For-Profit College Fined for Financial Aid Fraud

United States University, a profit-seeking school near San Diego, will pay a civil fine of $686,720 for submitting false applications for federal grants for which students were not eligible, federal prosecutors said. The school’s former financial aid director pleaded guilty to criminal financial aid fraud, the U.S. Attorney’s Office said. The school has campuses in Chula Vista and Cypress, California. It was known as InterAmerican University from 1997 to 2010, when it changed its name. It has nursing and other programs.

The school’s former financial aid director, Christina Miller, pleaded guilty to federal charges of criminal financial aid fraud, the U.S. attorney said. She admitted “that she knowingly and willfully falsified student financial aid applications, resulting in the improper awarding of federal Pell Grants to ineligible students. Under federal law, students already holding Bachelor’s degrees are generally not eligible for Pell Grant funds, but Miller admitted changing student degree status in order to allow the school to improperly receive Pell Grant funds from the U.S. Department of Education.”

Department of Education statistics show that financial aid-related fraud has been on the increase in recent years. However, those committing the fraud are typically students or groups of students operating in rings. Until now, cases involving collusion with school officials appear to have been relatively uncommon.

Investigation and enforcement of financial aid-related crimes has proven difficult. The need for broad–based inclusivity in federal aid programs combined with the nature of online learning processes has left gaps in the security and verification procedures for financial aid applications at such schools. This, in turn, has made financial aid crimes more difficult to detect at these schools where the students are not physically present. The federal government does not require verification of a student’s identity by the schools when they apply for financial aid. The schools are free to adopt their own identity-confirmation procedures. In schools where students’ existence are not easily identifiable, a financial aid system based largely on the concept of brick and mortar education is vulnerable to crime. In spite of across the board acknowledgement of increased financial aid fraud, there have only been a couple hundred convictions in such cases over the last seven years. Officials say that this fails to reflect the scope of the financial aid fraud problem because in most cases only ringleaders are prosecuted, while many others were involved in the crimes themselves.

While private, for-profit online schools, like University of Phoenix, are often targets of financial aid crime, public schools — such as Rio Salado — college remain favorite victims of fraud rings. Public colleges tend to have much lower tuition rates, and their online students are not required to register in person. This means that criminals are able to pocket a much larger difference between the cost of classes that they register for and the financial aid that they are given than they otherwise would at a private school. Moreover, the criminals are at no point required to have their identities confirmed in person.

Pell grants are often favorite targets of financial aid rings because they have no repayment requirements. This means that the possibility of detecting such fraud is significantly diminished with the passage of time. Loans, on the other hand, would invite scrutiny and investigation once the ringleaders or their straw students failed to make payments on the principal.

The fact that this case involves the personnel at a fro-profit university is bad news for the already-beleaguered for-profit education industry.

Educacion Significativa ["Meaningful Education"] LLC and IAC Funding LLC dba United States University will pay the civil fine. The whistleblower, Veronica Glaser, a former student and employee, will get some of the recovery under the False Claims Act. Miller, 60, of San Diego will be sentenced on June 27.

Comments

  1. The sad fact is that many of these for-profit institutions NEVER deliver degrees that are worth anything to industry, and many of them exploit students by encouraging them to take out loans for worthless “degrees.” Only after they graduate do many of them realize that no one will hire them.

  2. That’s pretty awful. I have no problem with for-profit institutions, but to make a profit at the sake of integrity and forsaking the law goes way too far. I hope the former director goes to jail.

  3. That doesn’t surprise me at all. The Pell grant is suspiciously easy to get approval for, I’ve known working adults that had decent incomes get approved without any hassle at all. The fact that there are some schools willing to game the system for extra income should be no surprise to anyone. this is especially true since the schools ultimately administer the award!

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