A government watchdog released a report Thursday in which it alleged the Biden administration’s defunct student loan relief plan, initiated by the Department of Education, would have opened the door to fraud.
“Education officials said they prioritized approving eligible borrowers,” read the report from the Government Accountability Office, “but Education did not apply key processes to detect and prevent fraud. However, given the large scale of the program—an estimated $430 billion of relief for potentially over 31 million borrowers—leading practices indicate that Education should have proactively addressed risks through effective fraud risk management.”
Lower court orders forced the department to cease work on the plan in November 2022, and the Supreme Court struck the plan down in June.
When it was forced to stop working on the plan, the Department of Education had not evaluated the results of the application process either for the approximately 12 million approved applicants or several hundred thousand applicants from whom it requested more information, according to the report. It also “did not have procedures in place to evaluate the borrowers it had approved, including whether its approach for approving borrowers was an effective tool for preventing fraud.”
Nor had the department taken steps to verify the incomes of two million borrowers it had planned to automatically approve based on their self-reported income on recent applications for financial aid or enrollment in student loan payment plans.
The department downplayed the potential fraud that the plan would have allowed in a letter from chief operating officer Richard Cordray responding to the findings, included in the office’s full report.
“The nature of the program and its fraud risks allowed the department to develop a risk-based approach to ensure that the potential rate of fraud among applicants would be less than one percent under even the most unlikely worst case scenario,” he wrote.
Cordray also claimed that the department had planned to implement fraud mitigation strategies if courts had not stopped it from doing so. Those strategies included making borrowers attest that they were eligible, making borrowers likely to be ineligible submit tax information to verify that they were eligible, and not giving relief to those the department needed to verify until it had reviewed their documentation.
“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.
The June Supreme Court ruling did not deter the administration from pursuing student debt relief. Senate Republicans on Wednesday failed to overturn an income-driven repayment plan the White House announced in the aftermath of the court’s ruling.