Abuse of financial aid, especially Pell Grants, is increasing as quickly as the rise in online education. However, various institutions, like the University of Phoenix, are successfully fighting back. What’s working?
Paved with Good Intentions
The intent of financial aid is clearly good. Pell Grants, for example, currently offer disadvantaged students up to $5,500 for the 2011-2012 academic year at their choice of over 5,400 postsecondary institutions. The money is sometimes paid directly to the student; other times directly to the college or university in a sort of debit account for the student’s use toward tuition, books, and other eligible supplies. For 2012-2013, Congress has budgeted $20.7 billion to fund the Pell Grant program. The intent is to allow those who would not normally be able to afford college to pursue higher education. However, this program is perhaps the one that is most abused. These fraudulent individuals even have a nickname: Pell-runners.
Imagine the Worst
NY Times reporter, Tara Levin, shares the frightening story of Michelle N. Owens who milked the system for $467, 500. How did she do it? While working in the Education Office of a prison, she applied for financial aid for 23 inmates to attend Webster University online; not one of the nearly two dozen prisoners knew they had applied. She was caught when an alert university employee noticed the aid going to the same address, that of Owens.
The problem is widespread. Levin also reported that since 2005, 42 financial aid rings have been caught stealing $7.5 million in financial aid. Many, Levin says, will recruit partners who enroll in college and disappear once the payments arrive. Sometimes the ringleaders help these individuals apply for the aid; they then split the proceeds.
Much of the fraud seems to center around online education because it’s easier to fake identities, etc. Community colleges come in a close second. While teaching at a community college, I remember watching students disappear after the third week of a semester despite having perfect attendance though typically after not submitting a single assignment. Someone would often joke: “Well, you can tell the financial aid payments were made.” I also recall the bookstore being the site of a lot fraud. Students would take the aid they received for books and classroom supplies and use it to buy laptops and other types of technology at full-price. They would then sell the equipment cheaply just off campus, pocketing their profits. Yes, most of us knew this was going on; it was as commonly known as the location of the nearest restroom or coffee machine. The problem was that no one listens to faculty, staff, or administration on this issue. Simply enforcing the eligibility requirements for major programs like Pell Grants would do much to reduce fraud. For example, Levin shares that most of those perpetrating financial aid fraud are prisoners and those who do not have high school diplomas; yet, eligibility states neither group is eligible for a Pell Grant.
Granted, some of these people who dropped out of college were probably innocent. Online schools and community colleges tend to attract a larger portion of non-traditional and under-prepared students. Therefore, there should be follow up for two reasons: 1) Some students may benefit from exit counseling to provide guidance on what to do next if they truly wanted to seek additional education or training but college was not for them; 2) Prosecuting those who were defrauding the financial aid system. This could easily result in millions of dollars in savings for those who would truly make good use of financial aid to pursue their schooling. As an educator who worked his way through school and supported his two children as a single father for over two decades with multiple jobs, I would either love to have this financial aid for people like me and my children, who would appreciate the blessing of such an opportunity, or the benefit of reduced taxes.
Simply ending or reducing aid to online and/or community college students is also an overly simplistic solution similar to the proverbial tossing the baby out with the bath water. Such an approach would deny legitimate students in need of the opportunity to pursue their education.
Levin does offer hope. She shares that Axia College, the community college feeder school of the University of Phoenix, employs four full-time employees to combat financial aid fraud. So far, they have reported 750 rings involving about 15,000 people! The National Center for Education Statistics (NCES) estimates that there were about 1,700 two-year schools in the United States in 2009. The number of four-year universities is roughly double that amount.. The potential number of fraud rings alone is in the millions! The dollar amount misused could be in the billions!
Other than policing this issue on the ground, what other solutions are there?
• Levin shares that the University of Phoenix is tracking calls and applications from the same phone numbers and ISP addresses. This enables them to investigate attempts to receive more than one financial aid package.
• Levin says that U of Phoenix also requires students to attend a three-week orientation that is simply “too much work” for most fraudulent claimants.
• About a year ago, Kaplan University also began offering its Kaplan Commitment program where students take classes for five weeks. If they are not passing at the end of that period, they are automatically withdrawn with exit counseling. They pay nothing for the courses they took. Although there are certainly other benefits to this program, it does help weed out financial aid fraud.
• Most colleges are also intensifying student identification, participation, and progress requirements. Increasingly, regular attendance and classroom activity are needed to receive the financial aid.
• FAA [Financial Aid Administrator] Guide to Detecting Fraud on Financial Aid Applications offers universities and individuals a list of useful techniques to detect financial aid fraud. Most notably is a cross-checking of submitted applications and other financial documents such as bank statements.
Yes, it does take money to start hiring and paying staff to review and investigate financial aid applications, but this is money well spent. Addressing financial aid fraud head-on will eventually more than pay for itself.