Financial aid fraud rings are targeting online college programs, according to a report (pdf) by the Department of Education’s Office of the Inspector General. Some 100 investigations are open.
Fraud rings seek federal aid for “straw students,” who may not know their names are being used, reports the New York Times. The college takes some of the aid to pay for tuition and sends the rest to the student as a “refund” to cover books, transportation and living expenses.
“Pell-runners” stop attending class once they receive the refund. Online students never have to show up at all.
Kathleen S. Tighe, the inspector general, suggested that colleges clamp down on identity verification, and that Congress and the Education Department rethink whether online students, mostly working adults, should be eligible for the same federal aid to cover living expenses as students who attend on-campus programs.
“Without that money there would be significantly less incentive for this particular scam,” Ms. Tighe noted.
At Rio Salado College, an online community college in Arizona, 64 people were convicted in a $538,000 scheme that unraveled after an employee in Rio Salado’s financial aid office noticed similar handwriting on several applications. The ringleader, Trenda Halton, a student who pleaded guilty last year, worked with several accomplices who recruited “straw students” to apply for Pell grants and loans. Ms. Halton signed into their online classes to meet Rio Salado’s attendance requirements, then took a cut of $500 to $1,000 once the aid money came through.
Axia College, a two-year program of the for-profit University of Phoenix, has identified 750 fraud rings involving 15,000 people. Four staffers work full time to verify students’ identities and weed out scammers and Pell runners.