11.21.19

Following New GAO Information, Senator Murray Urges DeVos to Reverse Course on Proposed Barriers to Income-Driven Repayment

Government Accountability Office provides Senator Murray with new information invalidating DeVos’ claims of “significant risk” of borrower fraud

 

Senator Murray calls on DeVos to immediately suspend her proposal in light of new GAO information

 

Senator Murray: “New information provided by GAO makes clear that Department efforts to implement verification are justified by unsupportable assumptions, and I strongly urge the Department to reverse course.”

 

Washington, D.C. – U.S. Senator Patty Murray (D-WA), ranking member of the Senate Committee on Health, Education, Labor and Pensions, demanded Secretary of Education Betsy DeVos immediately halt efforts to implement barriers to income-driven repayment (IDR), citing new information from Government Accountability Office (GAO) that invalidates the Department’s flawed assumptions of “significant risk” of borrower fraud. In a letter sent today to Secretary DeVos, Senator Murray provided the Department with new GAO information, requested by Senator Murray, highlighting that the Department made incorrect assumptions about borrower fraud and used those assumptions as the basis for new policies that would hurt student borrowers.    

 

“New information provided by GAO makes clear the Department’s efforts to impose verification procedures on borrowers are based on unsupported assumptions, and I strongly urge the Department to reverse course,” wrote Senator Murray. “The Department should evaluate this new information from GAO before taking any further steps to increase the burden on struggling student loan borrowers.”

 

“Ensuring access to IDR for at-risk borrowers is vital to promoting successful repayment outcomes in the federal loan portfolio. The Department should not embark on a dangerous new project without first investigating the facts,” continued the senator. “At a minimum, the Department should halt all efforts to create verification barriers to IDR enrollment until a full review of the facts and information can be completed.”

 

Background:

In July 2019, GAO published the report Education Needs to Verify Borrowers' Information for Income-Driven Repayment Plans at the request of House Republicans. In response to that report, Secretary DeVos claimed there is “significant risk” of borrower fraud in IDR given some instances of errors in income and family size on borrower applications. As a result, the Department has proposed new verification procedures for income-driven repayment (IDR) that would force borrowers to jump through unnecessary and cumbersome hoops and limit access to the vital program.

 

Given the incomplete analysis requested by House Republicans, Senator Murray requested additional clarification from GAO. The follow up information shows that the Department’s response was based on flawed assumptions. In its response to Senator Murray, GAO explained that there are many potential reasons for data errors in our complicated student loan repayment system that are beyond the borrower’s control, stating “it is not possible to conclude the existence of fraud” without further research.  

 

The full letter is below and a PDF is HERE.

 

November 20, 2019

 

The Honorable Betsy DeVos

Secretary of Education

U.S. Department of Education

400 Maryland Avenue, S.W.

Washington, DC 20202

 

Dear Secretary DeVos:

 

I write to request that the U.S. Department of Education (“Department”) immediately suspend efforts to create barriers to income-driven repayment (IDR) in light of new information from the Government Accountability Office (GAO).[1] I am extremely concerned that creating verification procedures for IDR will replicate barriers that reduce access to federal financial aid, including Pell Grants and federal student loans. Verification ensnares students in a jungle of red tape; more than 1 in 5 students selected for verification fail to complete it.[2] New information provided by GAO makes clear the Department’s efforts to impose verification procedures on borrowers are based on unsupported assumptions, and I strongly urge the Department to reverse course.

On July 25, 2019, GAO published the report Education Needs to Verify Borrowers’ Information for Income-Driven Repayment Plans (“IDR Report”). In response to that report, you said that “there is significant risk in the federal student loan portfolio” and, regarding errors in the IDR applications, that “we must have a system in place to ensure that dishonest people do not get away with it.”[3] As a result, the Department indicates that it is beginning a new initiative to verify borrowers’ income and family sizes on their applications for IDR.[4] 

That decision, however, is based on incorrect information. Specifically, GAO has provided me with additional information that undermines the Department’s assumption that there is a “significant risk” of borrower fraud in IDR.[5] I have enclosed a copy of the GAO letter for your review. The information from GAO shows that the Department’s response is based on flawed assumptions that the errors in reported income and family size highlighted in the IDR Report are the result of student loan borrowers defrauding the federal government. GAO explains that there are many potential reasons for data errors in our complicated student loan repayment system that are either the result of borrower confusion or beyond the borrower’s control. GAO also clarifies that it was not feasible to examine the full range of factors that lead to data errors within the IDR report and that “it is not possible to conclude the existence of fraud” without further research. Moreover, GAO stated that the Department has a number of simple solutions at its disposal to address errors in IDR data that do not impose additional burdens on borrowers. The Department should evaluate this new information from GAO before taking any further steps to increase the burden on struggling student loan borrowers.

 

In fact, the Department need not pursue any additional policy changes or pilot programs to verify borrowers’ reported income beyond the legislative proposals it has already offered and supported. The proposal included in the President’s fiscal year 2020 budget request would allow the Internal Revenue Service (IRS) to securely disclose tax return information directly to the Department for the purpose of administering federal financial aid programs. Indeed, the Department has already provided technical assistance regarding, and expressed support for, the bipartisan Faster Access to Federal Student Aid Act, which was passed unanimously by the United States Senate late last year.

 

GAO notes that had such a proposal been passed into law, with respect to the recommendation to verify borrower income for IDR, GAO “would consider the recommendation adopted.” However, GAO also notes that it had followed up with the Department to obtain more details about the legislative proposal since it did not have sufficient clarity to understand the budget request, but that Department officials “declined to provide additional information.” It is alarming that the Department did not respond to GAO’s request for more information since these facts were readily accessible and widely known by the Department. It is even more alarming that, despite declining to provide GAO with the requested information, the Department appears to have used the IDR Report as justification for beginning policies that could be harmful to federal student loan borrowers.

 

In addition, in GAO’s follow-up letter, it identifies many potential causes of unusual borrower income and family size, many of which suggest the need for policy solutions other than verification imposed upon the borrower, including:

 

  • Mismatches between when borrowers may have earned wages, but were not earning wages at the time of submitting the IDR application;
  • Borrowers misunderstanding what constitutes taxable income;
  • Servicers making mistakes when copying family sizes from paper applications into their computer systems;
  • Errors caused by requiring borrowers to provide information on family members in up to three places on the IDR application;
  • Fraud carried out by third-party debt-relief scams that could be uncovered by Department data mining and analytics;
  • Incongruities between prior-prior year tax return data and a borrower’s current tax return;
  • Poor guidance to student loan servicers on calculating income for IDR purposes that is not expected to be corrected until full implementation of the Next Generation Financial Services Environment in fall 2021; and
  • A change in the voluntary procedures issued to servicers for borrowers who report an increase of four or more family members, that occurred in the middle of GAO’s examination period.

 

Finally, GAO reaffirms the recommendation that the Department “take steps to consistently and regularly notify all borrowers in repayment about IDR plans, to help ensure that these plans serve their intended beneficiaries.” Without IDR, many struggling borrowers would fall further behind or end up delinquent or default on their loans. Ensuring access to IDR for at-risk borrowers is vital to promoting successful repayment outcomes in the federal loan portfolio. The Department should not embark on a dangerous new project without first investigating the facts.

I have further asked that GAO analyze additional information with respect to the data, including differences in the stage of repayment (beginning repayment on their loans with an IDR plan; switching their existing repayment plan to IDR; or recertifying their IDR plan) and disaggregation of any abnormalities in the IDR family size or income by the student loan servicer of the borrower. This information will help to identify further the extent to which specific points in time, or specific student loan servicers, may be disproportionately failing to assist borrowers through the IDR process. GAO has commenced its work to examine this information, and I expect the Department to fully comply with all of GAO’s inquiries, and respond in a timely fashion to all requests for information or clarification.

It is imperative that the Department help struggling student loan borrowers obtain the assistance they need to be successful in managing their debt. At a minimum, the Department should halt all efforts to create verification barriers to IDR enrollment until a full review of the facts and information can be completed. If you have any questions, please contact Bryce McKibben on my Health, Education, Labor, and Pensions Committee staff at 202-224-5501. Thank you for your attention to this matter.

 

Sincerely,

 

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[1] Letter fom The Honorable Gene L. Dodaro, Comptroller General of the United States, to Senator Patty Murray regarding GAO-19-347. November 12, 2019. Enclosed.

[2] National College Access Network. “FAFSA Verification: Good Government or Red Tape?” November 2018. https://cdn.ymaws.com/collegeaccess.org/resource/resmgr/publications/verificationwp2018.pdf

[3] U.S. Department of Education. Statement: U.S. Secretary of Education Betsy DeVos Calls for Review of Income Verification for Income-Driven Repayment Plans. July 25, 2019. https://go.usa.gov/xpks3

[4]“FSA anticipates undertaking a 12-month pilot project to assess the incidence of error or fraud in determining monthly payment amounts under income-driven repayment plans. Based on the results of the pilot project, FSA will determine the additional procedures needed, if any, to review and verify income for borrowers reporting zero income on income driven repayment plan applications and procedures to review and substantiate borrowers’ reported family size.” Page 17. U.S. Department of Education, Office of Inspector General. FY2020 Management Challenges Report. November 14, 2019. https://www2.ed.gov/about/offices/list/oig/managementchallenges.html

[5] Government Accountability Office. GAO-19-347: Education Needs to Verify Borrowers' Information for Income-Driven Repayment Plans. July 25, 2019. https://www.gao.gov/products/GAO-19-347