The Biden administration’s $430 billion federal student loan debt cancellation plan, which was struck down by the Supreme Court in June, failed to implement safeguards to protect against fraud, the Government Accountability Office reported Thursday.
The administration’s unilateral loan forgiveness program sought to cancel $10,000 of debt for individual borrowers earning less than $125,000 yearly and married couples earning less than $250,000 yearly. Borrowers who received Pell Grants would have been eligible to have an additional $10,000 of their debt canceled.
A 2022 GAO report, released prior to the administration’s plan to cancel hundreds of billions in student loan debt, found that Direct Loans distributed in the last 25 years would cost the federal government $197 billion instead of generating $114 billion in income as previously estimated by the Department of Education.
A new Thursday report from the federal watchdog found that Biden’s blocked student loan cancellation program failed to implement safety measures to protect against potential fraud.
“Fraud poses a significant threat to the integrity of federal programs and erodes public trust in government,” the GAO’s report stated. “We have previously reported that the public health crisis, economic instability, and increased flow of federal funds associated with the COVID-19 pandemic have expanded opportunities for fraud.”
By November 2022, over 26 million borrowers had applied and were automatically approved for the administration’s cancellation program.
More than 12 million of those borrowers were deemed eligible without having any income documentation collected or reviewed by the Education Department, the GAO found. The applicants were approved for the debt cancellation based only on their self-reported income. The watchdog found that another 2 million applicants were automatically approved based on income reported on previous financial aid applications or loan repayment plans.
“[The Education Department] and GAO have both previously identified problems with people underreporting their income on these forms, but the department did not take any steps to verify incomes for these borrowers before automatically approving them for relief. Federal internal control standards state that managers should take steps to mitigate fraud risks, but Education did not deploy any tools to verify these borrowers’ incomes or ensure they were eligible for relief,” the GAO stated.
The watchdog recommended that the administration “incorporate evaluations of fraud risk management before providing relief, implement all stages of its fraud risk management, and implement controls to avoid relying on self-reported data.”
Education Department officials “partially concurred” with the GAO’s three recommendations. The department stated that its “fraud risk prevention processes were still evolving when it suspended work on the program due to court orders,” the GAO’s report said.
Senate Health, Education, Labor and Pensions Committee Ranking Member Bill Cassidy (R-La.) called Biden’s cancellation program “unconscionable” for attempting to force taxpayers to cover others’ student loan debt.
On Thursday, Cassidy and Kentucky Republican Senator Rand Paul penned a letter to Education Secretary Miguel Cardona, alleging that the department attempted to cover up some of the GAO’s findings from the public.
“During its review of the public release version of this report, [the Education Department] applied the [Controlled Unclassified Information] designation to entire sentences, and, in one case, an entire footnote,” Cassidy and Paul wrote.
“GAO made changes to its report to address [the department] ‘s concerns. Our staff reviewed an unamended version of GAO’s report and were unable to determine a reasonable justification for ED’s CUI classifications,” they continued. “This raises serious questions about the review process that ED follows when examining GAO reports. It also raises concerns that ED may be using the CUI designation to sanitize embarrassing or otherwise unfavorable information in GAO reports and shield it from public release.”
The Education Department told the New York Post it is reviewing the senators’ letter. The White House did not respond to a request for comment from the Post.
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