U.S. Education Department Creates New Unit to Investigate Student Aid Fraud

Whistleblowers take note: the U.S. Department of Education has formed a new enforcement unit charged with investigating and prosecuting federal student aid fraud. Whistleblower rewards for reporting fraud against government programs, including student aid fraud, can equal 15-30% of any recovery.

February 23, 2016 – Student loan debt owed to the federal government grew to $1.2 trillion by the end of 2015—meaning that federal taxpayers have lent more than $600 billion in student loans since 2009 in addition to shelling out more than $30 billion per year in grants. The vast majority of student aid in the United States is authorized by Title IV of the Higher Education Act of 1965 and commonly referred to Title IV student aid.

Given the size of the Title IV programs, perhaps it is not surprising that student aid fraud by colleges and universities, particularly for-profit colleges, continues to plague the higher education industry. To combat this fraud the Department of Education has moved to implement a stricter gainful employment rule1  and announced the formation of a new enforcement unit dedicated to investigating and prosecuting violations of the rules and regulations that govern the Title IV student aid programs.2

Colleges, universities, trade schools and other institutions that receive Title IV funding have been caught engaging in several types of violations. These include:

  • Violating the Incentive Compensation Ban, i.e., paying admissions staff or referral sources based upon the number of students enrolled
  • High-pressure or deceptive recruiting tactics
  • Falsifying student attendance or withdrawal records
  • Improperly claiming online students’ engaged in academic activity when they did not
  • Falsifying or manipulating graduate employment statistics
  • Reporting inaccurate Title IV revenue in violation of the “90/10 Rule”

Not only do these illegal practices defraud federal taxpayers, they also harm students who are left with poor job prospects and thousands of dollars in non-dischargeable student loan debt.

See something, say something (and get paid)

Whistleblowers continue to play an important role in helping the Department of Education uncover and stop student aid fraud by colleges and universities. A federal law, the False Claims Act, allows whistleblowers to report fraud against the federal student aid programs and be awarded 15-30% of the government’s recovery in the case. Whistleblower or “qui tam” cases reward people for doing the right thing and help the federal government recover billions of dollars each year while resulting in hundreds of millions of dollars in awards to whistleblowers.

For example, in November of last year Education Management Corporation (EDMC), the second largest for for-profit college group in the country, agreed to pay $95.5 million to settle allegations that its schools knowingly violated Title IV regulations.3 The violations included employing higher pressure or boiler room type recruiting practices and paying admissions staff based on the number of students enrolled. The settlement resolved four separate False Claims Act whistleblower lawsuits. The whistleblowers, former employees of EDMC, will collectively receive $11.3 million as part of the settlement.

If you have knowledge and evidence of fraud involving federal, state or local funds, including student loan or grant fraud, both in New York and anywhere in the United States, contact the whistleblower attorneys at Levy Konigsberg LLP at 212-605-6200, or toll free at 1-800-988-8005, for a free and confidential consultation.

1 https://www.levylaw.com/qui-tam-attorney.php

2 http://www.ed.gov/news/press-releases/student-aid-enforcement-unit-formed-protect-students-borrowers-taxpayers

3 http://www.justice.gov/opa/pr/profit-college-company-pay-955-million-settle-claims-illegal-recruiting-consumer-fraud-and

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