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)