Since 2009, the Apollo Group (corporation that runs the University of Phoenix) has referred 850 potential fraud schemes to the Department of Education because of its suspicions that the “students” receiving the federal funding did not really exist or had used the money obtained for themselves and not for education purposes. Of the 850 referrals, 25 resulted in prosecutions. Good for Apollo and its efforts to stop education fraud.
The Department of Education’s Inspector General’s 2011 report indicates the fraud is well beyond the University of Phoenix. The DOE OIG opened 100 fraud-ring investigations in 2011. That figure compares to 16 opened cases in 2005. Since 2005, 215 individuals involved in 42 education fraud rings have been convicted of federal crimes related to the loan fraud. The fraudsters target online programs because it is more difficult to tie in the application process with the loan process and make sure the connections are made between funds dispersed and their use. These fraud rings represent 17% of the DOE OIG’s case load. If the school never has an in-person interview with an individual, it is difficult to know if the individual truly exists, but funds are dispersed, and as long as enrollment continues for 30 days, the funds go to the alleged student. They use those funds for all manner of expenses, iincluding paying a commission to the fraud ring leader who uses their addresses to get the loan funds. You can read the report here: http://www2.ed.gov/about/offices/list/oig/invtreports/l42l0001.pdf.
The fraudsters are the worst, but the educational shops, including the online institutions, need to do a bit more with internal controls, transcripts, ID verification, recordkeeping, and follow-ups on student enrollment. Anne Ryman at the Arizona Republic has a terrific piece on what needs to be done in the December 10th edition. Boys and girls, these are your tax dollars going to fraud rings. Bless the DOE OIG for working hard on these investigations and Ms. Ryman for bringing public attention to the problem.