Fraud and abuse of student financial aid is a rising nationwide epidemic, according to Myrna Perkins, Director of Financial Aid at Barton Community College. Her office has the challenge of spotting suspicious applications, as well as reducing the default rate on student loans.
Last year, Barton dispersed a total of $10 million in federal financial aid, including $3.6 million in Pell grants, Perkins said last week during a presentation to the BCC Board of Trustees.
Perkins said last year, $829 million in improper Federal Pell Grants were awarded nationwide, and the amount of improper federal student loan payments doubled, to $614 million.
“That’s a lot of money wasted and it’s a lot of money that could help legitimate students,” Perkins said.
The improper aid doesn’t just go to students who drop out after cashing in on a grant or loan. More than 34,000 participants in crime rings received federal financial aid last year.
This year, 219,000 applicants – 1 percent – have been flagged as suspicious.
BCC has taken steps to reduce fraud, abuse and the percentage of students who default on loans. The college created a new position, Financial Aid Risk Management Officer, as well as a Fraud and Abuse Team with representatives from all college departments.
Sharing information can reduce fraud as well as failure in classes, and dropouts are among those students most likely to default on loans. The team meets quarterly and lets the Financial Aid department know if students are attending classes, and if they’re taking the correct classes.
Kansas community colleges are also sharing information with each other. That allows Financial Aid to spot students with an unusual enrollment history. Some of those students, known in financial aid circles as “swirlers,” enroll at multiple colleges in an attempt to create financial aid packages, with no intention of pursuing an education.
Barton Community College presents a tempting target for fraud for several reasons, Perkins said. Swirlers typically look for online classes at inexpensive schools. After they enroll they receive a financial aid package that may include a Pell grant – which they don’t have to repay – and a loan, which they do not intend to repay. After the cost of courses is deducted from the financial aid package, the difference is “refunded” to the student, ideally to be used for other expenses related to getting an education.
“These students who are taking this money fraudulently don’t really plan to pay that money back,” Perkins said.
Another step Barton has implemented to reduce fraud is to verify the identity of financial aid applicants. That means students must come to a Barton campus and physically produce a driver’s license or other form of government-issue ID if asked to do so. If they can’t come to the campus, they must present the ID to a notary public who can verify it.
The U.S. Department of Education requires periodic reports from colleges. “There are over 7,000 regulations concerning dealing with financial aid,” Perkins said. Staff at BCC attend Department of Education training whenever possible, and in particular look for sessions of federal program reviews.
Student loan default rate
The state of the U.S. economy has led to a nationwide increase in student loan default rates, Perkins said. The college’s default rate, previously around 11 percent, is up to 19.6 percent when reported as a two-year rate, or 17.9 percent as a three-year average.
That is in line with the rest of the nation, Perkins said. “Fifteen to 25 percent is average. Anything below 15 percent is considered really good.”
The college is also working to lower the loan default rate, starting at enrollment. A “more vigorous review of demographics” can indicate a student who is at risk of default. BCC has also joined a program called Salt that is designed to help students manage their money and stay on track when paying back student loans.
Barton President Dr. Carl Heilman and Board of Trustees Chairman Mike Johnson said Perkins has been a key employee on the college staff during her 21 years at BCC.
“Financial aid debacles can be the downfall of an institution,” Heilman said, expressing his confidence in Perkins.
“She’s well respected in the state and nationally,” Johnson said, adding Perkins does this with a highly efficient staff that has only grown from three members to six in the last two decades.