College and other postsecondary education—including vocational and graduate programs—play a vital role in supporting economic success for individuals and the nation as a whole. To help expand access to college education, the federal government provided about $112 billion in financial aid in FY 2022 through grants, loans, and work-study funds.
However, the amount of federal student loan debt has grown to more than $1.6 trillion, and, in the past, many borrowers struggled to repay their loans and eventually defaulted. With student loan payments resuming after a more than 3-year payment pause due to the COVID-19 pandemic, the Department of Education (Education) should take steps to strengthen its management and oversight of federal student aid programs.
To make student loans more affordable, Income-Driven Repayment plans base monthly payments on a borrower’s income and family size, and extend repayment periods. Borrowers in these plans are also eligible for loan forgiveness after up to 20 or 25 years of qualifying payments. However, Education has not provided borrowers with key information about the requirements for forgiveness and their progress toward forgiveness.
While Income-Driven Repayment plans can help borrowers with limited incomes afford their monthly student loan payments, these plans can also result in high costs to the federal government and taxpayers. To minimize these costs, it is important that Education accurately determine monthly payment amounts for borrowers enrolled in these plans. However, Education has not established procedures to verify certain information on these applications, including borrower reports of zero income and borrower reports of family size.
If colleges provide inaccurate or misleading information about, for example, students’ ability to transfer course credits to another college or to quality for a specific certification after graduation, students may have difficulty completing their degree, finding a job in their field, or paying back their student loans. Education is supposed to provide oversight in this area, but it hasn’t completed or updated its procedures for investigating and imposing penalties on colleges found to be engaging in this behavior.
Colleges can use third-party online program managers to help run their online education programs. These managers often recruit students, in addition to providing other services. Many online managers are paid a share of tuition revenue—an arrangement Education allows only if safeguards against prohibited incentive payments are in place. For example, online managers must provide multiple services and not be paid separately for recruiting. These arrangements are subject to annual audits. However, colleges lack clear instructions from Education about disclosing these arrangements, making it hard to detect violations.
Policymakers need fact-based information on how federal financial aid programs relate to student outcomes, such as college access and completion. However, Education hasn’t conducted evaluative research specific to these programs, making it difficult to build on successful federal assistance efforts and improve less effective efforts.