Education Fraud is a Growing Problem

While we often spend a lot of time on this blog talking about healthcare fraud, given that Florida is ground zero for Medicare fraudsters, everyone should be aware of another growing area, education fraud. Education has become big business, and where there’s money to be made, the fraudsters are surely close behind.

One area that seems to get for-profit universities in trouble is recruitment-based pay. Under the federal Higher Education Act (HEA), a university cannot tie compensation for recruiters to the number of students they enroll, and universities must certify compliance with this law in order to qualify for federal grants and financial aid programs. The point of the law is to prevent greedy educational institutions from recruiting unqualified students (and setting them up for failure) for the sole purpose of bilking grant money out of the government.

Late last year, the Justice Department settled a $95 million False Claims Act case against a for-profit education company that was certifying compliance with the HEA, though it was unlawfully recruiting students using high-pressure sales tactics and by paying employees solely on the basis of the number of students they enrolled. In another case from last year involving the same company, the New York Attorney General accused the company of misleading students about accreditation and job placement rates. Accreditation is also a prerequisite to participating in student aid programs.

For-profit programs have also been dinged for taking in too much money from federal student aid programs. Under the HEA, a university may receive no more than 90% of its revenue from federal aid programs. Fortis College in Miami lost its eligibility for federal aid programs in 2014, as a result of its violating this rule for two consecutive years. The college took in a whopping 93% of its revenue from federal aid programs in 2013.

Student loan aid is another fertile ground for fraud. Student loan now exceeds $1.2 trillion, and at least one study has estimated that student loan debt in the United States grows by $2,700 every second. Given the growing student loan bubble, it is no surprise that fraudsters will try to make a quick buck. A few years ago, for instance, the Justice Department settled another case involving lenders who manipulated their bills to inflate the interest rate subsidies received from the Department of Education.

The government is keenly aware of these issues and wants to curtail the fraud. Last week, the Department of Education created the Student Aid Enforcement Unit to respond to allegations of illegal activity by colleges and universities, and President Obama has requested $13.6 million in the FY 2017 budget to strengthen oversight of federal student loan programs.

With the rise of for-profit universities, these kinds of frauds will surely increase in the future.