‘Pell runner’ losses force tuition hike

With a budget deficit made worse by student abuse of Pell GrantsHenry Ford Community College (Michigan) will raise tuition by 7 percent, reports the Press and Guide. The college will have to pay back $9.5 million in federal dollars — about 20 percent of tuition revenue — because many Pell recipients dropped out or failed all their classes after collecting up to $5,550 in student aid.

Collecting from “Pell runners” — students who stop attending once they get their grant money — rarely is successful, President Gail Mee said after the board meeting.

Trustee Aimee Schoelles asked if the college could see if the students have unpaid tuition bills from other colleges — a sign they are milking the system at one school and then moving to the next.

Mee said a federal registry tracks students who misuse their loans, but the data is too old to be useful.

Schoelles also suggested looking at class data to see where students drop or never attend and then overenrolling those courses so when students withdraw or never show the class is still closer to full.

Looking only at first-time, degree-seeking students, HFCC has the lowest graduation rate — 9 percent — of Michigan’s 18 community colleges; a third of students transfer before earning a degree.

$105,000 in college loans paid for drugs, feds charge

After collecting $105,000 in student loans and grants, a Pennsylvania man faces federal charges of student loan fraud and mail fraud. Robert Thomas Price Jr., 45, spent the loan money on crack cocaine, cars, motorcycles, jewelry, tattoos and video games.drugs, motorcycles, games and tattoos, the indictment charges. He claimed to be a student at Harrisburg Area Community College from 2005 and 2007.  Tuition for three years of full-time study would have totaled less than $16,000.

U.S. Attorney Peter J. Smith said today that Price secured about $92,000 in private student loans and around $13,000 in federal Pell Grants and Stafford loans. Price was aided in the alleged scam by his ex-wife, a former HACC employee who is not charged or named in the case, Smith said.

If convicted, Price could receive up to 20 years in prison and $250,000 in fines.


Pell cuts proposed for online students

Online students would receive smaller Pell Grants under a provision of a bill that recently passed the Senate Appropriations Committee, warns WCET. Currently, Pell recipients can include their housing, food and personal expenses, such as a computer, in their “cost of attendance.” The bill would let online students count only tuition, books and supplies.

Of course, taking online courses doesn’t raise the rent or the food bill, but neither does living at home and commuting to campus. The provision lets commuter students continue to count living expenses.

Fighting financial aid fraud is the motive, reports Inside Higher Ed.

As online programs have grown, so too have the number of “straw students,” who enroll in college, usually at open-access institutions like for-profit colleges and community colleges; take their refunds from federal grants after tuition and fees are covered; then drop out and pocket the proceeds. A report from the Education Department’s Office of the Inspector General in September found that while some cases have been prosecuted successfully, the department was overwhelmed by complaints about fraud rings.

Community colleges, which are offering more low-cost online classes, often charge less than the $5,550 Pell Grant. Students can use what’s left after tuition and fees to cover living expenses. The change could cost online students thousands of dollars a year.

“It will particularly hurt community college students,” said Christine Mullins, executive director of the Instructional Technology Council, a group affiliated with the American Association of Community Colleges that works on distance learning issues. “It’s patently discriminatory toward distance learning students.”

The provision also could set a dangerous precedent for financial aid, writes Jarret Cummings on Educause.

‘Pell runners’ steal $1 billion in aid

Pell runners” — scammers who scram once they’ve collected financial aid — are having a tougher time defrauding the U.S. Education Department.

Community college instructors are requiring more class work in the first few weeks to identify unserious students. And the mammoth University of Phoenix now requires a three-week orientation program. It was designed to help new students understand the rigors of college before they take out a student loan, but it’s also weeded out Pell runners.

. . . the scammers typically target schools with low tuition and minimal academic requirements. They apply for aid, sometimes using identities of multiple witting or unwitting participants.

A portion of the money goes to the college for tuition and fees; the rest is “refunded” to students. They’re expected to spend it on books, transportation and other expenses, but scammers skedaddle as soon as they pocket the aid.

Only 2.7 percent of Pell payments go to fraudsters, according to the National Association of Student Financial Aid Administrators. But the the dollar amount has soared from $600 million in 2009 to $1 billion in 2011.

•Starting this summer, Des Moines Area Community College will require all enrollees to attend an orientation in person.

•Lansing Community College has delayed disbursements of some aid for several weeks and asks faculty to report names of students who don’t come to class in the first two weeks.

•The Louisiana Community and Technical College System, concerned that its relatively low cost is attracting scammers, is raising tuition.

Increasingly, fraudsters are targeting online education programs, according to Education Department investigators.

Financial aid cheats target online programs

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.

Community college students get bigger Pell “refunds” because tuition is low, encouraging Pell runners and fraud rings.

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.


Failing students get federal aid

In California’s Central Valley, 10 percent of Pell Grants went to students who lost aid eligibility for dropping out, failing their classes or earning low grades, reports the Fresno Bee. As many as 25 percent of Pell recipients at community colleges fail to make “satisfactory academic progress” in a typical semester.

Low-income students get up to $5,500 in college aid; whatever isn’t needed for tuition goes to the student for living expenses.  The “refund” makes it possible for low-income adults to pay a babysitter, buy gas for the car, pay for books and survive while they try to improve their futures. But it also provides an incentive to enroll at a low-cost community college — California’s are the cheapest in the nation — for the money.

Pell recipients must show academic progress but have nine years to earn a certificate or degree. While students who drop out mid-term or get all F’s are supposed to repay the grant, the U.S. Education Department doesn’t track how much is repaid, the Bee reports. Nor does the department know how many aid recipients fail their classes.

Only 4 percent of Pell recipients at Fresno State fail to make satisfactory academic progress. The numbers are much higher for community college students.

In the spring 2010 semester at Fresno City College — the latest semester for which figures were available — about one-fourth of the students who won Pell Grants got warning letters for failing to maintain a C-minus average, dropping too many classes or dropping out.

. . . At Reedley College and the State Center Community College District’s centers in northeast Fresno, Madera and Oakhurst, 1,140 students — one-fourth of the Pell Grant recipients — got warning letters in spring 2010 for unsatisfactory academic progress.

. . .  In the fall 2010 semester at College of the Sequoias, nearly one-quarter of students on financial aid, including Pell Grants, got warning letters.

West Hills Community College District’s Coalinga and Lemoore colleges sent warning letters to nearly 11% of Pell Grant recipients in the spring 2010 semester, but only 5% in the fall 2010 semester.

Failing students should lose eligibility for aid after one semester, John Cummings, Reedley College’s vice president for admissions and records, told the Bee. Currently, students can fail for two semesters before losing the right to more money; many successfully appeal for a third semester of aid.

Pell recipients who earn poor grades may be doing their best. But college officials suspect fraud when aid recipients fail all their classes or withdraw a few weeks into the term after the refund checks go out.

“It’s happening in every state,” says Laurie Wolf, dean of student services at Des Moines Area Community College. Aid cheats “pick low-cost colleges” to maximize the refund. They also take out student loans they’ll never repay.

Some colleges have been granting two, three or four aid extensions to failing students who appeal the aid cut-off, Wolf says. That will change July 1, when new Education Department rules go into effect requiring colleges to cut off aid after a third semester of failure with no more appeals.

The appeals limit is long overdue, Benita Vega, financial aid administrator at College of the Sequoias, told the Bee.

“It’s the first time in 34 years that the government has come in and said, ‘We need to do something,’ ” Vega said.

At Louisiana’s low-cost technical colleges, 20 percent of Pell Grant recipients fail all their classes or withdraw in mid-term, after they receive the refund. “They’re enrolling not to get an education but to get a check,” says Joe May, president of the Louisiana Community and Technical College system. Because tuition takes only 21 percent of the grant, a full-time student may get as much as $2,500 each semester in cash.

House Speaker Joel Robideaux has introduced a bill in the new legislative session that would allow the technical colleges to raise tuition to capture more of the Pell Grant, reducing the incentive for people to enroll for the refund.

Colleges check for aid cheats

Community colleges are cracking down on distance-learning fraud, reports Community College Times.

Rio Salado College (RSC) in Arizona has stepped up its security since it was targeted by a fraud ring five years ago.

In 2006 and 2007, Trenda Lynne Halton fraudulently obtained more than $500,000 in student loans by recruiting more than 60 people to register as students at RSC for the purpose of applying for Stafford loans and Pell grants, the U.S. Department of Education’s Office of the Inspector General reported.

Halton charged the “straw students” a fee of $500 to $1,500 to participate in the scheme. She then went online posing as each student, enrolled in the courses and even did some homework to given the impression that it was a real student.

Halton is now serving a 41-month prison sentence for conspiracy, mail fraud and financial aid fraud.

Lansing Community College (LCC) in Michigan spotted aid scammers last year:  A dozen people using the same address submitted the same paperwork, enrolled in courses with no prerequisites and used the same IP address to apply for financial aid.

LCC has since implemented procedures to tag suspicious activities or information, such as students who apply for financial aid from out of state, students who apply for courses that don’t relate to their major and multiple registration attempts, which can indicate that someone is trying to enroll in whatever courses are available.

LCC also requires students to show up for orientation. College officials say they’re detecting potential fraud before aid is given, so few applicants are referred for prosecution.

In 2004, Truckee Meadows Community College (TMCC) in Nevada discovered a million-dollar scam perpetrated by a woman who registered her children and grandchildren as online students at colleges in Arizona, Colorado, Maryland, Texas and Nevada to collect financial aid.

Colleges can require online students to have a unique user name and password or require proctored examinations. In addition, TMCC faculty check to see if students haven’t checked into class in the first weeks of the semester.

Some young people enroll in class but never participate so they can claim they are “full-time students” to get lower rates on car insurance or be included in their parents’ health insurance policies.

GAO softens for-profit college report

For-profit college recruiters lied about potential earnings and deceived applicants about loans, charged undercover investigators in a Government Accountability Office report released Aug. 4.  Now the GAO has changed key passages, reports the Washington Post. All the changes make the for-profit recruiters look better.

For example, the original report charged a recruiter with telling the investigator that some graduates in architectural and civil drafting earn $120,000 to $130,000 a year. The GAO notes that 90 percent of drafters earn less than $70,000. In the revision, the recruiter adds that in the current economic climate, starting pay is only $13 to $14 an hour, $15 an hour if a graduate is “lucky.”

In another case, the original report said a recruiter had inflated salaries for massage therapists. The revision admits the recruiter gave an accurate figure, but added that the school’s massage instructors make much more.

The original report charged a recruiter had told the investigator that he’d finish the seven-month course before the details on the loan application would be checked by the Education Department. That suggestion came from the investigator, the revised report says. The recruiter merely agreed.

Undercover GAO investigators posed as prospective students in encounters with college representatives that were captured in audio and video recordings. The GAO is a nonpartisan investigative arm of Congress.

Its widely reported findings were a major political setback for the industry, and executives apologized for incidents that put their schools in an embarrassing light. Industry critics said the report buttressed their case as they pushed for a new rule requiring that for-profit colleges demonstrate that their courses lead to “gainful employment” for their students or lose access to lucrative federal student aid programs.

Democrat Sen. Tom Harkin, chair of the Health, Education, Labor and Pensions committee, used the GAO report to lambaste for-profit higher education in hearings on regulating the industry. While the GAO stands by its initial conclusion — some for-profit recruiters provide misleading information and encourage loan fraud — Republican Sen. Mike Enzi, the ranking Republican on the committee, wants the GAO to explain the changes. He wrote in a letter Tuesday to Gene L. Dodaro, the acting head of the GAO, that the “substantial” revisions raise “a number of troubling questions” and “undermine many of the allegations” in the GAO report.

Under attack in the Senate and facing tougher regulation of student loans, for-profit higher education companies have seen stock prices fall sharply. Both Apollo Group, which owns the University of Phoenix, and Kaplan have adopted new policies to screen out less-motivated students, who are unlikely to complete a program and earn enough to pay back their loans. Expecting enrollment declines, both companies are laying off employees.

Who will investigate the GAO? asks Jonathan Robe on the College Affordability blog.

Now I know that nobody is perfect and therefore the need for revision doesn’t necessarily imply malfeasance on the part of the GAO, but when you’re doing an investigation purporting to show misleading advertising and even fraud, the first rule of thumb is that you do all that you can to avoid committing the same error you accuse others of committing.

In an unbiased evaluation, would all the errors go one way?

Harkin hits for-profit education

Senate Education Committee Chair Tom Harkin “lashed out at the for-profit education sector” in a hearing Wednesday, reports Reuters.

Chairman Tom Harkin pointed to a Government Accountability Office (GAO) report released Tuesday that found staff at the controversial colleges urged potential students to fudge their income on loan forms and give misleading information about costs.

Abuses are “systemic to the for-profit industry,” Harkin said.

The ranking Republican, Sen. Mike Enzi, said, “In focusing only on for-profits, we are not being objective, and we are ignoring the bigger picture of what is happening across all of higher education.”

The GAO investigated for-profit colleges that receive 89 percent of revenue from federal aid, including University of Phoenix in Arizona, Everest College in Arizona, Kaplan College in California and Argosy University in Illinois.

The Career College Association, a trade group for the for-profit sector, vowed “zero tolerance for bad behavior” and promised to improve training and start a “mystery shopper” program.

GAO: For-profits mislead applicants

For-profit college recruiters told applicants to lie to qualify for more federal aid, inflated their future earning potential and let them cheat on entry tests, reports a Government Accountability Office study that used undercover investigators. Four of 15 unnamed colleges encouraged fraud, says the GAO. “All 15 made deceptive or otherwise questionable statements” to investigators posing as applicants.

One unidentified college told an undercover applicant to fabricate three dependents on an aid form so that he might qualify for a federal grant. A Texas institution advised an applicant not to report a $250,000 inheritance because it “was not the government’s business.” A small D.C. beauty college told an applicant that barbers can make $150,000 to $250,000 a year.

For-Profit Schools: The Student Recruitment Experience will be released tomorrow.

One told an applicant a $14,000 massage therapy certificate was a good value, when a nearby community college offered the same certificate for $520.

. . . Six schools told applicants that they could not speak with a financial aid counselor until they had agreed to enroll and paid an application fee. One school told an applicant that student loans were safer than car loans because “no one will come after you if you don’t pay.”

In a few cases, admissions and financial-aid officers provided “accurate and helpful information about the transferability of credits and prospective salaries,” the report says.

Shares in for-profit education companies fell when the report was leaked.