A recent government report has highlighted serious lapses in safeguards against potential fraud in President Joe Biden’s scuttled plan to unilaterally forgive $430 billion in student loan debt.
The Biden plan, announced in August 2022, aimed to provide relief ranging from $10,000 to $20,000 for 31 million federal student loan holders. Mired in legal challenges, court orders halted the program in November 2022 before the U.S. Supreme Court struck the final blow in June.
Spanning from January to September, the watchdog’s report specifically noted that the “increased flow of federal funds” for relief programs due to the COVID-19 pandemic increased the risk of fraud. This, the report stated, underscored the “imperative for federal agencies to manage fraud risks strategically.”
The watchdog’s report highlighted concerns over the Biden administration’s failure to verify incomes for millions of borrowers before granting relief.
“Education developed two processes to assess borrower incomes and account for fraud risks, but did not implement key procedures to further identify and prevent potential fraud,” the report states.
By November 2022, more than 12 million out of 26 million applicants were approved by the federal government for relief without collecting or reviewing any income documentation, solely relying on self-reported income and post-enrollment earnings data to estimate eligibility.
The Education Department’s methodology, relying on aggregated data to pinpoint these individuals, was harshly critiqued in the watchdog’s report.
Borrowers who received Pell Grants were eligible for up to $20,000 in relief, and other borrowers were eligible for up to $10,000 if their income fell below specific thresholds. A further 2 million borrowers automatically qualified based on past financial aid applications and loan repayment plans, without any income verification steps.
Only a fraction of flagged tax filings underwent income review before the Supreme Court overturned the program, per the report.
Interviews with key Education Department officials conducted as part of the watchdog’s review further exposed lapses in fraud risk management, raising questions about the department’s compliance with federal internal control standards and industry best practices.
The Education Department omitted information labeled as controlled unclassified information (CUI) in the publicly released version of the report.
This move was criticized in a scathing rebuke on Thursday by Sens. Bill Cassidy (R-La.) and Rand Paul (R-Ky.), both prominent figures in congressional committees.
The senators accused the department of misusing the CUI designation to withhold crucial information from the watchdog’s report.
“We understand the imperative to protect highly sensitive information in the interest of public safety or as mandated by law. However, the arbitrary shielding of information solely to evade embarrassment or complexity undermines transparency for the American people,” asserted the senators in a joint statement.
The senators accused Education Secretary Miguel Cardona of concealing information by applying designations to certain sections, raising questions about transparency and review processes within the department.
“The Executive Branch should never unnecessarily apply its own designations just to hide material from the public because it is embarrassing or difficult to explain,” the senators wrote in a letter.
President Biden and Mr. Cardona first announced the debt cancellation program in 2022, citing authorization under the 2003 Higher Education Relief Opportunities for Students (HEROES) Act. However, the Supreme Court ruled that the law was intended solely for veterans of specific wars, halting the president’s unilateral action.
Subsequently, a separate income-driven repayment plan was introduced, estimated to cost $475 billion over the next decade, according to the Penn Wharton Budget Model.
Dr. Cassidy, the ranking member on the Senate Health, Education, Labor, and Pensions Committee, condemned the lack of accountability in the administration’s approach, emphasizing the burden placed on taxpayers for others’ student debts.
“When GAO believes the Biden Administration is improperly applying the CUI designation to content in its reports, it should push back consistently and it should not take actions that it believes are unwarranted,” Dr. Cassidy wrote. “It is critical to ensure maximum transparency for the American people when there is no legitimate basis for safeguarding information.”
