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Financial aid fraud in online distance learning

The U.S. Department of Education (ED) recently released a Dear Colleague Letter to colleges and universities on financial aid fraud in online distance learning programs that advises institutions on ways to limit such fraud in the future (http://www.ifap.ed.gov/dpcletters/GEN1117.html). The letter responds to a September report from the department’s inspector general (IG) that reviews in detail the IG’s findings on the growth of financial aid fraud in relation to online programs, as well as steps the IG recommends that the department and institutions adopt to mitigate the problem (http://www2.ed.gov/about/offices/list/oig/invtreports/l42l0001.pdf).

The activities in question generally involve the misuse of individual identities provided to fraud rings by the individuals themselves. The ring leaders use these valid identities to seek financial aid awards for multiple fake students to participate in online distance learning programs. Once admission is achieved and a "student" secures a financial aid disbursement from the institution, the ring leader and his or her accomplice split the proceeds.

In addition to recommending changes in institutions’ financial aid disbursement policies, the letter proposes that colleges and universities adopt “automated protocols” in admissions application processing, student information, and/or learning management systems to assist in identifying and reporting possible fraud. Institutions are advised to institute tracking mechanisms to identify when multiple admissions applications are being submitted from the same IP and/or email address, as well as when multiple students are participating in online courses from the same IP and/or email address. The letter also recommends tracking online students’ geographic location to highlight anomalies (e.g., when one or more appear to live outside the area or areas from which a course normally draws).

While not stated directly in the letter, the IG’s report implies that the IG would like to see unusual patterns in the described factors lead to institutional efforts to confirm the identities of those involved, even though as the IG’s report notes: “…institutions offering distance education—like all Title IV institutions—are not required to verify prospective and enrolled students’ identities, …” (IG’s Report, p.  3). The report recommends and the letter indicates that the department may consider requiring institutions to verify “high school diploma information and applicant identity for all or some of an institution’s Title IV applicants who are engaged in distance education” in the near future (Dear Colleague Letter, p. 3). And both the IG’s report and the subsequent Dear Colleague Letter call for instances of suspected fraud to be reported to the IG for further investigation.

Determining the institutional response to the Dear Colleague Letter should entail consultation between the institution’s general counsel’s office and its directors of admissions, financial aid, and online learning programs. As those discussions take place, it is worth noting that any response should account for potentially valid reasons for multiple admissions applications or course log-ins to come from the same IP or email address, such as when individuals use computers at public libraries or other public facilities, or when one or more family members share an email address. Many institutions will also have to evaluate the department’s proposals in the context of contracts they have with applications processing and/or cloud services providers, where instituting any desired tracking may constitute a substantive change leading to additional contract negotiations and costs.

As members have feedback to share on problems or concerns in these areas, as well as suggestions for more effective and manageable ways to detect and combat financial aid fraud in online distance learning programs, I would appreciate receiving it (jcummings@educause.edu). In the interim, key references from the IG’s report may help your institution determine the timing and level of its response, if any, to the Dear Colleague Letter:

  • The lack of a legal requirement for institutions’ to verify online students’ identities for financial aid purposes, as well as the lack of ED’s regulatory and systems capacity to do the same (pp. 3, 10)
  • Acknowledgement that financial aid fraud rings “primarily target community colleges and other open enrollment institutions that have online programs with lower tuition” (p. 7)
  • The degree to which not validating a student’s high school diploma or general educational development (GED) credential may contribute to fraud exposure (p. 7-9)
  • Recommendations for the department—not institutions—on steps to take to address the use of inmates’ identities for financial aid fraud in online distance learning programs (p. 11) (note that neither the report nor the letter address any requirements on this issue to institutions)

Comments

Looking at this subject makes me cringe.  Identity theft is become more and more common the sad part is what to do about it.  These ring leaders who are securing awards for fake students and using the information from real students makes anyone leary about registering for an online class.  Nowadays, so many for profit colleges are popping up that one is not sure where to enroll or who to trust as far as the admissions process.  The schools are here today and gone tomorrow, makes one wonder how to pick and choose the right online learning environment.

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