Federal Student Loans: Additional Income and Family Size Data for Income-Based Repayment Plans

What GAO found

In June 2019, GAO identified indicators of potential fraud or error in income and family size information for borrowers with approved Income-Based Repayment Plans (IDRs). IDR plans base monthly payments on the borrower’s income and family size, extend repayment periods from standard 10 years to 25 years, and forgo any remaining balances at the end of that period. The Department of Education (Education) administers the federal William D. Ford direct lending program (direct lending) and contracts with private lending services to handle billing and other tasks, including processing of applications. borrowers for IDR plans.

Indicators of fraud or potential error in income information

The June 2019 GAO report found that approximately 95,100 approved IDR plans (11% of the nearly 878,500 IDR plans analyzed by GAO) were owned by borrowers who said they had no income but potentially earned a salary. sufficient to make monthly student loan payments. For this match, GAO disaggregated the data from this analysis for two variables – IDR request type and loan manager – to examine whether indicators of fraud or potential error varied for borrowers with circumstances of default. different reimbursements.

  • IDR application type. The new applications represented just over two-thirds of the roughly 95,100 plans owned by borrowers who reported zero income, but who may have had enough wages to make a student loan repayment. The remainder of the plans included (1) recertification requests, which borrowers with IDR plans are currently required to submit annually, and (2) monthly payment recalculation requests, which borrowers with IDR plans can voluntarily request from anyone. time depending on changes in their income or family size.
  • Loan officer. Two of the eight loan managers included in the GAO review (Great Lakes and Navient) made up more than three-quarters of the roughly 95,100 plans held by borrowers who reported zero income, but who may have earned enough wages to make a student loan payment. This is similar to the share of these loan officers in the overall population of nearly 878,500 plans analyzed by GAO.

Indicators of fraud or potential error in family size information

The June 2019 GAO report found that about 40,900 of the estimated 5 million IDR plans had been approved based on the size of families of nine or more, which the GAO considered to be atypical as they represented about 1 % of largest family sizes in education data. For this match, GAO disaggregated this data for two variables: IDR request type and loan manager.

  • IDR application type. The new applications represented more than half of the roughly 40,900 plans that were approved based on the size of atypical families of nine or more. Requests for recertification represented just over a third of these plans.
  • Loan officer. Three of the eight loan managers included in the GAO review (Great Lakes, Navient and Nelnet) accounted for about 90 percent of the roughly 40,900 plans that were approved based on the size of atypical families of nine or more. This is similar to the share of these loan officers in the overall population of approximately 5 million IDR plans analyzed by GAO.

Why GAO did this study

As of March 2020, half of the $ 989 billion in federal direct loans outstanding was being repaid by borrowers using IDR plans. Previous work by GAO has found that while these plans may ease the debt burden on student loans, they can result in high costs to the federal government.

GAO was asked to provide additional information on the findings and analyzes of its June 2019 report:Federal Student Loans: Education Must Verify Borrower Information for Income-Based Repayment Plans (GAO-19-347). This report examines the breakdown of IDR plans analyzed in the June 2019 GAO report by type of request and loan manager, and how GAO’s findings regarding fraud or potential error varied by type of request and loan manager. ready. To address these issues, GAO analyzed education data on borrowers with approved IDR plans from January 1, 2016 to September 30, 2017, the most recent data available at the time of analysis for the June 2019 report. GAO also analyzed the results of a match it performed using Education data and quarterly national salary data obtained from the National Directory of New Hires, a federal data set that contains quarterly data on the salaries of newly hired and existing employees. As per GAO’s June 2019 report, all analyzes exclude data reported by one of the education loan services, the Pennsylvania Higher Education Assistance Agency, based on data reliability issues that GAO has identified. during this review.

For more information, contact Melissa Emrey-Arras at (617) 788-0534 or [email protected] and Seto J. Bagdoyan at (202) 512-6722 or [email protected]

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