Feds slow to use modern tools to stop rising student loan fraud

The Education Department, charged with helping students compete in the 21st century, isn’t using basic online tools to fight rapidly rising student loan fraud that is now costing taxpayers hundreds of millions of dollars.

A new assessment by the department’s internal watchdog, the inspector general, found officials were not using basic digital investigative tools like checking Internet Protocol (IP) addresses or verifying email addresses, allowing easy avenues for defrauding federally backed student loans.

In short, students and criminals seeking to spoof them have moved online while the Department’s prevention efforts have lingered with outdated tools.

“Access to personal information using conventional and electronic means has made it easier for criminals to assume the identity of fictitious recipients and fraudulently apply for and obtain these funds,” the inspector general reported recently.

The results have been devastating to taxpayers: an 82 percent increase in student loan fraud since 2009 and at least $187 million in losses. Investigators say the actual losses could be as high as $874 million.

For failing to use the basic tools of the 21st century to guard against taxpayer losses from student loan fraud, the Education Department wins this week’s Golden Hammer, a dinstiction awarded by the Washington Guardian to missed opportunities to protect taxpayers.

The inspector general first flagged the concerns about fraud in January and this month renewed the concerns with a subsequent mention in its semiannual report to Congress.

The Education Department agrees with the findings of the internal investigation, promising to begin using the recommended safeguards this year.

“We share your concerns about the potential growth of fraud in the student aid programs, and we continue to work aggressively to analyze, identify and establish plans to implement a series of new policies, controls and processes to combat this problem,” said James W. Runcie, the Education Department’s chief operating officer.

The department has several new prevention initiatives underway.

Starting with the 2013 Free Application for Federal Student Aid (FAFSA) cycle, “applicants who appear to have an unusual enrollment history will have their records flagged, officials said.

“Specifically, applicants who received Pell Grant funding from multiple institutions over a period of time will be selected for this increased scrutiny,” Muncie said in a letter responding to the IG. Also, the department will collect email and IP addresses of students who apply for FAFSA online and run them through a test model to determine if they are a possible fraud risk, he said.


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