The days of punishing students with detention may quickly be changing to prison time.  You mean to say that students will serve jail time for skipping classes?  No, not quite; however, college students seeking to defraud the government through student aid programs could face detention in a federal penitentiary. According to an article in The Wall Street Journal, the U.S. is cracking down on students taking advantage of grants, teaching one tough lesson.

Federal officials are cracking down on student loan frauds, in an attempt to bring a one year, $1 billion, fraud industry to an end. (Nearly $1billion in a year?  Are all these fraudsters finance majors?) The question is:  how are students able to bilk the government of grants when specific application and eligibility guidelines and rules apply?  The director of financial aid at a Maryland community college explained:  “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.”  Pell grants, unlike loans, do not have to be repaid, and are typically awarded to undergraduate students who have not received a bachelor’s degree. (They don’t need to be repaid, meaning these grants are free money.) With free money floating around colleges, how are federal officials tightening the rules to keep Pell grants from students looking to fraud?

The Department of Education began using a new database in January 2013, flagging applicants for federal Pell grants that have an “unusual enrollment history,” meaning they’ve received aid from three or more schools in one year. (Are you kidding?  How about student aid for one school per year? If the kid transfers, the residual goes to the next school. No more of this double and triple dipping.) The Education Department sends the names in its database to the colleges and universities that ask the applicants to provide prior transcripts – the school can deny the grant or loan if they deem the applicant’s response to be unsatisfactory. Since January, the database has flagged 126,000 applicants suspected of fraudulent activity.  Nearly $829 million Pell grants were determined to be “improper payments” in the previous fiscal year.

This is a step in the right direction.  Unfortunately, fraudsters thrive when schools rely on self-reported information.  The next step is to leverage public records and data analytics to get to the root of the identity, so schools and the federal government truly understand the individual’s grant history.

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