E&W Blog

The Biden administration is practically asking for fraud. The rushed rollout of the student loan cancelation application fails to provide any kind of income verification—despite making the handout contingent on earning less than $125,000 annually. But we’ve seen similar scenarios before.

During the pandemic, identity verification requirements for unemployment insurance were significantly loosened, including self-certification of eligibility for the new Pandemic Unemployment Assistance program. This led to the biggest theft of taxpayer dollars in history. In fact, the Government Accountability Office (GAO) placed the unemployment insurance system on its “High-Risk List.” This is something usually only done when the GAO finds a billion dollars in waste, fraud, or abuse. Fraud within the unemployment insurance system far exceeded that during the pandemic.

The Washington Post reported unemployment insurance fraud likely cost taxpayers close to $163 billion during the pandemic. Colorado alone reported 43,000 fraudulent claims, while Washington state reportedly lost $647 million to fraudulent claims in 2020. Only $4 billion has been recovered.

Fraudsters were able to take advantage of this program because it lacked necessary safeguards. In one case a man stole the identities of elderly Illinois residents to collect unemployment insurance checks. He then laundered the money by purchasing salvaged automobiles that he and his co-conspirators shipped to Nigeria.

This kind of rampant fraud is completely unacceptable. Yet history could easily repeat itself if the courts do not strike down the illegal student loan bailout and the Biden administration does not change the application process.

This student loan bailout is going to cost enough as it is. According to the Congressional Budget Office, canceling student loan debt could total as much as $400 billion. This does not count the Biden administration’s changes to the income-driven repayment plans, his expansion to undermine the requirements of the Public Service Loan Forgiveness program, or the cost of the moratorium on student loan repayments and interest which disproportionately benefited high-income borrowers.

When considering all of these actions, the Penn Wharton Budget Model estimates the Biden administration’s student loan cancelation agenda could end up costing taxpayers close to $1 trillion when all is said and done. Add potential fraud on top of that number and taxpayers could be on the hook for untold amounts of money.

In short, we already have evidence of massive fraud under the UI system, and we know that President Biden’s student loan cancelation agenda is going to cost a fortune, but without careful safeguards in place, we are basically walking into this spending catastrophe with our eyes wide open. 

To make matters worse the Department of Education’s self-certification is just going to add to the challenges it has maintaining the fiscal integrity of the student loan program. For example, earlier this year a GAO report revealed that the federal student loan system has been losing billions of dollars a year, despite promises to taxpayers that it was making money. In total, the Department of Education is guilty of a $311 billion budget error. Instead of fixing the problem, President Biden’s policies are making it worse.

Our country cannot afford another fraud free-for-all. The Biden administration should commit to putting real fiscal safeguards in place to ensure bad actors do not use this student loan bailout as another way to fleece taxpayers.