Recommendation: The Chief Operating Officer of Federal Student Aid should obtain data in order to verify income information for borrowers reporting zero income on IDR applications. For example, Education could pursue access to federal data sources or obtain access to an appropriate private data source. (Recommendation 1)

Agency: Department of Education: Office of Federal Student Aid
Status: Open

Comments: Education generally agreed with this recommendation. Education stated that the President's fiscal year 2020 budget request includes a proposal that Congress pass legislation allowing the IRS to disclose tax return information directly to the department for the purpose of administering certain federal student financial aid programs. According to the agency, such legislation, if enacted, would allow borrowers to more easily certify their income on an annual basis to maintain enrollment in IDR plans, and allow the department to use the information to mitigate improper payments to borrowers as a result of misreported income data. Section 3 of the Fostering Undergraduate Talent by Unlocking Resources for Education Act (FUTURE Act), enacted in December 2019, provided Education with statutory authority to access certain Internal Revenue Service data for the purpose of determining eligibility for IDR plans, among other things (Public Law 116-91). As of August 2020, Education had begun planning for the implementation of the legislation. The Congressional Budget Office estimated that use of this authority to verify eligibility for IDR plans could result in over $2 billion in savings for 2020-2029.

Recommendation: The Chief Operating Officer of Federal Student Aid should implement data analytic practices, such as data matching, and follow-up procedures to review and verify that borrowers reporting zero income on IDR applications do not have sources of taxable income at the time of their application. (Recommendation 2)

Agency: Department of Education: Office of Federal Student Aid
Status: Open

Comments: Education agreed with this recommendation, and from January to March 2020 initiated a pilot program with three of its loan servicers to conduct additional verification of income or family size information on IDR plan applications for a random sample of borrowers each month. When initiated, the pilot focused on IDR borrowers who self-certified that they had no income or who reported certain family sizes. According to Education, selected borrowers would be asked to provide documentation to their servicers to support the income or family size reported on their IDR application. In the event errors were identified, servicers would work with the borrowers to update their applications. If these reviews resulted in changes to a borrower's monthly payment amount, the borrower would be expected to begin paying the new amount within the next 60 days. According to Education, as of the end of March 2020 when the pilot was put on hold, participating servicers selected 48,855 borrowers for verification. The verification pilot was put on hold as it implemented student loan relief for borrowers under the CARES Act in response to the COVID-19 global pandemic (Public Law 116-136). Specifically, on March 27, 2020, the CARES Act was enacted, which suspended student loan payments due, interest accrual, and involuntary collections for Direct and Federal Family Education Loans held by Education through September 30, 2020. According to Education, the Department suspended all IDR recertifications during this period. On August 8, 2020, the President issued a presidential memorandum directing the Secretary of Education to extend this relief to borrowers through December 31, 2020. Education reported that it will weigh options for resuming the pilot against other critical priorities and available resources, noting that its long-term strategy is to fully implement the authorities granted under the FUTURE Act, which provides Education with statutory authority to access certain Internal Revenue Service data for the purpose of determining eligibility for IDR plans, among other things (Public Law 116-91). GAO will continue to monitor Education's actions in this area, and will close the recommendation when Education provides documentation that it has implemented data analytic practices and follow-up procedures to review and verify that borrowers reporting zero income on IDR applications do not have sources of taxable income at the time of their application.

Recommendation: The Chief Operating Officer of Federal Student Aid should implement data analytic practices, such as data mining, and follow-up procedures to review and verify family size entries in IDR borrower applications. For example, Education could review and verify all borrower reports of family size or a subset identified as being most susceptible to fraud or error. (Recommendation 3)

Agency: Department of Education: Office of Federal Student Aid
Status: Open

Comments: Education agreed with this recommendation, and from January to March 2020 established a pilot program with three of its loan servicers to conduct additional verification of income or family size information on IDR plan applications for a random sample of borrowers each month. When initiated, the pilot focused on IDR borrowers who self-certified that they had no income or who reported certain family sizes. According to Education, selected borrowers would be asked to provide documentation to their servicers to support the income or family size reported on their IDR application. Education noted that under the pilot, loan servicers were required to request additional information from borrowers to verify family sizes greater than five; specifically, a statement listing each family member residing with the borrower and for whom the borrower pays at least 51 percent of the support. In the event errors were identified, servicers would work with the borrowers to update their applications. If these reviews resulted in changes to a borrower's monthly payment amount, the borrower would be expected to begin paying the new amount within the next 60 days. According to Education, as of the end of March 2020 when the pilot was put on hold, participating servicers selected 48,855 borrowers for verification. The verification pilot was put on hold as Education implemented student loan relief for borrowers under the CARES Act in response to the COVID-19 global pandemic (Public Law 116-136). Specifically, on March 27, 2020, the CARES Act was enacted, which suspended student loan payments due, interest accrual, and involuntary collections for Direct and Federal Family Education Loans held by Education through September 30, 2020. According to Education, the Department suspended all IDR recertifications during this period. On August 8, 2020, the President issued a presidential memorandum directing the Secretary of Education to extend this relief to borrowers through December 31, 2020. Education reported that it will weigh options for resuming the pilot against other critical priorities and available resources, noting that its long-term strategy is to fully implement the authorities granted under the FUTURE Act, which provides Education with statutory authority to access certain Internal Revenue Service data for the purpose of determining eligibility for IDR plans, among other things (Public Law 116-91). GAO will continue to monitor Education's actions in this area, and will close the recommendation when Education provides documentation that it has implemented data analytic practices and follow-up procedures to review and verify family size entries in IDR borrower applications.