Transcript Chapter XX: Title

NYSFAAA 2012
Financial Aid Fraud
Thomas J. Dalton
Excelsior College
Assistant Vice-President
for
Enrollment Management
Excelsior College
 Private, nonprofit distance learning college
located in Albany, NY.
 30 percent military.
 33,000 students world wide.
 Average age of Excelsior College students
is 39 years old.
 141,000+ graduates
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FA Fraud - Why hasn’t this
happened sooner?
 The fraud problem seems to have
landed on the doorstep of distance
education.
 Federal Student Aid (FSA) for distance
education history.
 50% rule for Title IV student-aid program
 Halt the spread of “diploma mills” of the
1980s.
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50% Rule
 Schools with more than 50% of their
courses offered via correspondence were
NOT eligible for Title IV. This included:
 Telecommunication courses
 On-line courses
 Correspondent courses
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50% Rule Rescinded
 The rule was rescinded by the Higher Education
Reconciliation Act (HERA) in February 2006.
 Prior to HERA, US Department of Education ran
a demonstration program with a half-dozen
schools allowing them to participate in FSA.
 Excelsior College applied for reinstatement after
HERA and was approved to participate in the
FSA programs in July 2007.
 Excelsior began awarding aid to students in the
fall of 2007.
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Growth in Distance Education
 Number of students taking distance
education courses
 8.2% in 1999 – 2000
 20.4% in 2007 – 2008
 Institutions offering distance education
programs for 2006 - 2007
 97% of 2 year public
 89% of 4 year public
DOE - National Center for Educational Statistics
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Office of Inspector General Report
 Issued September 26, 2011
 Investigative Program Advisory Report,
Distance Education Fraud Rings, Control
No. ED-OIG/L42L000I
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Purpose this OIG Report
 Alert Federal Student Aid (FSA) and the
Office of Postsecondary Education
 Serious fraud in distance education programs.
 Make recommendations to reduce future
fraud.
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What the OIG Report Found
 As of last August
 100 open fraud ring investigations
 49 additional being evaluated for
investigation
 Since 2005, OIG has prosecuted
 42 of the 215 different fraud rings
 $7.5 million in fines and restitution
7/16/2015
How the Fraud Rings Work
 “Ring leader” gets personal information from
individuals:
 SSN
 DOB
 Demographic (address etc.)
 In exchange for a portion of the disbursed FSA
 Ring leader completes and submits FAFSAs for
these individuals.
 Targeting lower tuition colleges, often distance
education programs or community colleges.
7/16/2015
How it Works (continued)
 Ring leader also:
 Applies for Admissions (open enrollment colleges)
 Completes registration process
 Ring leader begins participation in online courses.
 Participates just enough to receive the disbursement
of FSA funds.
 Schools issue credit balance refund (funds over and
above direct institutional charges).
 Ring leader may or may not follow through with
sharing the proceeds with individuals.
 Ring leader pockets most of the credit balance refund
from the college.
7/16/2015
Standard Cost of Attendance
 Direct Costs for Distance Education
 Tuition & Fees
 Indirect Costs for Distance Education





Room & Board
Books & Supplies
Personal
Transportation
Other (Technology)
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Excelsior Cost of Attendance
Estimated for semester (15 Weeks) for a halftime 6 credit hour student
Tuition
Fees
Books
Room & Board
Technology Allowance
Total
$2,130
$198
$300
$4,100
$600
$7,328
Direct Cost paid to the student’s account
Indirect Cost refund to the student
$2,328
$5,000
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Fraud at Excelsior College
 Small Ring (6 Students, one “Ring Leader”).
 By chance we noticed the same address
for all the students during verification of
the FAFSA.
 Investigated further:
 Same IP address
 Low to zero income
 Checks from Credit Balance Refunds all
signed over to “Ring Leader”
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OIG Recommendations
 Include in upcoming negotiated
rulemaking for distance education
programs
 Confirm student identification as part of the
enrollment process
 Retain IP information during application,
enrollment and attendance
 Designate identity, HS graduation status
and statement of educational purpose
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OIG Recommendations (con’t)
 Establish edits within Central Processing System
(CPS) and the Nat’l Student Loan Data System
(NSLDS) to flag potential fraud ring participants.
 Seek statutory change to Cost of Attendance for
students enrolled in distance education
programs.
 Establish data match with Department of Justice
to ensure incarcerated persons do not receive
FSA.
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OIG Recommendations (con’t)
 Implement controls in the DOE PIN
system to prevent multiple PINs to the
same email address.
 Utilize existing regulations to establish
repayment liabilities for fraud ring
participants that are not subject to
prosecution.
 Dear Colleague Letter to alert institutions
to the problem of fraud rings with distance
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education.
OIG Recommendations (con’t)
 Ensure that pretrial diversions are
recognized as convictions for program
debarment or exclusion purposes under
HERA by establishing processes to
prevent individuals who enter into pretrial
diversion agreements from obtaining Title
IV funds until the requirements of HERA
for eligibility are satisfied.
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Steps Already Taken by DOE
 Dear Colleague Letter GEN 11-17 (October 20, 2011)
 Institutions are required to have processes to verify identity that are
subject to review by the institution’s accreditor (34 CFR 602.17(g))
 Verification regulations modified to permit better targeting of
reviews by institutions (34 CFR 668.51-61)
 High school diploma
 Collect on FAFSA
 Require institutions to have a procedure in place to address apparently
bogus high schools and diplomas (34 CFR 668.16(p))
 On-going OIG/FSA work to detected fraud
 Task Force formed to review recommendations & take appropriate
actions
 Likely, we will not be moving forward on all OIG recommendations.
Some recommendations would likely have unintended consequences
that would inhibit access and completion for innocent low-income
student
7/16/2015
Steps taken by Excelsior
 Delay 1st disbursement of funds until 30
days into the term.
 Certify loans one term at a time
 Two disbursements per term
 Example in a 15 week term (30th day & 54th
day)
 Automated “Excessive Absenteeism”
policy.
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Excessive Absenteeism at
Excelsior College
 Automated into the learning management
system (Blackboard Learning Management).
 Weekly Alerts within the system for failure to
participate.
 Failure to participate in a course for three
consecutive weeks, student is administratively
withdrawn from the course.
 If this happens in all courses in the term a
Return to Title IV (R2T4) calculation is
processed, limiting the earned aid the student
can receive.
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Future steps at Excelsior
 Implementing student Authentication at
different points in the education process
 Beginning at the time of Enrollment
 Beginning of a course
 Midterm exam and final (Crossover between financial
aid fraud and academic integrity)
 Fraud Awareness campaign on the Excelsior
campus including:
 Financial Aid & Admissions teams
 Bursar & Course Registration Team (Registrar)
 Academic Advisors & Students
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Future steps at Excelsior (con’t)
 Automation to review specific data on an
ongoing basis (Not always fraud but red flags
that need to be monitored):
 Duplicate Internet Protocol (IP) addresses for several
students
 Duplicate home addresses by several students
 Frequent changes in home address by students
 Students withdrawing at the time of disbursement
several terms in a row
 Plagiarism or meaningless academic activity
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Questions
Thomas J. Dalton
Assistant Vice President for Enrollment
Management
(518) 608-8200
[email protected].
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