Financial Aid Fraud Made Easier by Online Colleges

Financial Aid Fraud Made Easier by Online Colleges

Online classes provide students with an excellent way to get a college degree without sacrificing their current jobs or family obligations. There is little doubt that the benefits of online education to society as a whole are valuable. However, there are some unscrupulous individuals who are using online education as an opportunity to commit fraud instead of getting an education. Although nobody is quite sure exactly how much money has been scammed from the financial aid system, there have been hundreds of thousands bilked from one school, Rio Salado College, in the past three years.

How It Works

At Rio Salado, fraud ringleaders used stolen identities to apply for federal financial aid and loans. They then kept the funds for their own use. One of the involved fraud rings lasted for at least four years, while another worked along with inmates in state prisons to attain financial aid funding illegally. Since these crimes were uncovered, the college has enacted stricter application procedures.

Financial aid fraud operations are very sophisticated and often involve hundreds or more people. Most of the time, a leader recruits other individuals who act as students. These individuals use their personal information to enroll in school and to apply for federal financial aid and loans. These fake students receive a cut of the money in exchange for their cooperation. In other instances, stolen identities are used. Either way, the students withdraw from school or simply refuse to complete classes and don’t pay back the money.

A Nationwide Problem

This problem is not unique to Rio Salado College. The Apollo Group, parent company of the University of Phoenix, has provided the federal government with tips on more than 850 financial aid fraud schemes in the past three years. Of these referrals, around 25 have yielded prosecutions.

Across the nation, financial aid fraud rings are on the rise. According to the U.S. Department of Education’s Inspector General, over 100 investigations of financial aid fraud rings were opened in 2011. This is considerably higher than in 2005, when there were only 16 new investigations opened. In addition, over 200 people associated with 42 separate fraud operations have been convicted of their crimes since 2005. These numbers can misrepresent the problem, however, as only the ringleaders are often prosecuted.

Not a Victimless Crime

Although perpetrators of financial aid fraud rings do not physically assault or physically harm others, this is far from being a victimless crime. Federal financial aid and loans are the only way many students can afford to go to college. The funds are used to cover tuition, the costs of books, and other fees. Since there is a set amount of financial aid to be disbursed each academic year, every dollar received by fraud rings is money taken from the pocket of a needy student. In addition, people whose identities are stolen and used in the fraud operations have their credit ruined and can take months or years to get things right again.

Why Online Schools Are Being Targeted

These crimes are on the rise because the popularity of online education is growing. Online schools typically have gaps in the application and financial aid award process that make it nearly impossible to detect fraud. One problem is that the federal government has no requirement for online colleges to confirm student identities, leaving the decision to award aid solely in the hands of school financial aid offices.

The current financial aid system was designed to meet the needs of traditional students and schools and provides major security vulnerabilities when applied to an online setting. The volume of possible fraud referrals is so high that there are not enough resources to fully investigate all leads. Although the federal government and online schools are taking steps to tighten restrictions and to close loopholes, it seems that criminals will continue to rob college students of needed funding for years to come.

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