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GAO: U.S. Should Verify Borrowers’ Income for Income-Driven Loan Plans

July 26, 2019
 
 

The Government Accountability Office in a report released Thursday recommended that the Department of Education do more to verify the income and family size of borrowers applying for income-driven repayment plans.

IDR plans allow borrowers who can’t manage loan repayment under a standard 10-year plan to make monthly payments equal to 10 percent of their income. The remaining loan balance for those borrowers is forgiven after 25 years.

Payments under IDR are based on both reported income and family size. And the GAO found that more than 76,000 borrowers making no monthly payments may have earned enough to pay something toward their student loans. Those borrowers collectively owed more than $4 billion in outstanding federal loans in fiscal year 2017. And more than 35,000 borrowers reported atypically large family sizes.

Education Secretary Betsy DeVos in a statement called on lawmakers to give the department authority to independently verify income information using IRS data.

"If Congress provides the department with this authority, we could significantly reduce the risk of fraud and improper payments, save taxpayers money, and reduce the burden on borrowers when they annually recertify their income with the department," she said in a statement.

In the 115th Congress, Senate lawmakers did just that. The chamber unanimously passed a bill called the FAFSA Act in December that would allow borrowers to grant the IRS permission to share their income information directly with the Department of Education. Allowing the IRS to take that step would mean borrowers wouldn’t have to verify their income themselves. A companion bill was introduced in the House but never received a vote.

The bill was introduced by Senator Lamar Alexander and Senator Patty Murray, the top Republican and Democrat, respectively, on the Senate education committee. Justin Draeger, the president of the National Association of Student Financial Aid Administrators, released a statement urging lawmakers -- particularly the House -- to pass the legislation as a stand-alone bill.

Draeger also said attempts to safeguard against potential fraud should be balanced against the potential of creating bureaucratic barriers for borrowers who need access to tools like income-driven repayment.

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