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Ferreting Out Financial Aid Fraud

October 15, 2009

WASHINGTON -- Rumor had it, in the days leading up to Wednesday's hearing before a House of Representatives committee, that officials from the U.S. Government Accountability Office were preparing to screen a video for lawmakers that showed officials at an unidentified for-profit college giving would-be students the answers to a test designed to gauge whether they have the "ability to benefit" from a higher education. The alleged misbehavior by the college official had already been made public -- it was by far the most explosive accusation made in a GAO report issued last month -- but the vision of an ACORN-like video that might live for eternity on Youtube and Metacafe suggested that Wednesday's hearing could be explosive and make life extremely uncomfortable for for-profit colleges.

The incident at the unnamed for-profit college did get a multimedia airing before the House Education and Labor Committee -- in the form of audio, not video -- and the apparently egregious violations of federal law had some members of the audience burying their heads in their hands and squirming in discomfort.

But while that aspect of the proceedings might have turned them into a circus that (as many Congressional hearings do) generated far more heat than light, the session was surprisingly substantive and informative -- if troubling, at times, in terms of its implications for the future, especially regarding the potentially large pool of non-high school graduates qualifying for federal financial aid and the government's perceived difficulties in ensuring that distance learning students really are who they say they are. While for-profit colleges were in the spotlight, there was general consensus that the types of fraud identified in the GAO report were not relegated to those institutions.

The audience at Wednesday's hearing included a larger-than-usual contingent of young men in suits -- Wall Street analysts who had trekked down to D.C. on Amtrak or the shuttle in the expectation (and in the case of some of them, the hope) that the lawmakers and government officials who testified would take dead aim at for-profit colleges, since they were the focus of the GAO report. And there is no doubt that the report, which cited several instances of wrongdoing and said the Education Department needed to tighten its oversight of how the colleges gauge the academic preparedness of their students, provided ammunition to critics, as evidenced by the comments of Rep. Rubén Hinojosa (D-Texas), who chaired Wednesday's hearing.

"I am concerned that Congress and the Department of Education have not been providing the appropriate oversight necessary to protect students as they pursue educational opportunities at for-profit colleges and universities," Hinojosa said to open the hearing. "We have also not done enough to monitor the quality of educational programs offered at some of these institutions despite the growth of the for-profit sector in recent years."

As outlined by George A. Scott, director of Education, Workforce, and Income Security for the accountability office, the GAO report contained some damning information about for-profit colleges -- or at least the small number on which the agency focused, especially the Washington-area branch of a publicly traded higher education company at which its investigators found apparently illicit behavior when they visited under cover. On two separate visits to the institution, which agency officials declined to identify because they have referred the case to the Justice Department for possible prosecution, officials administering the "ability to benefit" tests gave answers to the 20-odd students, who needed to pass the test to qualify to receive federal financial aid.

Photo: Education and Labor Committee

George A. Scott

"Yeah, this is correct. Give it a 'C,' " the test proctor told the class (click here to hear it) on the GAO's first visit, audio snippets of which Scott played during the hearing. "Number one on your answer sheet, that’s a 'C’. Ok, mark it in. Nice and hard so it will go through that part of the paper people. Everybody got it."

"Good news, I'm going to help you with the first three," the test administrator said on a second visit. "More good news. You gotta 'nail … nail' 10 of them to pass... I'm going to give you three, that means you've got to get to nail seven."

The GAO investigators also found that their answer sheets had been changed to correct answers they had purposely gotten wrong.

Much of the discussion about the GAO report Wednesday focused on the extent to which its findings reflected broad problems -- among for-profit colleges, among all institutions that enroll and give financial aid to students who did not graduate high school, or about the use of "ability to benefit" tests generally.

On the first point, Scott and the Education Department officials who testified, Deputy Under Secretary Robert Shireman and Acting Inspector General Mary Mitchelson, all went out of their way to say that the evidence did not suggest widespread problems among for-profit institutions (a point on which the other witness, Harris N. Miller of the Career College Association, readily agreed). "However, our work has identified potential fraud at a few proprietary schools and significant vulnerabilities in Education's oversight," Scott said.

If they were reluctant to generalize about the implications of the GAO report for all for-profit institutions, many of the witnesses and lawmakers seemed genuinely concerned about what the report said about the government's ability to ensure that students who take ability to benefit tests are capable of taking advantage of a higher education -- and about how much federal agencies know, and don't know, about those who take advantage of the process.

Shireman of the Education Department did not contest the GAO's assertion that the department provides too little oversight of the companies that publish ability to benefit tests, which are supposed to regularly analyze patterns in how students score on these tests. Current federal rules also "do not require test publishers to follow up when irregularities are identified, or to report corrective actions to [the] Education" Department, Scott noted. "Given the risks of potential fraud and abuse associated with ATB testing, such weaknesses in Education’s monitoring and oversight leave the ATB test program vulnerable to future violations."

Mitchelson, the inspector general, estimated that as many as 11 percent of students who receive federal financial aid may have taken ability to benefit tests because they did not graduate high school -- a figure that stunned several financial aid experts in the audience, since that would represent 1 million or more students. Neither she nor Shireman said they knew, without further study, whether those students are disproportionately enrolled at for-profit or other types of colleges, though it's safe to assume that they can be found in larger numbers at career colleges, community colleges, and other open-access institutions.

Shireman said the Education Department is developing a tool that will help it determine which institutions are enrolling significant numbers of students after passing ability to benefit tests, and that the tests were among the issues the department plans to explore in its upcoming negotiated rule making sessions.

Rep. Timothy Bishop (D-N.Y.), suggested that the department consider adopting a proposal, which was dropped at the last minute from last year's Higher Education Opportunity Act, that would require institutions with large numbers of students who take ability to benefit tests to administer those tests through fully independent entities. Under questioning from Bishop, Scott said that the "independent test administrator" who gave the answers to

Photo: Education and Labor Committee

Harris N. Miller

his under cover investigators was under contract at her for-profit college, though he was unsure if the contract was with the college itself or the publisher of the ability to benefit test in use there.

Miller, the Career College Association CEO, acknowledged the concerns about potential fraud involving ability to benefit tests but said he worried about going too far in limiting such students' chances of getting a higher education. "Some of them are never going to be successful in passing a GED, and we in society have to make a decision on whether to cut them off from college or not," Miller said. He said some for-profit colleges have already begun "cutting way back" on the number of students they admit using ability to benefit tests, because of concerns about their cohort default rates and other federal accountability measures that are hurt if high-risk students don't make it academically.

While the GAO report focused most of its attention on potential fraud associated with ability to benefit tests and high school diploma mills (to which some for-profit college officials sent students to get "degrees" to qualify them for federal aid, GAO said), Mitchelson of the inspector general said she was growing increasingly concerned about an emerging vulnerability: "student eligibility problems associated with distance education."

As she described it, the Education Department is ill-prepared (largely because of underdeveloped laws and regulations) to ensure "that students [in online programs] are actually enrolled in and engaging in academic activities, and that they are who they say they are." Recent audits by IG's office of two online institutions, Capella University and TUI University, Mitchelson said, as well as early findings from two others that are now underway, have revealed evidence that "student aid funds are being disbursed to ineligible students in online programs or to students who have dropped out of these programs," she said.

This is booming business for the agency, Mitchelson said. "Since 2005, we have initiated 29 distance education-related investigative efforts, 19 of which were identified in the last two years," she said. "Our ongoing work has revealed that criminals seek to exploit institutions with minimal requirements to establish eligibility for initial and continued student aid disbursements. Community colleges and other low-cost institutions are the primary target of this type of fraud."

 

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