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Fighting Pell Grant fraud


In Michigan, Lansing Community College recruiters speak with parents and students at College Night.

Photo: Kevin Fowler

​​Recent media reports of people posing as students to swindle Pell Grant funds have focused attention on student aid fraud, but in most cases community colleges have thwarted such attempts through myriad methods.

Although there is no silver bullet to entirely prevent such crime, community colleges are staying abreast of new tricks criminals use, especially when they involve technology, said David Baime, senior vice president for government relations and research for the American Association of Community Colleges (AACC).

“The main thing is for colleges to be aware of the problem, and I’ve been impressed by the amount of work our colleges are doing in this area,” he said.

Haley Chitty, director of communications at the National Association of Student Financial Aid Administrators, agreed that colleges are addressing the issue, though media reports rarely focus on the successes of preventing such crimes. A report from the Obama administration showed that improper payment of Pell Grants was only at 2.7 percent in 2011, continuing a recent downward trend. Colleges want to bring that figure even lower to ensure that taxpayer funds are used effectively, Chitty said.

“We are stewards of that money,” added Joe Bekken, financial aid director at North Idaho College (NIC), which this fall redesigned how it disburses student aid.

Perform due diligence

Five years ago, Rio Salado College (RSC) in Arizona was targeted by a major fraud ring. Now, when screening financial-aid applications, staffers look for anything suspicious.

Report on distance education fraud rings from the U.S. Education Department's Inspector General  

“We had 30 or 40 students living at one residence, which tells us we may want to perform additional verification measures,” said Kishia Brock, vice president of student affairs, referring to a few student aid applications the college received.

An internal team known as the “fraud squad” is dedicated to researching and reporting financial-aid irregularities, she said.

“If a discrepancy comes up in something as fundamental as an address, it gives us the impetus to ask for more information,” said Ryan Chase, director of financial aid at RSC.

The college is also developing standards on ways for students to submit required information for student aid. For example, faxes are notoriously poor quality. Chase prefers a scanned color copy of a photo ID that gets emailed.

RSC is in the early stages of planning a more proactive enrollment-verification system that would begin at the point of enrollment, rather than when staffers are processing financial aid.

Emphasis verification

Lee Carrillo, director of financial aid at Central New Mexico Community College, also practices stricter verification tracking.

“About two years ago, we noticed a group of students working out of Mississippi,” he said. “They had a ringleader calling for all those students, saying she was that person and needed to get her funds.”

When the college tried to verify the group, none of the students were able to turn everything in, particularly transcripts from other schools.

Carrillo’s office verifies out-of-state files as soon as they arrive, and those students must submit information before they receive aid. In addition, the team runs population selections periodically throughout the term to see if they’ve missed anyone.

Financial aid officials agree that the best defense is to be observant. If something seems fishy, investigate. Look for duplicate phone numbers, addresses or even handwriting.

Cracking down on distance learning fraud

“Sometimes parents will call requesting information on their child, but we’re not allowed to release information. They call right back and change their voice and act like they are their child,” said Sharon Wurm, director of financial aid for Truckee Meadows Community College (TMCC) in Nevada.

Another preventive step for colleges is to update their student code of conduct, which is what Michigan’s Lansing Community College (LCC) did.

“We added a statement that says any attempt to commit financial-aid fraud will breach or potentially breach the code of conduct,” said Stephanie Bogard Trapp, director of financial aid.

Students identified as potentially committing fraud—such as those without a local address or who take random, low-credit courses—have to meet with the judicial affairs director or the dean, who assesses if the student is there for educational purposes. Many don’t even show up for the appointment, said Bogard Trapp said.

Delay disbursements of funds

At RSC, students are required to participate in an education-related activity during the first week of classes. The college doesn’t disperse aid until after the staff has validated class participation.

It’s a similar story at LCC, where Bogard Trapp said they used to verify academic progress only once a year until two years ago, when they began monitoring aid once a semester.

This fall brought an even larger change. Historically, LCC released aid a day or two before the semester began. As of this fall, it now does so three to four weeks into the semester.

“Our instructors report who doesn’t attend and we re-evaluate their eligibility for loans and Pell Grants,” Bogard Trapp said.

In Idaho, NIC this fall implemented a similar policy that had a dual purpose: curbing student aid fraud and freeing up class seats for students. Under the policy, students who received student aid but failed to show up for classes during the first week of the semester were dropped from the courses and subsequently did not receive student aid funds.

College officials counseled the students who were dropped, often offering an opportunity for them to take late courses, NIC’s Bekken said. Most of the students did not show up for class the first week because they had personal matters, such as traveling for work, or they were unaware that they had to attend classes that week, he said.

The college examined the issue of attendance in 2010 and realized that over the course of the subsequent year it had to return $500,000 to $1 million in federal student aid because students did not show up for class, Bekken said.

Share information

Laurie Wolf, executive dean of student services at Des Moines Area Community College in Iowa, thought fraud was just a financial-aid issue until last April, when she learned that a group of aggressive callers were hounding her admissions team first thing in the morning—and up to 10 times a day—demanding to know about their admission status. Once admitted, they wanted to take only online classes, and they didn’t care which subjects the classes were in.

Sharing such information within a college and with colleagues at other colleges is important to track trends and to develop preventive strategies, said RSC’s Ryan. It also helps with morale and emphasizes that most aid applicants are legitimate students.

“We have come to embrace sharing what we know,” Ryan said. “You need to help your team so they don’t lose perspective for what they are at the college to do.”

He and Brock have been on national panels to share their expertise with other institutions and learn from each other.

Community colleges are obviously not the only higher education institutions targeted by criminals. In September, a 36-year-old woman from South Carolina was sentenced to 51 months in prison and ordered to pay nearly $130,000 for orchestrated a student aid scam.

Recent "Dear Colleague" letter from the U.S. Education Department regarding student aid fraud 

During a previous stint in prison, Michelle Owens worked in the penitentiary’s education program and had access to the personal information of other inmates taking courses. She later used that information to fraudulently apply for student aid to take online courses through Webster University under the names of 23 different people. In total, she applied for $467,500 in federal aid and received about $125,000.

Student aid fraud carries a maximum penalty of five years in prison and up to $20,000 in fines. Mail fraud carries a penalty of up to 20 years and fines up to $250,000.

An eye on online

Emerging technology has provided new ways for criminals to pose as students seeking financial aid, which has college officials developing strategies to snare new schemes.

“We’ve become more proactive in leveraging IP addresses, as well as submissions of online-related assignments, to evaluate if there is academic misconduct,” said RSC’s Chase. “By using our academic-integrity database, we can spot trends with IP addresses. It gives us yet another avenue to evaluate. I’m interested in building on the types of proactive systems we’ve put together to evaluate additional patterns.”

Several of the strategies used by colleges were outlined in a recent “Dear Colleague” letter from the U.S. Education Department in response to a rash of recent student aid fraud rings. (The department expects to soon publish additional guidance.)

TMCC adopted its own anti-fraud procedures for distance education. During the first few weeks of a semester, faculty is directed to verify the class roster and see who hasn’t checked into class.

Whatever steps a college takes will go a long way in cutting down on fraud. The important thing is to do something.

“I’m a first-generation college student and know what it means to work your way up, and that’s why I get so irritated when people rip off the system,” said DMACC’s Wolf. “I spend a good day-and-a-half each week addressing questions or problems related to this issue.”