With a few clicks of a mouse, online financial aid fraud is becoming a more serious problem for schools across the nation. People are enrolling in online college courses and applying for financial aid to steal the money they receive. Then they disappear. Webster University has been recognized in national news as a victim of this kind of fraud.
Michelle Owens, an inmate at a South Carolina prison serving time for forgery charges, was given responsibilities in the education department of the jail and had access to other inmates’ personal information.
Owens enrolled and submitted the information of 23 other inmates without their knowledge to Webster University through the internet and mail. She was then awarded $467,500 in financial aid.
Mark Kantrowitz, an expert in matters of financial aid who has spoken before Congress regarding these situations, said online financial aid fraud is easier to accomplish because the criminals do not have to be physically seen.
“If it’s a brick and mortar campus and you see the same person again and again, but they have a different name each time, it kind of rings a bell,” Kantrowitz said.
Susan Kerth, interim director of public relations at Webster, said she could not comment on the case and the security revisions made by the financial aid office, if any changes have been made at all, because of this incident.
Though Owens was convicted and sentenced to serving prison time on Sept. 29, she is one of many who are falsely acquiring financial aid through online education. A report from the U.S. Department of Education’s Office of the Inspector General (OIG) states that since 2005, hundreds of arrests have been made because of fraud. Approximately 215 distance education participants from 42 different fraud rings have been convicted. Restitution orders have been charged, totaling $7.5 million.
The report states these arrests do not truly reflect the number of people falsely applying to online educational programs, as only the ringleaders are caught and convicted in most cases.
Online education has changed the dynamics of many colleges around the world, benefiting students who cannot physically attend school. These programs, however, also present an appealing and seemingly easy way to get cash.
The report issued by OIG claims financial aid programs were, “designed primarily to deliver aid to students who are physically present in traditional classrooms, rather than alternative online environments.”
Online students are not required to have their identities confirmed, and some schools do not verify students’ identities, according the OIG report. Because perpetrators use correct social security numbers and other valid information, the report claims the data they submit satisfies the department’s central processing system.
The most prominent way criminals commit fraud online is by employing “straw” students. They arrange an agreement that whatever refund (money given for books, living expenses) the “student” would get back from their financial aid award, a portion would be given to the ringleaders. Another way is by obtaining information without the victims’ knowledge, similar to Owens’ case.
David Bergeron, deputy assistant secretary of the Office of Post-Secondary Education, said there needs to be improvements by both government and colleges.
“I think there’s a need for greater vigilance just in general … not picking out any particular school,” Bergeron said. “And with any criminal act, it’s impossible to prevent every incident of a crime. All you can do is take steps to reduce the incidents of crime.”
However, as of Aug. 1,100 fraud investigations have been opened and are being looked into by the OIG. Fraud rings represent 17 percent of all open investigations. With this large number, the OIG stated in its report that because of the sheer volume of referrals, finite resources and other external limitations, not all of these incidents can be investigated.
Solutions proposed in the OIG report mention lowering the amount of financial aid given to online learning students. The OIG has concerns over the propriety of giving online students funds for transportation and living expenses.
The report states “limiting the allowances for room and board for distance education students would reduce the amount of financial aid funds obtained, decrease loan debt, and reduce the amount of refunds available to distance educations fraud rings.”
Katie Alexander, junior international relations major, enrolled in her first online class this semester. With her schedule, she found an online class worked best. However, she said if the government lowered the amount of financial aid given to her for online classes, she would not enroll at all.
“I wouldn’t be where I am without financial aid,” Alexander said. “It (fraud) is a problem that has to be taken care of but, I don’t think that’s quite the right measure.”
Kantrowitz said giving less aid could work, but the department does not want to affect legitimate students who need money for living expenses in order to keep advancing academically.
“On one hand, they (OIG) want to ensure independent students can borrow to pay for living expenses because if you have to work a job while you’re enrolled, you’re less likely to graduate,” Kantrowitz said. “But on the other hand, they want to limit overhauling by students because it does you no good to graduate with debt that’s twice your salary.”
Other proposed solutions include the verification of student’s identity, preventing inmates to obtain these awards as well as improving quicker detection of fraud rings.
Bergeron said that he and his associates will be leading a panel with administrations from schools across the country this fall on how this problem can be better controlled.
“What is critically important that we do not do, is not harm innocent students because of people perpetrating fraud,” Bergeron said. “I want to protect every dollar of the taxpayer’s funds. But I also want to make sure that every student who is entitled to support from the federal government gets every dollar that they’re entitled to.”