President Joe Biden’s failed first attempt at student loan forgiveness had a fraud problem, according to an independent watchdog.
Last year, the federal Education Department approved 16 million borrowers, of more than 26 million who applied, for up to $20,000 in student debt relief without applying standard fraud prevention measures, the nonpartisan Government Accountability Office concluded in a report published Thursday.
The debt relief plan would have forgiven as much as $400 billion in student loans, addressing a burden that continues to weigh down many American families. Repayments resumed on those loans last month after a more than three-year freeze triggered by the pandemic. Had the plan not been stalled by lower courts − and ultimately struck down in dramatic fashion over the summer by the Supreme Court’s conservative majority − the department would have “left the door open” to the possibility of some ineligible borrowers getting forgiveness based on fraudulent data, the auditors said.
“It is crucial that the department commit to fraud risk management in any future program it pursues,” they wrote.
The report provides fodder to Biden’s political enemies as his administration doubles down on the need for relief from the nearly $2 trillion that Americans owe in student debt, which in recent years has ballooned into the U.S. government’s single largest financial asset. Though Americans are split along party lines about whether widespread student debt relief is fair, Biden has centered it as an issue in his reelection campaign, enlisting a group of negotiators to help with crafting more targeted forms of loan forgiveness.
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A primary concern laid out in Thursday’s GAO report was over some borrowers with self-reported incomes. When the Education Department rolled out Biden’s massive student debt relief plan last October, the federal government didn’t verify some borrowers’ self-reported incomes before approving them for relief, according to the auditors.
Education Department: GAO audit ‘mischaracterizes’ fraud prevention efforts
The Education Department minimized the findings.
In an Oct. 16 letter signed by Richard Cordray, the chief operating officer for the Federal Student Aid program, the department said the potential rate of fraud among applications would have been less than 1% − even in the unlikeliest worst-case scenario.
“Faulting the Department’s implementation of its fraud risk management strategy as incomplete, when federal court orders prevented the Department from continuing to work on any aspect of the program, mischaracterizes those efforts,” Cordray wrote in the letter responding to GAO’s findings.
Among other recommendations, the auditors suggested that the federal government avoid relying on self-reported data in future loan relief efforts. They also told the Education Department to fully implement all stages of its risk management plan before embarking on any other relief.
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The department mostly agreed with those suggestions but dissented on some of the technicalities. Cordray noted that the program “inherently had an extremely low risk of fraud,” “targeted a population of borrowers well known to the Department” and offered debt relief, not cash payments.
The federal watchdog began its inquiry into the program before the Supreme Court ruling in June, GAO spokesperson Chuck Young told USA TODAY in an email. It was launched by GAO in the interest of program integrity, Young said. Unlike some other audits, it was not conducted at the request of Congress.
Zachary Schermele is a breaking news and education reporter for USA TODAY. You can reach him by email at zschermele@usatoday.com. Follow him on X at @ZachSchermele.
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