The Biden administration last year quickly moved to provide student debt relief to millions of Americans before it had implemented appropriate safeguards to prevent fraud, according to new findings by a congressional watchdog.
In a report released Thursday, the Government Accountability Office said the Education Department did not go far enough in creating anti-fraud procedures to prevent a small share of high-income borrowers from getting relief for which they didn’t qualify under the $430 billion program.
Department officials failed to make sure their process for catching ineligible borrowers was working properly before they approved millions of applications, GAO said. In other cases, the report found the administration didn’t verify borrowers’ self-reported income information before automatically approving them for relief.
Both shortcomings, GAO concluded, opened the door to fraud in Biden’s sweeping student debt relief program, which the Supreme Court struck it down in June.
While the findings won’t have any practical effort on the now-defunct program, they could shape how the Biden administration structures its next attempt at mass debt cancellation, which the Education Department is actively developing.
GAO recommended that the Education Department’s next program incorporate more “robust” procedures for rooting out fraud that are fully implemented before any loans are forgiven. It also urged the department “to avoid relying solely on self-reported data in any future debt relief efforts.”
The Biden administration has not said yet whether it will require applications or any self-certification for the new, more targeted debt relief program that it plans to pursue under a different legal authority, the Higher Education Act.
But Education Department officials have said publicly that they’re interested in finding ways to automate any future student debt relief as much as possible, using existing data that the agency already has on file or can easily access.
The report also offered fresh ammunition to Republican critics of Biden’s student debt relief efforts, who have repeatedly accused the administration of a reckless approach to canceling debt without regard for the billions of dollars it costs taxpayers.
Rep. Virginia Foxx (R-N.C.), the chair of the House education committee, said the GAO findings showed that the department had turned a blind eye to combating fraud. She blasted what she called the administration’s “lack of appetite for oversight and accountability.”
Sen. Bill Cassidy (R-La.), the top Republican on the Senate education committee, suggested that parts of the GAO report would have been more damning to the administration had the Education Department not moved to withhold parts from public view.
In a letter to the department, Cassidy and Sen. Rand Paul (R-Ky.) wrote that their staff had reviewed an “unamended version” of the report and “were unable to determine a reasonable justification” for the information to be shielded from public view. But they didn’t say what that withheld information was.
Rich Cordray, the head of the office of Federal Student Aid, wrote in a formal response to GAO that the agency disagreed with some of its findings but agreed mostly with the watchdog’s recommendations moving forward.
Cordray denied that the program relied solely on self-reported data and wrote that “any future debt relief efforts will not rely solely on self-reported data.” He also said improved data-sharing between the Education Department and IRS over the past year would benefit future debt relief efforts.
In a statement, an Education Department spokesperson defended the administration’s efforts to root out fraud in the original debt relief program. The department had developed and was implementing “a carefully tailored fraud risk management strategy to ensure that only qualified borrowers would receive relief while also protecting borrowers from scams,” the statement said.
The spokesperson noted that the agency’s efforts to prevent fraud were targeted at the 2 percent of federal student loan borrowers whose incomes were estimated to be too high to receive relief. The vast majority of federal student loan borrowers, 98 percent, qualified for the program.
GAO’s examination of the fraud risks in the program highlights many of the challenges that the Biden administration faced in quickly standing up an unprecedented, sweeping student debt relief program.
Biden’s student debt relief program, which would have provided up to $10,000 or $20,000 of student debt to tens of millions of borrowers, was announced in August 2022 after a drawn-out policy debate within the administration.
Many progressives had urged Biden to enact a universal debt relief program, without any application process, citing concerns it would bog down borrowers and create administrative hoops.
The White House, seeking to stave of criticism that the program would help high earners, ultimately settled on income caps. It limited the program to individual borrowers who earned less than $125,000 or families who earned less than $250,000.
That left the Education Department with the vexing problem of how to quickly determine which people would qualify because the agency didn’t have access to income information for most borrowers.
Administration officials decided to create a simple application that allowed borrowers to sign an attestation, under penalty of perjury, that they met the income requirements.
Ultimately, the Education Department in a matter of several weeks last fall rolled out an application process that was widely praised on the left for its simplicity and for avoiding the technology pitfalls that have plagued other high-profile projects, such as the infamous HealthCare.gov meltdown during the Obama administration.
But the GAO report suggests the Biden administration may have moved too quickly.
Of the approximately 12 million people who submitted an online application and checked a box certifying that they met the income criteria, the Education Department pulled out about 790,000 of those applications for additional scrutiny, according to GAO. The administration had planned to require those borrowers to produce documentation, such as a tax return, to prove that their income was below the limit.
But the Education Department swiftly approved the remaining borrowers for relief before it evaluated whether its process for setting aside the 790,000 borrowers was an effective safeguard against fraud.
In addition to the application process, GAO also criticized the Education Department for its approach to automatically approving borrowers without an application, using income information it already had on file.
The department had income information for 7.2 million borrowers because they had recently applied for student aid or submitted it for an income-driven repayment plan. While most was transferred directly from the IRS, GAO found that the income information for 2 million of those borrowers had been self-reported and was never verified.
CORRECTION: This report has been updated to clarify Rich Cordray’s response to GAO about the use of self-reported data for student debt relief.