Fraud and Online Learning

Online college courses have made higher education possible for untold numbers of working adults who cannot enroll in traditional classes and need flexibility to receive instruction at home. But online courses are also particularly vulnerable to student aid fraud, a growing problem that federal officials must move quickly to control.

A report from the Department of Education’s Office of the Inspector General says that since 2005 it has opened 100 investigations and is evaluating 49 additional complaints, including one that could potentially involve as many as 10,000 participants.

Distance-learning students rarely show up on any campus, so their identities can be easily falsified. Fraud rings target community colleges and other open-enrollment schools that offer low-priced, online programs. The fraud rings enroll “straw” students who provide their names, dates of birth and Social Security numbers to obtain federal financial aid. The ring leaders then take a share of the student loan money that schools disburse to students after tuition and other allowable costs are paid.

In one case, a defendant at an online community college in Arizona incurred only $600 in tuition and fees for a summer course, but was awarded a total of $7,060 in federal aid, which is generally calculated based on income eligibility. This money is meant to cover living, transportation and other expenses that online students may not incur. Fraud rings have succeeded in enrolling prison inmates, even though they are not eligible for federal student aid, as well as “students” who were illiterate.

The inspector general’s office says participants in 42 different fraud rings have been convicted and more than $7.5 million in restitution and fines have been ordered in the past six years. This may be only a small portion of the problem. Some rings involve hundreds of participants, and it is unlikely that either the Office of the Inspector General or the Department of Justice has resources to track down and prosecute them all.

To improve security, the government needs to put colleges on notice that they are responsible for disbursing aid to eligible students only. It should not allow payments for expenses a student does not actually have. Congress should change student aid to fix this problem.


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