As the number of students who commit financial aid fraud continues to grow, the U.S. Department of Education is struggling with figuring out ways to meet the needs of low-income students while eliminating abuse. According to many officials, finding the answer has been difficult, as putting in safeguards will only result in the creation of extra layers for already overworked financial aid officers as well as for struggling students who are trying to further their education.
“It’s a balancing act,” said Evan Montague, who is the dean of students for Lansing Community College, in a recent insidehighered.com article.
In a recent report released by the Office of the Inspector General, the U.S. Department of Education claims that online education scams have increased dramatically. Generally, these scams involve enrolling phony students in classes. These fake students then receive federal aid and share the proceeds with the ringleader of the operation. In one ring, a thief stole the identities of 50 inmates and stole more than $300,000 in federal student aid.
Due to their low tuition rates, community colleges are the most commonly targeted. By selecting schools with low tuition rates, the thieves are able to keep more money for themselves. Nonetheless, all types of schools have been targeted by these fraud rings, including online schools, for-profit schools and even public universities.
Since 2005, federal investigators have busted 42 financial aid fraud rings, resulting in $7.5 million in fines against those involved. According to experts, this is just the tip of the iceberg. In fact, investigators were working on 49 new complaints as of August. Furthermore, the Apollo Group has identified over 15,000 fraudulent students since 2008. Many of these students enrolled in the company’s Axia College, which is an open enrollment institution. In all, the company has referred about 750 fraud rings to the inspector general, with each ring having an average of 19 students involved.
To address these issues, the inspector general has issued nine recommendations to colleges to help make it more difficult for fraud to occur. Some of these include requiring colleges to confirm student identities, collecting and retaining IP addresses from student computers, changing the cost of attendance calculation for those students who are enrolled in online programs and limiting federal aid for distance education programs that do not incur costs for room, board and other similar expenses.
“The team is continuing to identify what actions can be undertaken swiftly that will have the most impact on curbing fraudulent practices,” said Sara Gast, who is the spokeswoman for the Education Department, which is working with Republican and Democratic leaders to address the issue. Gast went on to say that the task force “is specifically looking at what steps in the student aid application process and systems changes could be implemented to flag potential fraudulent activity.”
In response to fraud concerns, Apollo has invested a significant amount of money into what it refers to as its “fraud squad.” As a result of intensive employee training and other initiatives, the company has become far more effective at catching the phony students before they receive federal aid. In fact, officials report that the rate was over 80 percent last month. Due to the success of the initiative, Apollo officials regularly meet with staff from the inspector general’s office in order to share their fraud-prevention techniques.
“There needs to be measures to constrain these criminals,” said Michael B. Goldstein, who is a lawyer with the firm Dow Lohnes. “But it has to be done so it doesn’t constrain a very valuable, and increasingly valuable portion of higher education.
While officials at community and for-profit colleges agree that steps need to be taken to prevent fraud rings, some are concerned that some of the proposed actions go too far. Collecting IP addresses, for example, could turn into a privacy issue. Furthermore, some feel placing limits on the amount of financial aid provided to online students could be viewed as discriminatory. At the same time, something needs to be done to address the issue, and some believe it is appropriate to limit student aid in certain cases.
“Institutions with a commitment to maintaining low costs should not be targeted by students with an interest in borrowing money in excess of these costs,” said Wallace E. Boston, who is the president and chief executive officer of the American Public University System.
http://liarcatchers.com/fraud_investigation.html
With most of the fraud rings, the students who enroll in classes never had any intention of pursuing a degree. Rather, they simply enroll in classes to receive federal aid, which they then split with the ring leader without ever attending a single class. Many of these rings involve dozens of students.
“In one ongoing investigation of a very large fraud ring, we interviewed and obtained affidavits from 45 participants, all of whom admitted they did not intend to earn a degree, certificate or other credential,” the U.S. Department of Education report stated. “Some of these individuals are illiterate and were unable to write a statement or read a summary of their verbal statement to our investigators.”
In 2009, investigators convicted 64 people from one ring, which targeted the online Rio Salado College. The ring reportedly took off with $538,000 in federal aid. Yet, due to the amount of effort it takes to make such big busts, the report stated “It is unlikely that such a robust effort to prosecute all participants in such a large investigation will be repeated in the future.”
At some schools, officials are delaying the release of financial aid funds in an effort to weed out what they refer to as “phantom students.” While students receive a small payment upfront to help pay for books and books, a larger installment is not made until four weeks into the semester and another is scheduled for later in the academic year. Although some students are frustrated by the delays, others say it actually helps them budget more effectively.
What efforts do you think colleges should take to help reduce financial aid fraud? Do you think it is unfair to place more obstacles in the way, or do you think honest students should have no problem with meeting any new requirements that are put into place?
