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- Addressed

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- Partially Addressed

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- Not Addressed

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- Consolidated or Other

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- Pending

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- Closed-Partially Addressed

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- Closed-Not Addressed

Year Identified: 2013

Area Number: 16

Area Type: Fragmentation, Overlap & Duplication

Action:

The Commissioner of Internal Revenue should identify characteristics of tax filers who are not claiming a higher education tax expenditure when they appear to be eligible for one and possible reasons for this.

Progress:

As GAO recommended in May 2012, the Internal Revenue Service (IRS) has conducted a review, albeit limited, of eligible students and families who may not be claiming a higher education tax benefit. In June 2013, IRS officials noted that the review had identified more than 15.6 million Forms 1098-T, Tuition Statement, that were not associated with a claim on Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), which may mean that eligible students and families are not claiming an education benefit. IRS officials said they do not plan to conduct further research because the complexity faced by taxpayers in determining qualification requirements for higher education benefits makes it challenging to assess whether taxpayers have chosen the most advantageous benefit. In many cases, the nuances of each taxpayer’s situation affecting his or her eligibility for education benefits are not evident from information reported on their tax returns or the Form 1098-T, making it difficult to identify characteristics of tax filers who are not claiming a higher education expenditure when they are eligible for one. IRS believes and GAO concurs that working with the Department of Education and its partners to better inform eligible students is the most effective approach (see action 2).

Action:

The Commissioner of Internal Revenue and the Secretary of Education should work together to use this information to identify strategies to improve information provided to eligible students and families.

Progress:

The Internal Revenue Service (IRS) and Department of Education (Education) have developed a coordinated, comprehensive strategy to better inform eligible students of higher education tax benefits, as GAO recommended in May 2012. For example, IRS coordinated with Education to create an education tax credit web page on the department’s Federal Student Aid website. Officials also updated communications products, such as IRS.gov; promoted the interactive decision tool offered on IRS.gov; and are creating new products, including an online resource guide. IRS also revised Form 8863,Education Credits (American Opportunity and Lifetime Learning Credits), to use a series of questions for the taxpayer to ascertain credit eligibility on a per student basis, which will help taxpayers understand and use information reported to them by educational institutions on the Form 1098-T, Tuition Statement. In addition, Education officials arranged a meeting with national education associations that helped IRS revise its communication strategy for education tax credits. These associations agreed to conduct needed outreach to their members about federal tax benefits for higher education. These actions have provided additional information to eligible students, which could increase uptake of these tax benefits.

Action:

The Secretary of Veterans Affairs should collaborate with the Department of Education (Education) and the higher education community, leveraging their experiences in administering aid. These collaborations should include assessing the applicability and viability of adopting processes and actions taken by Education, where practical, such as returning overpayments of program funds or reconciling benefit payments.

Progress:

In response to GAO’s May 2011 recommendation, the Department of Veterans Affairs (VA) met with Education officials in 2011 to discuss the processes used by each agency to deliver and recuperate funds issued for educational assistance. While these meetings revealed that existing statutory and technical differences prevent VA from adopting certain Education processes that have been deemed effective in administering federal student assistance, the agencies did collaborate to assess the applicability of Education’s processes to VA. As of December 2013, VA officials stated that no legislative changes had been enacted to allow VA to use methods similar those used in Education to issue and recoup benefit payments. However, VA officials stated that they continue to partner with Education and other agencies through routine interaction and normal business practices to improve the administration and delivery of VA benefits. Continuing this collaboration with Education to identify other opportunities for leveraging experiences may help VA improve its efficiency and effectiveness in administering aid programs.

Action:

 The Secretary of Defense should direct the Undersecretary of Defense for Personnel and Readiness to undertake a systematic review of its oversight of schools receiving tuition assistance program funds. In doing so, the Undersecretary of Defense for Personnel and Readiness should consider reviewing the Department of Education's (Education) recently promulgated requirements for state authorization of schools and coordinate with Education to determine the extent to which these requirements are useful for overseeing schools receiving tuition assistance funds.

Progress:

The Department of Defense (DOD) has made multiple, systematic changes to strengthen its oversight of schools receiving tuition assistance funds. Specifically, all participating schools are now required to sign a memorandum of understanding (MOU) that they will adhere to certain standards in order to receive tuition assistance funds. These standards are designed to address issues with accreditation, recruiting practices, and policy disclosures that would help protect service members while allowing for judicious oversight of taxpayer dollars. In addition, DOD has developed two working groups with Education, the Department of Veterans Affairs (VA), the Department of Justice, and the Bureau of Consumer Financial Protection. The working groups are intended to strengthen enforcement of student protections, and one result of this collaboration is a new system to register student complaints that will be accessible across agencies in the coming months. In the meantime, DOD has recently implemented its own complaint tracking system that will feed into the interagency system when it becomes fully operational. Moreover, DOD has decided to shift its oversight strategy to a risk-based assessment of participating schools, which will consider school sector and location in addition to leveraging information from the interagency complaint system. With regard to reviewing Education's requirements for state authorization of schools, the policy has changed since GAO originally recommended this action in March 2011, but DOD's collaboration with the agency offers opportunities to stay informed of relevant requirements.

Action:

The Secretary of Education should take advantage of opportunities presented by recent and anticipated substantive program changes to sponsor and conduct evaluative research into the effectiveness of Title IV programs and higher education tax expenditures at improving student outcomes.

Progress:

As of January 2020, the Department of Education (Education) had made some progress toward sponsoring and conducting evaluative research into the effectiveness of Title IV programs and higher education tax expenditures at improving student outcomes, as GAO recommended and Education agreed to in 2012. For example, Education took several steps to make data on higher education programs more accessible for research purposes. Education officials also said they are convening stakeholder panels including both governmental and nongovernmental researchers to identify and prioritize key policy questions related to Title IV and higher education tax expenditures. Afterward, Education is planning to partner with governmental or external researchers (via contracts or grants) to investigate the issues identified as priorities. GAO believes that Education's leadership of such efforts would represent a meaningful commitment to make progress on addressing this recommendation.

Given that Education has identified a critical research gap in the area of linking higher education financing to student outcomes, GAO continues to emphasize that Education should ensure that its efforts result in actively sponsoring or conducting evaluative research specific to federal programs and assistance that can be used in future policymaking. Making these data-sharing and research efforts a priority will help policymakers make fact-based decisions on the merits and value of various federal assistance efforts.

Action:

The Secretary of Education should assess and improve, as necessary, the quality of data and methods used to forecast borrower incomes, and revise the forecasting method to account for inflation in estimates.

Progress:

The Department of Education (Education) agreed with GAO’s November 2016 recommendation and has taken some steps to improve borrower income forecasts. Specifically, Education adjusted borrower incomes for inflation in its Direct Loan program reestimates for the fiscal year 2017 Agency Financial Report. This step resulted in a downward reestimate of income-driven repayment (IDR) plan costs for loans issued through the 2016 cohort totaling $17.5 billion

Education has also acknowledged problems with the borrower income data it uses to estimate IDR plan costs and is working to develop strategies to overcome challenges in obtaining more accurate borrower income data, particularly limitations on access to income data from the Internal Revenue Service. In January 2020, officials said that efforts to develop a data sharing agreement with the Census Bureau stalled due to complications of setting up the agreement as a statistical project under the Census Bureau’s legal authority. Therefore, the department plans to re-engage with the Department of the Treasury (Treasury) to obtain updated income data. Officials said they have developed a draft project plan of anticipated work with Treasury, but that time frames for obtaining data are difficult to project given the early stage of negotiations. Obtaining such data will enable Education to improve the reliability of its borrower income forecasts and IDR plan cost estimates.

Action:

The Secretary of Education should obtain data needed to assess the impact of income recertification lapses on borrower payment amounts, and adjust estimated borrower repayment patterns as necessary.

Progress:

In June 2018, the Department of Education (Education) obtained a report from a contractor that assessed the causes and cost implications of borrower income recertification lapses and identified areas in which Education could better account for such lapses in its cost estimates. However, subsequent legislative action eliminated the need for such improvements. Specifically, in December of 2019 the FUTURE Act (Pub. L. No. 116-91) was signed into law, permitting Education to obtain the data needed to automatically recertify borrower incomes annually. Education is working with the Internal Revenue Service on system updates to automatically recertify borrower incomes and eliminate recertification lapses for such borrowers.

Action:

The Secretary of Education should complete efforts to incorporate repayment plan switching into the agency's redesigned student loan model, and conduct testing to help ensure that the model produces estimates that reasonably reflect trends in income-driven repayment plan participation.

Progress:

The Department of Education (Education) agreed with this November 2016 recommendation, committing to better accounting for repayment plan switching in its estimates. To-date, Education has updated its existing repayment plan selection assumption to better reflect trends in income-driven repayment (IDR) plans. However, Education has acknowledged that this update has not fully addressed GAO’s concern and stated that it plans to further update its estimation approach in 2020 to account for borrowers switching into IDR plans in future years. Education anticipates that this step will allow the agency to account for over 90 percent of repayment plan trajectories, better reflecting trends in IDR plan participation.

Action:

The Secretary of Education should, as a part of the agency's ongoing student loan model redesign efforts, add the capability to produce separate cost estimates for each income-driven repayment plan and more accurately reflect likely repayment patterns for each type of loan eligible for these plans.

Progress:

The Department of Education (Education) agreed with GAO’s November 2016 recommendation and has added the capability to produce separate cost estimates for each income-driven repayment (IDR) plan and modified its estimation approach to produce separate cost estimates for each type of loan eligible for IDR plans. The latter step resulted in a downward reestimate of IDR plan costs totaling $6.7 billion for loans issued through the 2016 cohort. These changes will enable Education to better account for cost differences across IDR plans and the loan types eligible for them.

Action:

The Secretary of Education should more thoroughly test the agency's approach to estimating Income-Driven Repayment plan costs, including by conducting more comprehensive sensitivity analysis on key assumptions and adjusting those assumptions (such as the agency's Public Service Loan Forgiveness participation assumption) to ensure reasonableness.

Progress:

The Department of Education agreed with this action, as recommended by GAO in its November 2016 report. In its fiscal year 2017 Annual Financial Reports, Education reported the results of sensitivity analysis testing of income levels and Public Service Loan Forgiveness participation impact on Direct Loan program costs. Education also provided GAO documentation that it tested and revised its income-driven repayment (IDR) plan participation assumption, which resulted in higher estimated borrower participation in IDR plans. Education also provided GAO the results of stress tests of borrower incomes and the resulting impact on estimated defaults. These additional analyses will help Education assess and improve its Direct Loan program budget estimates and provide policy makers with more detailed information about expected costs.

Action:

The Secretary of Education should publish more detailed Income Driven Repayment plan cost information-- beyond what is regularly provided through the President's budget--including items such as total estimated costs, sensitivity analysis results, key limitations, and expected forgiveness amounts.

Progress:

The Department of Education agreed with this action, as recommended by GAO in its November 2016 report.  In its fiscal year 2017 financial report, Education discussed estimation risk, including limitations in its Income-Driven Repayment (IDR) plan cost estimates and actions taken to improve IDR cost estimates in response to GAO's recommendations. In addition, Education's fiscal year 2018 budget justification contained a new section with detailed information on IDR cost estimates, including an exploration of expected forgiveness amounts for borrowers in IDR plans. Finally, Education shared more detailed information on its cost estimates with external stakeholders, including Hill staff and researchers, at a meeting in December of 2017. This information could help better support efforts to assess the cost-effectiveness of IDR plans and design any needed reforms.