Monday, October 24, 2011

As Online Courses Grow, So Does Financial Aid Fraud

What a total disgrace:

Ms. Owens, 36, who continued to make fraudulent applications to Webster for more than a year after she was released from Leath Correctional Institution in 2008, was sentenced on Sept. 29 to 51 months in federal prison and ordered to pay $128,852 in restitution.

She is one of 215 participants in 42 financial aid fraud rings who have been convicted since 2005 and ordered to pay $7.5 million in restitution and fines, according to a new report by the Department of Education's Office of the Inspector General. But those numbers do not reflect the scale of the fraud rings, the report said, since often the ringleaders are the only ones prosecuted.

With the huge expansion of online college courses, financial aid scams have become a serious problem: as of Aug. 1, the inspector general had opened 100 investigations into distance-education fraud involving thousands of suspects; such crimes now make up about 17 percent of the agency's open cases, and investigators are working on 49 new complaints, scrambling to keep up. "Because of the sheer volume of referrals, finite resources and other external limitations," the report said, "we cannot investigate all of the referrals we receive concerning distance-education fraud rings."

The rings generally seek federal aid for "straw students" who have no intention of pursuing an education — or, as in Ms. Owens's scheme, are unaware of the application. The aid is sent to the college, which takes the portion covering the initial tuition and fees, and then "refunds" the excess to the student to cover other expenses like books, transportation and room and board.

Some rings involve vast cadres of foot soldiers, many of them lacking a high school diploma, recruited with the understanding that they will keep a portion of the aid money and kick back the rest to the ringleader.

Until 2005, colleges could not participate in federal aid programs if more than half their students were enrolled in what were then known as "correspondence" or "telecommunications" courses. For online courses — but not correspondence courses — the 50 percent rule was eliminated in 2005.

By now, the vast majority of colleges and universities offer online courses, and some huge commercial institutions have hundreds of thousands of online students. Amid tough economic times, an increasing number of these students are actually what are known as "Pell-runners" — people who disappear as soon as they receive the proceeds of their Pell grants or student loans.

Kathleen S. Tighe, the inspector general, suggested that colleges clamp down on identity verification, and that Congress and the Education Department rethink whether online students, mostly working adults, should be eligible for the same federal aid to cover living expenses as students who attend on-campus programs.

"Without that money there would be significantly less incentive for this particular scam," Ms. Tighe noted. "We'll do the best we can with our resources to investigate the allegations we receive, but there are actions that can be taken to help reduce the appeal of this quick-cash-for-little-effort scam."


As Online Courses Grow, So Does Financial Aid Fraud

Published: October 13, 2011

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