matching and analytic practices might not be adequate to detect fraudulence or mistake, combining these with follow-up procedures to confirm info on IDR applications may help Education lessen the danger of utilizing fraudulent or erroneous information to determine month-to-month loan payments, and better protect the federal investment in figuratively speaking.

Why GAO Did This Study

At the time of September 2018, nearly 50 % of the $859 billion in outstanding federal Direct Loans had been paid back by borrowers making use of IDR plans. Prior GAO work found that while these plans may relieve the duty of education loan financial obligation, they could carry high charges for the government that is federal.

This report examines (1) whether there are indicators of possible fraud or mistake in earnings and household size information supplied by borrowers on IDR plans and (2) the degree to which Education verifies these details. GAO obtained Education data 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 whom reported zero earnings with wage information from NDNH for the exact same time frame 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 Just What GAO Recommends

GAO advises that Education (1) obtain data to validate earnings information for borrowers whom report zero earnings on IDR plan applications, (2) implement information analytic methods 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 this guidelines.