Federal financial-aid programs inject billions of dollars into American educational institutions every year. With such amounts at stake, the temptation to defraud the U.S. Department of Education may lead administrators to fudge numbers or commit other types of fraud to boost budget margins.
Like all other fraud against the government, education fraud is punishable by law. The Office of the Inspector General (OIG) requires school personnel to report fraud, waste or abuse by applicants for educational program assistance who commit forgery or make false claims about independent status, citizenship, identity or income.
Federal regulations also target employees, third-party servicers and other agents of educational institutions that deal with the administration or receipt of federal funds under Title IV of the Higher Education Act. Institutions must report any incidence of fraud, misrepresentation or breach of fiduciary responsibility or other illegal conduct involving funding of the school or its students.
Common examples of student aid or student loan fraud committed by education institutions include:
- Misrepresenting the number of students who receive aid
- Lying about eligibility criteria for students participating in an aid program
- Deceiving the government about educational programs
- Failing to return funding after students drop out
- Providing improper incentives or bonuses to loan officers and recruiting agents
As with other examples of false claims, people who report education fraud may be eligible for whistleblower protection under the False Claims Act. Qui tam actions are also authorized by the Whistleblower Protection Act (WPA) (for Federal employees) or the American Recovery and Reinvestment Act of 2009 (ARRA). The OIG has jurisdiction under the ARRA to launch whistleblower investigations at private institutions who disclose allegations of fraud, waste or abuse of funds designated by ARRA to the Department of Education. State whistleblower protections include New Jersey’s Conscientious Employee Protection Act (CEPA) and Pennsylvania’s Whistleblower Law.
One important development in this area of false claims liability is the rapid growth of Internet-based distance-education institutions that provide online degrees with virtual attendance requirements. An investigation by The Chronicle of Higher Education into distance-education fraud quoted a Department of Education official who warned Congress of significant increases in investigations of student loan fraud at online universities since 2005. One incident involved a student at an Arizona online college who forged dozens of enrollments and loan applications and pocketed over $500,000.
As with any type of qui tam action, employees who are worried about retaliation for reporting education fraud can learn about their options for legal protection and receiving a reward by consulting with a false claims attorney.