Federal Student Loans: Education Needs to Verify Borrowers’ Information for Income-Driven Repayment Plans

8 August 2019 In Featured Reports

By Yesenia Ayala

Recently, the United States Government Accountability Office (GAO) released a report entitled Federal Student Loans: Education Needs to Verify Borrowers’ Information for Income-Driven Repayment Plans which examined  errors and/or misinformation provided by federal loan borrowers in Income Driven Repayment (IDR) plans and the extent to which the U.S. Department of Education (ED) verifies income and family size.

Among the findings:

  • As of September 2018, $414 billion in outstanding Direct Loans was being repaid through IDR plans.
  • 11% of approved IDR plans belonged to borrowers who reported zero income but still appeared to earn enough wages to make a monthly loan payment.
    • 34% of these borrowers earned an estimated annual wage of $45,000 or more.
  • GAO also analyzed the family size of approximately 5 million IDR plans approved between January 1, 2016 and September 30, 2017.
    • 6 million of the 5 million reported family sizes of between two and five members.
    • 40,900 reported a family size of nine members or more.
    • The number of plans with a reported family size of nine or more raised flags in GAO’s analysis as this is considered a data “outlier” and could potentially be a source of fraud where borrowers overreport family size to reduce their monthly payments.It may also be a result of borrowers confusion regarding who counts as a “family member.”
    • Borrowers with family sizes of nine members or more owed approximately $2.1 billion in Direct Loans.
  • GAO recommended that the Department of Education collect information to verify the income of those who report zero income on their IDR applications and implement practices and follow-up procedures to verify loan borrowers’ family size.