Feds Flag 126K in Student Loan Fraud Crackdown

$829M in Pell grants were 'improper payments' last year

By Matt Cantor,  Newser Staff

Posted Jun 24, 2013 10:39 AM CDT

(Newser) – Some $829 million in "improper payments," including those involving fraud and clerical errors, went out to Pell grant recipients over the fiscal year that ended in September. Though that's a smaller figure than in the previous two years, it's up 86% from 2007—and the US is trying to root out the problem. Many applicants are applying for cash without planning to attend school at all; officials have flagged 126,000 questionable applicants since January, the Wall Street Journal reports. That's some 1% of aid applicants for the 2013-2014 academic year.

Some of the fraud can be chalked up to organized crime, says the education department's inspector general: Last year, more than 34,000 in crime rings improperly got student cash. For the department, the biggest red flag is the receipt of aid for at least three schools in the same year. Officials tell schools about their concerns, and the schools seek further records from the applicant. "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," says a financial aid director at Maryland's Anne Arundel Community College. Adds another: "We have individuals that told me, 'I spent all this money on graduate school. I can't get a job. I can't afford to live, I need the money.' It's not so much about the education, it's the money."

The government has set its sights on student loan fraud.   (Shutterstock)
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