1. NYSFAAA 2012 Financial Aid Fraud
Thomas J. Dalton
Excelsior College
Assistant Vice-President
for
Enrollment Management

2. Excelsior College
Private, nonprofit distance learning college located in Albany, NY.
30 percent military.
33,000 students world wide.
Average age of Excelsior College students is 39 years old.
141,000+ graduates

3. FA Fraud - Why hasn’t this happened sooner?
The fraud problem seems to have landed on the doorstep of distance education.
Federal Student Aid (FSA) for distance education history.
50% rule for Title IV student-aid program
Halt the spread of “diploma mills” of the 1980s.

4. 50% Rule
Schools with more than 50% of their courses offered via correspondence were NOT eligible for Title IV. This included:
Telecommunication courses
On-line courses
Correspondent courses

5. 50% Rule Rescinded
The rule was rescinded by the Higher Education Reconciliation Act (HERA) in February 2006.
Prior to HERA, US Department of Education ran a demonstration program with a half-dozen schools allowing them to participate in FSA.
Excelsior College applied for reinstatement after HERA and was approved to participate in the FSA programs in July 2007.
Excelsior began awarding aid to students in the fall of 2007.

6. Growth in Distance Education
Number of students taking distance education courses
8.2% in 1999 – 2000
20.4% in 2007 – 2008
Institutions offering distance education programs for
97% of 2 year public
89% of 4 year public
DOE - National Center for Educational Statistics

7. Office of Inspector General Report
Issued September 26, 2011
Investigative Program Advisory Report, Distance Education Fraud Rings, Control No. ED-OIG/L42L000I

8. Purpose this OIG Report
Alert Federal Student Aid (FSA) and the Office of Postsecondary Education
Serious fraud in distance education programs.
Make recommendations to reduce future fraud.

9. What the OIG Report Found
As of last August
100 open fraud ring investigations
49 additional being evaluated for investigation
Since 2005, OIG has prosecuted
42 of the 215 different fraud rings
$7.5 million in fines and restitution
11/12/2018

10. How the Fraud Rings Work
“Ring leader” gets personal information from individuals:
SSN
DOB
Demographic (address etc.)
In exchange for a portion of the disbursed FSA
Ring leader completes and submits FAFSAs for these individuals.
Targeting lower tuition colleges, often distance education programs or community colleges.
11/12/2018

11. How it Works (continued)
Ring leader also:
Applies for Admissions (open enrollment colleges)
Completes registration process
Ring leader begins participation in online courses.
Participates just enough to receive the disbursement of FSA funds.
Schools issue credit balance refund (funds over and above direct institutional charges).
Ring leader may or may not follow through with sharing the proceeds with individuals.
Ring leader pockets most of the credit balance refund from the college.
11/12/2018

12. Standard Cost of Attendance
Direct Costs for Distance Education
Tuition & Fees
Indirect Costs for Distance Education
Room & Board
Books & Supplies
Personal
Transportation
Other (Technology)

13. Excelsior Cost of Attendance
Estimated for semester (15 Weeks) for a half-time 6 credit hour student
Tuition $2,130
Fees $198
Books $300
Room & Board $4,100
Technology Allowance $600
Total $7,328
Direct Cost paid to the student’s account $2,328
Indirect Cost refund to the student $5,000

14. Fraud at Excelsior College
Small Ring (6 Students, one “Ring Leader”).
By chance we noticed the same address for all the students during verification of the FAFSA.
Investigated further:
Same IP address
Low to zero income
Checks from Credit Balance Refunds all signed over to “Ring Leader”

15. OIG Recommendations
Include in upcoming negotiated rulemaking for distance education programs
Confirm student identification as part of the enrollment process
Retain IP information during application, enrollment and attendance
Designate identity, HS graduation status and statement of educational purpose

16. OIG Recommendations (con’t)
Establish edits within Central Processing System (CPS) and the Nat’l Student Loan Data System (NSLDS) to flag potential fraud ring participants.
Seek statutory change to Cost of Attendance for students enrolled in distance education programs.
Establish data match with Department of Justice to ensure incarcerated persons do not receive FSA.

17. OIG Recommendations (con’t)
Implement controls in the DOE PIN system to prevent multiple PINs to the same address.
Utilize existing regulations to establish repayment liabilities for fraud ring participants that are not subject to prosecution.
Dear Colleague Letter to alert institutions to the problem of fraud rings with distance education.

18. OIG Recommendations (con’t)
Ensure that pretrial diversions are recognized as convictions for program debarment or exclusion purposes under HERA by establishing processes to prevent individuals who enter into pretrial diversion agreements from obtaining Title IV funds until the requirements of HERA for eligibility are satisfied.

19. Steps Already Taken by DOE
Dear Colleague Letter GEN (October 20, 2011)
Institutions are required to have processes to verify identity that are subject to review by the institution’s accreditor (34 CFR (g))
Verification regulations modified to permit better targeting of reviews by institutions (34 CFR )
High school diploma
Collect on FAFSA
Require institutions to have a procedure in place to address apparently bogus high schools and diplomas (34 CFR (p))
On-going OIG/FSA work to detected fraud
Task Force formed to review recommendations & take appropriate actions
Likely, we will not be moving forward on all OIG recommendations. Some recommendations would likely have unintended consequences that would inhibit access and completion for innocent low-income student
11/12/2018

20. Steps taken by Excelsior
Delay 1st disbursement of funds until 30 days into the term.
Certify loans one term at a time
Two disbursements per term
Example in a 15 week term (30th day & 54th day)
Automated “Excessive Absenteeism” policy.

21. Excessive Absenteeism at Excelsior College
Automated into the learning management system (Blackboard Learning Management).
Weekly Alerts within the system for failure to participate.
Failure to participate in a course for three consecutive weeks, student is administratively withdrawn from the course.
If this happens in all courses in the term a Return to Title IV (R2T4) calculation is processed, limiting the earned aid the student can receive.

22. Future steps at Excelsior
Implementing student Authentication at different points in the education process
Beginning at the time of Enrollment
Beginning of a course
Midterm exam and final (Crossover between financial aid fraud and academic integrity)
Fraud Awareness campaign on the Excelsior campus including:
Financial Aid & Admissions teams
Bursar & Course Registration Team (Registrar)
Academic Advisors & Students

23. Future steps at Excelsior (con’t)
Automation to review specific data on an ongoing basis (Not always fraud but red flags that need to be monitored):
Duplicate Internet Protocol (IP) addresses for several students
Duplicate home addresses by several students
Frequent changes in home address by students
Students withdrawing at the time of disbursement several terms in a row
Plagiarism or meaningless academic activity

24. Questions
Thomas J. Dalton Assistant Vice President for Enrollment Management (518)