Back to School Scam


Just as students have to compete against each other to gain admittance into their educational institutions of choice, universities, colleges and trade schools also compete to attract the best students. One key benefit that prospective students look for when choosing a school is the success rate for job placement following graduation. With today’s job market leaving many graduates without a salary or resources to pay back huge student loans, a high job placement rating would make a school more attractive to discerning students – unless, a school happens to falsify its job placement rates to attract more students and to qualify for additional federal student financial aid funding. A Department of Justice press release details how one school chain in Texas (Where everything is bigger, including the fraud) inflated its job placement statistics to maintain compliance with the federal student aid program eligibility requirements, while fraudulently submitting $3.7 million of ineligible student financial aid claims.

In order to participate in federal student aid programs, a school must sign a Program Participation Agreement where the institution agrees to specific terms. One of these terms states that if a school uses its job placement rates to attract students, then those rates must be accurate and available to prospective students. According to the press release, the school system knowingly misrepresented their placement statistics, thereby violating their agreement and jeopardizing their state licensure and accreditation.

The government also alleged that the school’s corporate employees falsely increased the enrollment numbers, which increased the amount of federal dollars they received from taxpayers and students, who incurred long-term debt as a result. Some of the enrolled students were ineligible for financial aid due to a lack of high school diplomas or GEDs, or they had falsified high school diplomas. Others should have been dropped from class rolls due to poor grades or lack of attendance. School officials allegedly told some students that a criminal record would not prevent them from getting a job and quoted salaries higher than what would be obtainable for a graduate. (Don’t believe everything you hear.)

The Texas school will pay back the government from funds supporting three letters of credit the institution had provided to the Department of Education. (The Dept. of Education will take letters of credit? What happened to cash? Maybe the IRS can take a letter of credit for my next tax payment?) The Department of Education also will disburse two million dollars from the letter of credit funds for student loan refunds in relation to the cases filed against this Texas school system. (Maybe there is justice in the world.)

Bait and switch tactics usually involve luring a customer to buy something, but then convince them to purchase a more costly item. In this case the opposite happened? the victims were sold on the benefits of the school’s job placement rate (a priceless value); but in the end, they couldn’t deliver on the promise. Federal aid exists to make the dream of a higher education a reality. Innocent individuals who deserve the benefit should not be denied the chance for a better life because a trusted institution would prefer to make some extra dollars at their expense.

Source: Today’s ”Fraud of the Day” is based on a press release titled, ”Texas-Based School Chain to Pay Government $3.7 Million for Submitting False Claims for Federal Student Financial Aid,” issued by the U.S. Department of Justice on August 22, 2013.

WASHINGTON, D.C. – ATI Enterprises Inc. will pay the government $3.7 million to resolve False Claims Act allegations that it falsely certified compliance with federal student aid programs’ eligibility requirements and submitted claims for ineligible students, the Justice Department announced today.

”Federal financial aid is meant to help students obtain a quality education from an eligible institution, and the Department of Justice is committed to ensuring colleges comply with the rules to make certain that happens,” said Stuart F. Delery, Assistant Attorney General for the Civil Division.

Read More

Previous articleOne Swipe Too Many
Next articleMassachusetts Cracking Down on Convenience Store Fraud
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.