GAO-16-375SP: Training, employment, and education: 37. Post-9/11 GI Bill Overpayments

Training, employment, and education > 37. Post-9/11 GI Bill Overpayments

The Department of Veterans Affairs could achieve substantial savings by developing guidance and controls to reduce the volume of annual Post-9/11 GI Bill overpayments—which amounted to over $400 million in fiscal year 2014—and to improve the collection of overpayment debts, of which $262 million was still outstanding as of November 2014.

Why This Area Is Important

The Post-9/11 GI Bill provides education benefits to eligible veterans and their beneficiaries. The Department of Veterans Affairs (VA) administers the program and pays schools for tuition and fees on behalf of veterans and sends additional payments for housing and books directly to veterans. Overpayments most often occur when VA pays benefits based on a student’s enrollment at the beginning of the school term and the student later drops one or more classes (or withdraws from school altogether). Students therefore receive benefits for classes they did not complete, and the “overpayment” must be paid back to VA. VA identified $416 million in Post-9/11 GI Bill overpayments in fiscal year 2014, or 4 percent of the $10.8 billion in education benefits paid during that period. Overpayments affected one out of four beneficiaries in fiscal year 2014—more than 225,000 veterans—and about 6,000 schools.  Given the size and projected future growth of the Post-9/11 GI Bill program, these overpayments can result in a substantial loss of taxpayer dollars if they are not recovered. In addition, overpayment debts can create financial hardships for veterans and administrative burdens for schools.

VA generally holds veterans liable for repaying any overpayments resulting from enrollment changes during the school term, in accordance with statutory requirements.[1] Schools are only responsible for repaying tuition payments to VA in certain circumstances, such as when the veteran completely withdraws from the school on or before the first day of the term.  Most overpayment debts are collected relatively quickly, but VA had $262 million in outstanding debts, as of November 2014. Veterans are responsible for the vast majority of these outstanding debts, in part because VA has less success collecting debts from veterans than from schools.



[1]38 U.S.C. § 3685(a).

What GAO Found

In October 2015, GAO reported on the effectiveness of VA’s efforts to reduce and collect Post-9/11 GI Bill overpayments. GAO found that VA lacked adequate guidance and controls that could reduce overpayments from enrollment changes, which accounted for around $247 million of high-dollar overpayments (i.e., overpayments greater than $1,667) in fiscal year 2014, according to GAO estimates.[1]

First, many veterans may not realize they can incur overpayments as a result of enrollment changes because VA provides limited guidance to veterans on its policies. For example, VA does not explain in its guidance to veterans how to avoid creating debts once enrolled in school or disclose its formula for calculating overpayments. As a result, veterans can be unaware of the consequences of enrollment changes until after they have already incurred their first overpayment debt, according to school officials. According to federal internal control standards, agencies should use adequate means of communicating with external stakeholders who may have a significant impact on the agency achieving its goals.[2] However, VA’s lack of sufficient guidance may cause some veterans to incur debts that could have been avoided.

In addition, unlike in most other GI bill programs, VA has generally not required veterans using the Post-9/11 GI Bill to regularly verify their enrollment throughout the school term, which can also impact their housing payments. Therefore, some veterans continue to receive thousands of dollars in housing overpayments between the time they drop courses and when the enrollment change is reported to VA by school officials. VA officials said they would like to require veterans using the Post-9/11 GI Bill to verify their monthly enrollment but would need to develop a new verification process. Such an effort could provide substantial long-term savings for VA in comparison with the current system by reducing housing overpayments, and it could help VA comply with federal requirements to establish practices that help ensure funds are safeguarded against waste or loss.[3] For example, $125 million of the $416 million in overpayments VA made in fiscal year 2014 were for housing overpayments, some of which would have been avoided if veterans using the Post-9/11 GI Bill were required to verify their monthly enrollment.

School officials also create overpayments when they make errors, such as reporting enrollment information incorrectly, which VA officials said is sometimes attributable to a lack of training. For example, some school officials routinely made systematic errors reporting enrollment information. In total, school reporting errors accounted for around $28 million in Post-9/11 GI Bill high-dollar overpayments in fiscal year 2014, according to GAO estimates.[4] VA officials said the agency offers a variety of training opportunities, including an online course, but the number of school officials that have completed the training course remains low. Although VA officials said they would like to be able to require school officials to complete a minimum level of training on how to implement the program, they indicated that the agency lacks authority to do so. Since school officials have essential duties in processing Post-9/11 GI Bill payments, they need to possess and maintain a level of competence to do their job, which includes receiving training, consistent with federal internal control standards.[5]

As for collection of overpayments, GAO found that two aspects of VA’s formula for prorating tuition overpayments reduce total collection. First, VA’s formula for prorating overpayments gives veterans credit for extra days of attendance after they drop a class. When a Post-9/11 GI Bill beneficiary drops a class during the term, VA prorates the resulting overpayment as though the veteran attended class through the end of the month rather than using the actual date of the withdrawal. This in effect credits students for up to 30 extra days of classes they did not attend, which can reduce the overpayment amount subject to collection by hundreds of dollars per veteran, as shown in the figure below. VA officials said this policy was designed for monthly housing benefits, and then also applied to tuition benefits, which are paid separately under the Post-9/11 GI Bill. However, since VA’s overpayment calculation is crediting veterans for school days they did not attend, it inappropriately increases the cost of the program, particularly since the law stipulates that education benefits shall only be paid for the period of time during which the veteran is enrolled.[6]

Effect of Prorating Overpayments Based on the End of the Month

Effect of Prorating Overpayments Based on the End of the Month

Second, VA’s formula for prorating overpayment amounts does not account for schools’ own internal refund policies, and can sometimes result in veterans receiving surplus funds that VA is not collecting. Some schools have fairly generous tuition refund policies when students drop a class or withdraw from school early in the term. In these cases, a school may send the veteran a tuition refund that is larger than the overpayment amount the veteran owes to VA, leaving the veteran with a potential financial gain, as shown in the figure below. For example, officials at one school estimated that the difference between their refund policy and VA’s overpayment calculations had resulted in VA making over $136,000 in excess tuition payments for 53 veterans between 2009 and 2014, averaging over $2,500 per veteran. These officials said they had attempted to return these excess funds to VA, but VA would not accept them. VA officials said they cannot accept funds in excess of the overpayment debt that is billed to veterans. The Post-9/11 GI Bill’s authorizing statute specifies that benefits are only payable for the actual tuition and fees charged by a school.[7] However, in these cases VA’s tuition and fees payments exceed the amounts charged by the schools once the refund policies are accounted for—that is, VA is making payments for tuition amounts that were not charged by the school. As a result, VA is overpaying for tuition and these excess funds are being retained by schools or returned to veterans rather than collected by VA.

Overpayment Example when Veteran Withdraws during School’s 100 Percent Refund Period

Overpayment Example when Veteran Withdraws during School's 100 Percent Refund Period



[1]GAO calculated these dollar estimates using VA’s required quarterly reports on high-dollar overpayments. Exec. Order No. 13,520, § 3(f), 74 Fed. Reg. 62,201, 62,203 (Nov. 20, 2009). For the fiscal year 2013 and 2014 reports, VA reviewed a sample of overpayments each quarter that were over $1,667. GAO’s dollar estimates are based on a sample with 95 percent confidence intervals of $226 million to $267 million for student enrollment changes and $259 million to $301 million for the total high-dollar overpayments.

[2]GAO, Standards for Internal Control in the Federal Government, GAO/AIMD‑00‑21.3.1 (Washington, D.C.: Nov. 1, 1999).

[3]31 U.S.C. § 3512(c) and GAO/AIMD‑00‑21.3.1

[4]GAO’s dollar estimates are based on a sample with 95 percent confidence intervals of $19 million to $36 million for school errors.

[6]38 U.S.C. § 3680(a).

[7]38 U.S.C. § 3313(c)(1)(A).

Actions Needed

To address Post-9/11 GI Bill overpayments resulting from school errors, in October 2015, GAO suggested that Congress take the following action:

  • Consider granting VA explicit authority to require a minimum level of training for appropriate school officials.

To reduce the occurrence of Post-9/11 GI Bill overpayments and increase debt collections, GAO also recommended in October 2015 that the Secretary of Veterans Affairs take the following four actions:

  • Provide guidance to educate student veterans about their benefits and the consequences of changing their enrollment.
     
  • Identify and implement a cost-effective way to allow Post-9/11 GI Bill beneficiaries to verify their enrollment status each month, and require monthly reporting.
     
  • Revise the policy for calculating overpayments by prorating tuition overpayments when veterans reduce their enrollment during the term based on the actual date of the enrollment change rather than paying additional benefits through the end of the month during which the reduction occurred.
     
  • Ensure VA is recovering the full amount of tuition and fee payments if a school does not charge a veteran for any tuition or fees after dropping a class or withdrawing from school.

Although GAO cannot estimate the potential savings that would result from these actions, the potential exists for substantial savings from addressing overpayments that amounted to over $400 million in fiscal year 2014 alone. If VA does not take action, the amount of annual overpayments will likely continue to increase as more veterans use their GI Bill benefits, accumulating more uncollected debts each year. It is not reasonable to expect VA to eliminate overpayments entirely, since some overpayments are an inevitable byproduct of veteran enrollment changes. However, VA could achieve substantial savings that would increase over time by reducing the number and dollar amount of Post-9/11 GI Bill overpayments and increasing collections of debts.

How GAO Conducted Its Work

The information contained in this analysis is based on findings from the product in the related GAO products section. In developing those findings, GAO reviewed available Post-9/11 GI Bill financial data from fiscal years 2013 and 2014. GAO also examined the causes of overpayments from a generalizable sample of high-dollar overpayments (greater than $1,667) from fiscal years 2013 and 2014 as well as an in-depth review of a nongeneralizable sample of 20 overpayment cases. In addition, GAO reviewed relevant federal laws, regulations, and policy guidance for processing and collecting VA debts, interviewed senior VA officials, and visited one of VA’s four Regional Processing Offices as well as VA’s debt collection office to interview management and frontline staff. Furthermore, GAO interviewed representatives from several veterans service organizations, higher education associations, and administrators at nine schools about the effects of overpayments on veterans and schools. The nine schools were selected to include a mix of program lengths (2-year and 4-year schools), sectors (public, nonprofit, and for-profit), and student veteran populations.

Table 22 in appendix V lists the program GAO identified that might have opportunities for cost savings or revenue enhancement.   

Agency Comments & GAO Contact

In commenting on the October 2015 report on which this analysis is based, VA agreed with each of GAO’s recommendations and identified steps it plans to take to implement them. To address overpayments resulting from enrollment changes, VA plans to provide information on the consequences of enrollment changes in benefit letters and veteran guidance and to develop a system for verifying veterans’ monthly enrollment. To address collection issues, VA plans to adjust its regulations and procedures for prorating overpayments and accounting for school refund policies.

GAO provided a draft of this report section to VA for review and comment. VA reviewed the draft and did not have any comments.

For additional information about this area, contact Melissa Emrey-Arras at (617) 788-0534 or emreyarrasm@gao.gov.