by Adolfo Mendez
College Press Service
While education officials have always known some college students falsify documents to get Pell Grants, it's only recently that they've been able to determine the extent of the lies.
A new study reveals more than 100,000 college students received Pell Grants during the 1995-96 school year who should have never received the free federal money.
According to the U.S. Department of Education's Office of Inspector General, college students lied about their family income to get the award money. Worse yet, the inspector general's office reported that colleges, by themselves, have no way of discouraging the practice.
"We knew some people were lying, based on our past criminal investigations where we have found that students lied," said Patrick Howard, director of student financial assistance programs for the Office of Inspector General at the Department of Education. "We just had no idea of the magnitude."
Just how large is the problem? The inspector general's report found thousands of students are lying on their student-aid applications and costing the government millions as a result.
Working with the Internal Revenue Service, the inspector general's office compared family incomes reported on students' financial-aid applications with those reported on their parents' federal tax records.
The audit showed the government gave $109 million more than it should have to at least 102,000 students in 1995-96 because students either failed to report or underreported their income.
In addition, at least 1,200 students who claimed to be veterans were not. The result, according to the inspector general's office, was that they were granted independent status, which most likely increased their eligibility for Pell Grants. Students in this category were awarded more than $1.9 million in Pell Grants, which are supposed to go only to needy students.
The audit also referred to four unnamed students who stood out because they had "the greatest income discrepancies" between their tax forms and student-aid forms. Three of the four students received full Pell Grants; the other was awarded a grant slightly below the $2,400 maximum.
The parents of the four students reported family incomes to the IRS ranging from $646,720 to $1.3 million. During the same period, three students reported zero earnings on their student-aid applications and the fourth reported just over $7,000.
It gets worse: One unnamed student reported no income on the student-aid application, even though the IRS found the student's family reported more than $1.3 million in adjusted gross income on their tax return. The student, although his identity is known to the IRS, can't be prosecuted, Howard said.
In fact, none of the students who received Pell Grant money will be prosecuted.
"At this point, we cannot go after them criminally, although we'd love to," Howard said. "It's part of our agreement with the IRS."
That agreement only allowed the Department of Education to report how widespread the fraud is. It did not allow the department to reveal the names of the students either to the public or the schools where the Pell Grants were applied.
Currently, the department relies on colleges to verify that students submit accurate data on their student-aid forms. Federal law requires colleges to verify key eligibility information for at least 30 percent of their students who receive financial aid.
But while many colleges require aid applicants to submit copies of their family's federal income tax form, the colleges have "no assurances" that the forms are the same as those sent to the IRS, the report said.
"Sometimes people submit fake 1040s. There are marketing companies that are in the business of producing fraudulent tax returns," Inspector General Thomas Bloom told legislators in March. Bloom testified during a hearing before a subcommittee of the House Committee on Government reform and Oversight.
He said many colleges are too time- and cash-strapped to investigate whether the financial information submitted by students is fraudulent. They lack the experience, too, to ferret out offenders, he said.
Bloom recommended that the federal government take on the responsibility of insuring that federal aid is going to the students who need it. He said the IRS should share tax returns with the Department of Education, a move critics have said would invite "Big Brother" into students' lives.
"I'm a strong believer in privacy rights," Bloom said. "But it is different when you're asking for federal money."
Leslie Gray, a freshman at Harold Washington College in Chicago, agreed that the Department of Education should work with the IRS to pull records at will. "I think they should," Gray said. "(Students who lie) take money away from people who don't have any money for college."
She said she was surprised by the IRS audit. "That makes other people, like me, look bad," she said.
Gray, who attends a community college where tuition and books run slightly more than $1,000 annually, said she received the maximum Pell Grant award this school year. "Without it, I wouldn't be in school," she said.
Gray said she's heard students at the school talk about falsifying information. "They say, 'I can try to get more money if I say I'm on public aid (when they're not).' And I'm like, 'Like they don't know'."
Many financial aid officers said the audit caught them off guard, too. Cathy Kavanagh, associate director of financial aid at the University of Delaware, said she's never seen Pell Grant fraud in her 10 years of working at the university. "I was surprised by the IRS audit," Kavanagh said. "From our perspective, we review every Pell Grant applicant."
That review usually takes the form of comparing what the student said one year to the next. "So if their income drops dramatically, we will ask them to document it. We ask for a copy of the tax return," she said.
But even those verification methods aren't fool-proof, since students can bring in false returns, Kavanagh said.
While the Department of Education plan may solve the problem, Kavanagh was uneasy about the plan.
"As a taxpayer, I would be concerned about confidentiality," she said. "It depends on how they would use the information."