Student-Aid Scams Targeted By Schools, Government

"Federal officials are cracking down on fraud in student-aid programs, responding to evidence that a growing number of recipients—acting alone or as part of organized crime rings—are pocketing federal loans and grants without any intent of going to school," The Wall Street Journal reports. "The Education Department in January began using a database to flag applicants for federal Pell grants who have an "unusual enrollment history"—having received aid for three or more schools within a year, primarily. The department sends the names to colleges and universities, which then ask applicants to provide prior transcripts and other documents. A school can deny a grant or loan if it deems the applicant's responses to be unsatisfactory. Since January, the agency said it has flagged 126,000 applicants, about 1% of all those seeking aid for the 2013-2014 school year. 'What we find are very poor students academically that are borrowing to the max, getting the maximum in their Pell grant and just going from school to school,' said Rich Heath, director of financial aid at Anne Arundel Community College, in Maryland, where the new system has flagged 108 aid applications out of about 8,000 total. Roughly $829 million in Pell grants in the fiscal year that ended last September were 'improper payments,' which includes fraud and disbursements due to clerical errors, the Education Department reported last year. That was down from the previous two years, but up 86% from 2007. Improper payments through the federal student-loan program more than doubled last year from the year before to $614 million. More than 34,000 participants in crime rings improperly received federal student aid last year, up 82% from 2009, the department's inspector general estimated this month. Justin Draeger, president of the National Association of Student Financial Aid Administrators, said while schools are trying to curb fraud, they strive to get aid to deserving students. 'Schools are constantly trying to find the right balance here.'"

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