DFI Calls on Department of Education IG to Request an Immediate Pause on Biden’s Student Loan Cancellation, Protect Taxpayers from Waste, Fraud and Abuse

October 19, 2022

WASHINGTON—The Defense of Freedom Institute (DFI) is calling on the U.S. Department of Education (ED) Office of the Inspector General to request that the Department pause the agency’s implementation of the Biden Administration’s illegal student loan cancellation program until safeguards are put in place to prevent fraud regarding income eligibility.

In a letter to ED’s IG Sandra Bruce, DFI warns, “the Department has failed to create reasonable and adequate safeguards to prevent waste, fraud, and abuse in the student loan debt cancellation program, which exposes the American taxpayer to enormous losses and improper enrichment of unqualified applicants.”

Under the current program, students are eligible for Federal student loan cancellation if they meet certain income eligibility requirements, yet by ED’s own admission, its system for approving loan cancellation applications relies largely on fraud-prone self-certification of income eligibility.

“We’re talking about cancelling more than $430 billion in debt owed to the taxpayers based on little more than pinky promises from borrowers that they qualify for loan forgiveness,” said Bob Eitel, President and Co-founder of DFI. “This is the sort of malfeasance that happens when an administration acts without authorization from Congress and makes it up as it stumbles along. This behavior simply cannot stand, and that’s why we are calling on the IG to urge the Department to immediately stop processing student loan cancellation applications until rigorous safeguards are put in place to protect billions of dollars in taxpayer money.”

As DFI notes in its letter to Inspector General Bruce, there is a simple solution for income verification—add a requirement in the application that ED be allowed to verify a borrower’s income with the IRS. Yet, in the interest of expediency, “the Department is offering disturbingly broad and effortless access to debt cancellation to ensure that any applicant who applies for loan forgiveness will receive it.”

On its website, FSA expresses concern about possible fraud, but only against  borrowers, not against the government or taxpayers. In a section called “Beware of Scams,” FSA warns borrowers about getting duped but seems to ignore its own advice to safeguard taxpayer money from those who may try to defraud the Department by misrepresenting their income levels.

“In the wake of federal COVID relief aid, it has become clear that reliance on self-certification of eligibility for a program makes the federal government vulnerable to fraud and abuse,” DFI’s letter continues. “The Inspector Generals of several federal agencies, including the Department of Labor and the Small Business Administration, were raising alarms about the risks of self-certification within weeks of the first wave of COVID disbursements.  More recently, several investigations have confirmed that self-certification invites fraud and abuse.”

Added Eitel, “Despite the well-known pitfalls of self-certification and the lack of any imminent deadline, the Department is charging ahead.  This administration is determined to blow open a path for quick and easy loan cancellation with little to no oversight or protection for the taxpayers. The IG is responsible for stopping waste, fraud, and abuse.  Given the massive amount of Federal assets at stake, OIG should request that the Department pause the debt cancellation program and work with the agency to develop an effective fraud prevention protocol. The taxpayers expect nothing less.”