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Concerns increase over distance education fraud


New technology for colleges and universities could help impede Title IV fraud rings.

fraud-distance-identityInstitutions and students participating in online learning may have more to worry about than retention rates and passing grades, thanks to a rise in what the Office of the Inspector General (OIG) is calling “Distance Education Fraud Rings.”

These fraud rings are characterized by the OIG as comprised of one of more ring leaders who facilitate enrolling “straw students” in distance education programs in exchange for receiving a portion of the Title IV funds that the institution disburses to the straw students. Straw students willingly provide their identities to fraudulently obtain the Title IV funds and enroll in online programs at eligible institutions, with the funds going to both the ring leaders and the straw students for their personal use.

One recent example of a Distance Education Fraud Ring is Los Angeles’ Prodee University. Affiliated with three other schools, the schools enrolled 1,500 students who never attended classes and lived in other states on student visas in a “pay-to-stay” scheme. They generated as much as $6 million a year in purported tuition payments, authorities said.

Other recent fraud rings included Tri-Valley University in the San Francisco Bay Area; College Prep Academy in Duluth, Georgia; California Union University in Fullerton; and many more.

“If anybody has any illusions there was just one bad apple, that’s not the case,” said Barmak Nassirian, director of federal policy analysis with the American Association of State Colleges and Universities in an interview with the San Jose Mercury News. “There are plenty of them out there.”

According to the OIG, just one fraud ring associated with an institution could claim hundreds of thousands in federal financial aid.

“Distance education is the fastest growing segment of higher education and creates unique oversight challenges and increases the risk of school noncompliance with the law and regulations,” said the OIG in a recent audit of distance education in relation to Title IV of the Higher Education Act (HEA). “Distance education also creates new opportunities for fraud, abuse, and waste in the Title IV programs. Past Office of Inspector General audits, investigations, and special projects have shown instances of problems related to verifying student identity, determining attendance, and determining cost of attendance. These problems are increasing as schools deliver more programs through distance education and more students enroll in programs offered entirely through distance education.”

But it’s not just the OIG that has cause for concern over student identity schemes. According to Don Kassner, president of ProctorU, colleges and universities are quickly realizing any distance education program can be subject to fraud schemes.

(Next page: Why IT is on alert; technology solutions)

Kassner, who recently spoke at a congressional hearing on updates to the HEA as related to Title IV fraud in distance education, said that college and university clients are quickly becoming alarmed at the implications of student identity fraud.

As noted by the OIG, online learning students can falsify not only FAFSA information (Social Security number, alien registration status, dependency status, income and assets) and GED or high school diploma information, but also steal other student identities for federal financial aid schemes.

According to the recent 2015 Identity Fraud Study from Javelin Strategy Research and LifeLock, students are three times higher than the average consumer to be victims of identity fraud. The study also reveals that students are four times more likely than other consumers to be victims of “familiar fraud” – fraud committed by someone they know. Students are also the least likely demographic to detect identity fraud themselves: 22 percent were notified that they had become a victim of identity fraud either by a debt collector or when they were denied for a credit card.

“This is bad news for colleges and universities who don’t have tech solutions in place that can accurately verify student identity,” explained Kassner.

Ultimately, an institution is responsible for the funding it receives for its students. And, even if an institution is found not to have known its distance learning students were using false identities, it’s still responsible for paying back those funds to the government—a potential setback in funding and accounting.

“Recently, we had an online university client who was extremely concerned about Title IV fraud,” said Kassner. “Even though the OIG mandates that schools have a process in place to verify that the student who registers in a distance education course or program is the same student who participates in and completes the course or program and receives the academic credit, technology solutions to-date haven’t been keeping pace with the technology used by hackers…it’s no longer enough to verify IP and email addresses.”

To try and provide better student identity verification in compliance with the OIG and also the Higher Education Opportunity Act of 2008 (HEOA), ProctorU this week announced the launch of Ucard.

Ucard, which has been in beta with prominent online institutions (for example, Troy University), is an online student authentication service based on the traditional school ID card.

Seven institutions are already using Ucard in a variety of settings–from attendance tracking to managing financial aid disbursements–and have provided valuable input on the development and uses, said Kassner.

According to ProctorU, Ucard employs a multi-layered authentication process to check and verify a student’s identity in a matter of minutes. Via webcam, a live proctor sees the student and checks their government-issued ID, just like they would in person.

Then, using techniques based on what the company says is industry-leading fraud protection and banking standards, Ucard validates the student’s identity through a series of questions served through public data records.

According to the company, what makes Ucard effective at reducing identify fraud is their proprietary, “sophisticated keystroke analysis software” that adds the final layer of authentication to the stepped verification process designed to protect both the student and university from online and academic fraud.

The keystroke analysis software measures characteristics such as length of time to type a particular word or phrase and the length of time a key is pressed, among the many features of a person’s typing behavior. According to KeyTrac, a keystroke analysis company, on average only two people in 10,000 have very similar typing behavior on average.

ProctorU also recently signed the Student Privacy Pledge, which safeguards student privacy regarding the collection, maintenance and use of student personal information. “We signed this pledge because student privacy is a priority. In order to make certain that student information is protected, proper training is ensured in the usage of data gathered during the proctoring or identity verification process,” Kassner said.

More information about Ucard is available at the ProctorU website.

The OIG also recommends institutions modify disbursement rules for students participating exclusively in distance learning programs, which would immediately reduce the amount that fraud ring participants can receive. Schools also have the authority to:

  • Delay disbursement of Title IV funds until the student has participated in the distance education program for a longer and more substantiated period of time.
  • Make more frequent disbursements of Title IV funds so that not all of the payment period’s award is disbursed at the beginning of the period.

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