News: Federal Policy & Advocacy

Data Sharing Between ED and IRS Would Prevent Errors in Popular Student Loan Repayment Plan

Thursday, July 25, 2019  
Posted by: Carrie Warick, Director of Policy & Advocacy
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The U.S. Government Accountability Office (GAO) released a new report today that rings alarm bells about income-driven repayment (IDR) plans available to borrowers in the direct federal student lending program.  Unfortunately, the GAO research found that there are errors, or possibly fraud, in the application process to qualify for IDR plans, specifically in the number of individuals reporting $0 income and large family size. 

These repayment plans are vital to students struggling to afford higher education because they provide a safety net if students cannot immediately make their full loan payments after finishing school. Without the future option of IDR plans, many low-income students and students of color would choose to borrow less and further reduce the share of these students that complete a postsecondary credential.

GAO’s proposed solution to this problem is a verification process for IDR plans requiring borrowers to submit information that the government already possesses. The current, similar FAFSA verification process for students applying for financial aid adds significant hurdles to the process and causes large numbers of students not to complete it. Replicating these hurdles after students leave college, when they do not have the support of a financial aid office to help them, is not the right solution. 

Fortunately, members of Congress proposed the best solution last year: The Faster Access to Federal Student Aid Act. This bill would allow the U.S. Departments of Education and Treasury to directly share income information. The changes would both reduce the need for FAFSA verification as well as prevent a newly burdensome process for borrowers by creating an automated IDR verification process between federal agencies. 

In its response to the report, the U.S. Department of Education suggested similar legislation action, pointing out that the President’s budget request included the idea as well. Upon news of the report, Department of Education Secretary Betsy DeVos said that she is “again calling on Congress to provide the Department the authority to independently verify income using IRS data.”

NCAN strongly urges Congress to take up the FAFSA Act again this Congress so that students can have a more streamlined experience both accessing federal student aid and in repaying their federal student loans.