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Whistleblowers Help Stop Student Aid Fraud at For-Profit Schools


Whistleblower actions filed under the False Claims Act are helping the government stop fraud in connection with the federal student loans and grants (collectively known as “student aid”) received by for-profit trade schools, also known as trade, vocational or technical colleges. The whistleblowers are usually current or former employees of the schools who help the federal government uncover and stop fraudulent activity by filing of Qui Tam lawsuits under the False Claims Act. Known as “relators” in False Claims Act cases, whistleblowers earn an award that is anywhere from 15% to 30% of the government’s recovery for claims that bring to light fraud in connection with the receipt of federal funds, such as student aid.

Enrollment and tuition prices at for-profit educational institutions have grown quickly over the last decade. In 2009-10, for-profit schools received $32 billion in federal student aid funding – 25 percent of all federal student aid disbursed by the Department of Education under the Higher Education Act. The majority of this aid is from Pell Grants, Stafford loans and GradPlus loans. But with this influx of federal money has come increased scrutiny from federal and state officials who question whether the tax dollars pouring into these schools are justified by the education they provide to their students.

In 2011, a whistleblower action filed against one of the largest for-profit colleges resulted in a $78.5 million recovery by a whistleblower on behalf of the government. Other violations that have recently gained government support include:

  • Tying employee compensation to student enrollment numbers;
  • Fraudulently receiving more than 90 percent of a school’s funding from federal student aid (the “90/10 rule”);
  • Misrepresented job placement rates for graduates;
  • Enrolling ineligible students; and
  • Continuing to enroll students enrolled who should have been dropped due to poor grades or attendance.

With the enactment of new Federal and State regulations, the types and numbers of claims filed by whistleblowers against for-profit schools will likely increase. For example, potential claims might include:

  • Falsifying student information in order to qualify for federal grants and loans;
  • Inaccurate reporting of graduation, attendance, or student employment data;
  • Failing to return federal funding after a student withdraws;
  • Inaccurate reporting of rebates, private loans, or discounts provided to students;
  • Deceptive marketing or recruitment practices; and
  • Continuing to enroll and collect federal aid for students that fail to meet standards or pay their tuition balance.

Federal law does not allow individuals to file a whistleblower or “qui tam” case under the False Claims Act without an attorney. The attorneys at Levy Konigsberg LLP have in-depth knowledge of the federal student aid system and experience investigating whistleblower claims against higher education institutions. We have assisted our whistleblower clients in recovering more than $70 million on behalf of the Government and have the expertise to help make your case a success.

If you have knowledge and proof of Education Fraud, then give us a call today for a free consultation and case review with an experienced whistleblower attorney.

This information is for educational purposes. It is not offered as and does not constitute legal advice or legal opinions. You should not act or rely upon this information without seeking the advice of an attorney.



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