Colleges are on the hook for federal aid distributed to fraudulent applicants, according to the Education Department (ED).
In a July 17 document that answers questions related to its new real-time FAFSA fraud detection initiative, ED said that colleges must return all Title IV funds distributed to students that are later found to be fraudulent. This requirement applies even if the institution had no indication of fraud at the time of disbursement and the student had not been selected for identity verification.
“The absence of prior knowledge or verification selection does not relieve the school of responsibility if the student was not, in fact, eligible under the statute or regulations,” according to ED’s electronic announcement. “The financial responsibility for improper payments lies with the school. This allocation of risk reflects the structure of the Title IV programs, which places primary responsibility for front-end eligibility determinations and proper disbursements on participating schools.”
This absolute responsibility for aid disbursed to fraudulent students potentially exposes institutions to significant financial liabilities.
Other matters addressed in the “electronic announcement” are more technical in nature.
