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 relieve the responsibility of federal figuratively speaking, borrowers can use for Income-Driven Repayment plans. The plans utilize borrowers’ taxable income and household size to ascertain an inexpensive payment rate. Monthly obligations is 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 doing more to confirm borrowers’ earnings and household size due to prospective error or fraud:
Significantly more than 76,000 borrowers making no payments that are monthly have had enough earnings to cover one thing
More than 35,000 borrowers had authorized plans with atypical family members sizes of 9 or maybe more
Exactly How family members size impacts re re re payment quantities in a few Income-Driven Repayment plans for a borrower with $40,000 in taxable earnings
Graphic showing that the solitary debtor’s payment will be $182 but decreases to $74 with a family group of 3 and $0 with a family group of 5
Extra Materials:
- Highlights Web Web 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
Workplace of Public Affairs
(202) 512-4800
youngc1@gao.gov
Just Just 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 household size, expand repayment durations through the standard ten years to as much as 25 years, and forgive staying balances by the end of this duration.
Zero earnings. About 95,100 IDR plans were held by borrowers whom reported zero earnings yet possibly earned sufficient wages to produce 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 employed and current workers. Based on GAO’s analysis, 34 % among these plans had been held by borrowers that has believed yearly wages of $45,000 or higher, including some with projected annual wages of $100,000 or even 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 family members sizes of nine or maybe more, that have been atypical for IDR plans. Nearly 1,200 among these 40,900 plans had been authorized predicated on household sizes of 16 or even more, including two plans for various borrowers which were authorized employing a grouped household measurements of 93. Borrowers with atypical family members sizes of nine or even more owed very nearly $2.1 billion in outstanding Direct Loans as of September 2017.
These outcomes indicate some borrowers may erroneously have misrepresented or 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’ earnings and household 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 spend stubs, Education generally accepts borrower reports of zero income and debtor reports of household 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 has not yet methodically implemented other information analytic methods, such as for example making use of information it already needs to identify anomalies in earnings and household size that could suggest fraud that is potential mistake. Although data matching and analytic methods may possibly not be enough to identify fraudulence or mistake, combining these with follow-up procedures to confirm info on IDR applications may help Education lower the threat 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 payday loans in ohio 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 could carry high prices for the authorities.
This report examines (1) whether you can find indicators of prospective fraudulence or mistake in family and income size information provided 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 information available, and evaluated the danger for fraudulence or mistake in IDR plans for Direct Loans by (1) matching Education IDR plan information for the subset of borrowers whom reported zero earnings with wage information from NDNH when it comes to same time frame and (2) analyzing Education IDR plan data on borrowers’ family members sizes. In addition, GAO reviewed IDR that is relevant and procedures from Education and interviewed officials from Education.
Just Exactly Just What GAO Recommends
GAO advises that Education (1) obtain information to confirm income information for borrowers whom report zero earnings on IDR plan applications, (2) implement information practices that are analytic follow-up procedures to confirm debtor reports of zero earnings, and (3) implement information analytic techniques and follow-up procedures to confirm borrowers’ family members size. Education generally consented with this guidelines.