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

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
(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 ascertain an affordable repayment price. Monthly obligations is 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 as a result of prospective mistake or fraudulence:

Significantly more than 76,000 borrowers making no payments that are monthly have had enough earnings to cover one thing

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

Just exactly How household size impacts re re payment quantities in a few Income-Driven Repayment plans safe online personal loans in colorado for a debtor with $40,000 in taxable earnings

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

Extra Materials:

  • Features 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 Exactly Just What GAO Found

GAO identified indicators of prospective fraud or mistake in earnings and household size information for borrowers with approved Repayment that is income-Driven( plans. IDR plans base monthly premiums on a borrower’s earnings and household size, expand repayment periods through the standard decade to as much as 25 years, and forgive remaining balances at the conclusion of the duration.

Zero earnings. About 95,100 IDR plans were held by borrowers whom reported zero earnings yet potentially earned sufficient wages to produce monthly education loan re payments. This analysis is dependant on wage information from the nationwide Directory of brand new Hires (NDNH), a dataset that is federal contains quarterly wage information for newly employed and existing employees. Relating to GAO’s analysis, 34 per cent of those plans had been held by borrowers that has projected yearly wages of $45,000 or even more, including some with calculated yearly wages of $100,000 or maybe more. Borrowers by using these 95,100 IDR plans owed nearly $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 higher, that have been atypical for IDR plans. Very nearly 1,200 of those 40,900 plans were authorized centered on household sizes of 16 or higher, including two plans for various borrowers which were approved employing a grouped family members size of 93. Borrowers with atypical household sizes of nine or higher owed almost $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 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 leads to Education for further investigation.

Weaknesses in Education’s processes to validate borrowers’ family and income size information limitation being able 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 household size without verifying 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 methodically implemented other information analytic methods, such as for instance making use of information it currently needs to detect anomalies in earnings and household size which will suggest fraud that is potential mistake. Although data matching and analytic methods may possibly not be adequate to identify fraud or mistake, combining all of them with follow-up procedures to validate information about IDR applications may help Education reduce steadily the danger of utilizing fraudulent or erroneous information to calculate month-to-month loan re re payments, and better protect the federal investment in student education loans.

Why GAO Did This Research

At the time of September 2018, nearly 1 / 2 of the $859 billion in outstanding federal Direct Loans had been paid back by borrowers making use of IDR plans. Prior GAO work discovered that while these plans may relieve the duty of education loan financial obligation, they could carry high charges for the government.

This report examines (1) whether you will find indicators of possible fraudulence or mistake in family and income size information supplied 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 newest information available, and evaluated the risk 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 exact 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.

Exactly What GAO Recommends

GAO suggests that Education (1) obtain information to validate 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.