WASHINGTON — With new findings questioning the risk of fraud, Sen. Patty Murray, D-Wash., is asking the Education Department to suspend an expanded initiative to ensure that borrowers qualify for popular student loan repayment plans.
“Verification ensnares students in a jungle of red tape,” Murray, the top-ranking Democrat on the Senate Education Committee, wrote in a letter to Education Secretary Betsy DeVos on Wednesday. “The [Education] Department’s efforts to impose verification procedures on borrowers are based on unsupported assumptions.”
Murray’s concerns stem from a Government Accountability Office report in July that said lax vetting of income and household data submitted by borrowers in income-driven repayment plans is leaving the programs susceptible to fraud and errors. The plans cap monthly payments at a given percentage of earnings, with the promise the balance will be forgiven after 20 or 25 years. The government calculates payments using a borrower’s income and family size.
GAO researchers found that about 95,100 income-driven plans were held by borrowers who reported no earnings while actually making enough to pay something toward their debt. About one-third of that group were estimated to have earned at least $45,000 a year; some had six-figure salaries.
An additional 41,000 plans were held by borrowers who said they had households of at least nine people.
When the GAO report was released, DeVos issued a statement saying the findings were proof of her long-held belief that “there is significant risk in the federal student loan portfolio. Misrepresenting income or family size is wrong, and we must have a system in place to ensure that dishonest people do not get away with it.”
The report served as the basis for the Education Department’s plan to shore up verification policies, which Murray argues are based on “flawed assumptions” that errors result from borrowers defrauding the government.
The senator asked the GAO to clarify its findings and was told many potential reasons exist for data errors, including borrower confusion over what constitutes taxable income or loan servicers’ mistakes when copying family size from paper applications into computer systems. In a written response to Murray’s questions, the GAO said it was not feasible to examine the full range of factors that lead to data errors in the report and that “it is not possible to conclude the existence of fraud” without further research.
The Education Department said robust vetting is critical to ensure that taxpayers are not left on the hook for money that should be repaid.
“It is astonishing that a member of Congress would ask us to ignore our fiduciary responsibility to the taxpayer by turning a blind eye to fraud,” Education Department spokeswoman Angela Morabito said.
