U.S. DEPARTMENT OF EDUCATION (ED) OFFICE OF POST SECONDARY EDUCATION

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23 févr. 2014 (il y a 3 années et 1 mois)

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Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
Programs



Public Hea
ring May 31
, 201
2





1








U.S. DEPARTMENT OF EDUCATION (ED)









OFFICE OF POST SECONDARY EDUCATION








Transcription for Negotiated

Rulemaking
Sessions and Public Hearings

201
2


Deliverable 4: Transcription of Public Hearing
held
in the 8
th

Floor
Conference Room located
at
1990 K Street N.W., Washington, D.C.

on May
3
1
, 201
2







The public hearings began as noticed in the
Federal Register at 9:00 a.m.




























Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
Programs



Public Hea
ring May 31
, 201
2





2


PRESENT


EDUARDO OCHOA, Assistant Secretary for


Postsecondary Educa
tion

LYNN MAHAFFIE, Senior Director for Policy


Coordination, Development and


Accreditation Services

DAVID BERGERON, Deputy Assistant Secretary


for Policy, Planning and Innovation

RON SANN, Office of General Counsel

AJITA TALWALKER, Office of the Unde
r


Secretary





Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
Programs



Public Hea
ring May 31
, 201
2





3

ALSO PRESENT


CYNTHIA LITTLEFIELD, Association of Jesuit


Colleges and Universities

ANGELIA MILLENDER, Broward College

MARK SARVER, eduKan

MEGAN MCCLEAN, National Association of


Student Financial Aid Administrators

VICKIE SCHRAY, Bridgep
oint Education

JOAN ZANDERS, Northern Virginia Community


College

RICH WILLIAMS, United States Public Interest


Research Group

LAUREN SAUNDERS, National Consumer Law


Center

WES HUFFMAN, Coalition of Higher Education


Assistance Organizations

DANIEL TO
UGHEY, TouchNet Information System

ERIC RODRIGUEZ, Nelnet Business Solutions

ARNIE MILES, Georgetown University

JOHN SUESS, University of Maryland
-
Baltimore


County

ROBERT BARBIERI, Higher One

CHRISTINE MULLINS, Instructional Technology


Council

CHRISTOP
HER MULLIN, American Association of


Community Colleges

MAUREEN BUDETTI, National Association of


Independent Colleges and Universities














Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
Programs



Public Hea
ring May 31
, 201
2





4


CONTENTS


Asst. Secretary Ochoa


Welcome and Introduction

.............

4


Cyndy Littlefield, Association of Jesuit


Col
leges and Universities

............

9


Angelia Millender, Broward College

........

21


Mark Sarver,
EduKan

.......................

29




Megan McClean, National Association of


Student Financial Aid Administrators

35


Vickie Schray, Bridgepoint Education

......

42


Joan Zanders, Northern Virginia Community


College

.............................

51


Rich Williams, United States Public Interest


Research Group

......................

72


Lauren Saunders, National Consumer Law


Center

..............................

84


Wes Huffman, Coalition of Higher Education


Assistance Organizations

............

91


Daniel Toughey, TouchNet Information


System

..............................

96


Er
ic Rodriguez, Nelnet Business


Solutions

..........................

108


Arnie Miles, Georgetown University

.......

125



John Suess, University of Maryland
-
Baltimore


County

.............................

131


Robert Barbieri, Higher One

..............

140


Christine Mullins, Instructional Technology


Council

............................

148


CONTENTS(Cont'd)




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
Programs



Public Hea
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, 201
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5


Christopher Mullin, American Association of


Community Colleges

.................

155


Maureen Budetti, National Association of

Independent Colleges and Universities

...

160


Daniel Toughey, TouchNet

Information System

......................

165




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
Programs



Public Hea
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, 201
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6

P
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1

9:06 a.m.

2



ASST. SEC. OCHOA:

Good morning
3

of behalf of the U.S. Department of
4

Education, I welcome you to this public
5

hearing. We appreciate your interest and
6

the time that you're taking to share your
7

thoughts and recommendations with us.

8



Let me take a moment to introduce
9

my colle
agues here with me.

10



David Bergeron, Deputy Assistant
11

Secretary for Policy Planning and
12

innovation, and Ron Sann, an attorney from
13

our Office of General Counsel.

14



As you know, we published a
15

notice in the Federal Register expressing
16

our intent to convene

a committee to develop
17

regulations designed to prevent fraud in the
18

Title IV programs, especially in light of
19

the ever
-
changing and advancing technology.

20



Our intent is to ensure that
21

Title IV funds are used properly and are, in
22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
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Public Hea
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7

fact, provided to eligibl
e individuals for
1

their legitimate
postsecondary

pursuits.
2

This hearing is the first step in that
3

process.

4



The Department held a similar
5

hearing last week on May 23rd in Arizona.
6

We're also accepting written comments
7

through our electronic system, and
if you
8

have actually hard copies of those comments
9

and you wish to leave them with our staff
10

outside the room, you're welcome to do so as
11

well.

12



In September of 2011, the Office
13

of Inspector General issued the Department
14

an investigative program advisory
report
15

outlining concerns about fraud in distance
16

education programs.

17



As a result, the Department
18

issued a Dear Colleague letter, GEN
-
11
-
17,
19

alerting institutions to the issue and
20

providing guidance to assist in addressing
21

it.

22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
Programs



Public Hea
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, 201
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8



Since the OIG's report
was
1

released, we have established an internal
2

task force to take a closer look at the
3

issue, presented the topic at several
4

conferences, including the most recent
5

federal student aid conference, and now are
6

taking steps to look at longer
-
term
7

solutions.

8



In that context, regulatory
9

changes may be appropriate. Along with the
10

issue of fraud in the Title IV programs, we
11

are interested in looking at potential
12

issues around the use of debit cards and
13

other mechanisms for disbursing federal
14

student aid funds an
d improving and
15

streamlining the campus
-
based programs.

16



It's important to remember that
17

these regulations are being developed in the
18

context of current law. We can't change the
19

Higher Education Act through our
20

regulations, so some issues, such as the
21

al
location formula for the campus
-
based
22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
Programs



Public Hea
ring May 31
, 201
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9

programs, are not on the table.

1



That should not constrain
2

anyone's comments, but please recognize this
3

important limitation on our actions. The
4

purpose of this hearing is for us to hear
5

from you. We will not engage

in a lot of
6

dialogue or address questions about what
7

issues may or may not be part of an eventual
8

negotiating session.

9



We will use the information
10

provided to us at these hearings, as well as
11

any written comments we receive, to inform
12

our next negotiate
d rulemaking process.

13



We expect to announce the next
14

round of negotiated rulemaking during the
15

summer through a notice in the
Federal
16

Register

that will specify the subject
17

matter for negotiations and will request
18

nominations for negotiators.

19



Thank y
ou again for being here.
20

And we will begin with our first presenter,
21

who is Cyndy Littlefield from the
22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
Programs



Public Hea
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, 201
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10

Association of Jesuit Colleges and
1

Universities.

2



MS. LITTLEFIELD: Good morning,
3

everyone. It's always such an honor to kick
4

off these sessions.

5



Fi
rst of all, I want to say to
6

Dr. Ochoa, thank you for your years of
7

service. We understand you will be leaving
8

us soon, so on behalf of the Higher Ed
9

community, I want to thank you for all of
10

your assistance and availability that you
11

have made to all of u
s in higher education.
12

So we wish you well, going back to
13

California, I understand.

14



Good morning, everyone. I am
15

Cynthia Littlefield, Director of Federal
16

Relations
of the Association of Jesuit
17

Colleges and Universities. In this
18

capacity, I have the ho
nor of representing
19

all of the 28 Jesuit campuses in the United
20

States.

21



AJCU is also affiliated with 100
22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
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, 201
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11

international Jesuit institutions, some of
1

which were founded in the 1500s, I might
2

add.

3



I speak today in response to the
4

inquiry by the Departme
nt of Education on
5

three areas: distance education and
6

potential fraud and abuse; the use of
7

electronic fund transfers; and the potential
8

of negotiating on
-
campus
-
based aid programs
9

for purposes of meeting the President's
10

executive order, 13563, improving
regulation
11

and regulatory review.

12



We appreciate the opportunity to
13

have this dialogue today.

14



In the area of distance
15

education, AJCU founded Jesuit Net, our
16

distance education consortium, over 12 years
17

ago, amongst our Jesuit institutions, and we
18

deve
loped our own competency
-
based distance
19

education component for all of our distance
20

education courses.

21



To date, there are approximately
22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
Programs



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, 201
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12

400 programs online, with many of our Jesuit
1

institutions also developing their own
2

distance education programs while
utilizing
3

our competency
-
based distance education
4

program, which has been acknowledged by the
5

Department of Education.

6



Since the Jesuit institutions are
7

heavily engaged in distance education, any
8

discussion on future regulatory action
9

regarding distance
education is of concern.
10

Also, it is exacerbated because of the soon
-
11

to
-
be requirement of state authorization on
12

distance education.

13



There is a cause and effect on
14

the cost of that regulation alone, which
15

according to Regis University, is costing
16

anywhe
re between $125,000 to $150,000 to be
17

distance education authorized in all states
18

in the Union.

19



In consultation with our Jesuit
20

institutions, we asked if they were aware of
21

any potential fraud or abuse that could have
22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
Programs



Public Hea
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, 201
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13

occurred in this area of distance ed
ucation.
1

None of our institutions offered that there
2

were any concerns over fraud and abuse.

3



Two of our institutions expressed
4

a new trend of graduate students taking out
5

a heavy amount of loan volume. One
6

institution noted that 15 students dropped
7

out

of school soon after they registered.

8



To rectify that problem, that
9

institution is now delaying disbursements
10

about two weeks, so the student can solidify
11

the beginning of their online work. In this
12

way, the serious students will be staying,
13

and that
is one way to augment this
14

potential concern in prevention
of

fraud.

15



Another one of our institutions
16

proffered the following, that federal
17

student loans, between the Stafford and Grad
18

PLUS loans for grad students, can cover
19

assumed tuition and fees plus
a reasonable
20

allowance for room, board, books,
21

transportation, and miscellaneous personal
22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
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expenses.

1



It is left to the school's
2

discretion to define what is reasonable.
3

Many people are troubled if they see working
4

adults, many with potential good salarie
s,
5

borrowing to the cost of attendance figure
6

for distance ed online programs.

7



And so that is a developing trend
8

amongst two of our institutions, but
9

certainly not amongst the others.

10



From time to time, there's been
11

national articles that indicate pote
ntial
12

quality issues with some distance education
13

courses. At our Jesuit institutions,
14

quality is certainly equitable with the
15

delivery of our traditional
-
based education
16

courses in person on our campuses. And any
17

new regulations to weed out faulty abuse

by
18

other higher education entities will also
19

impact those institutions who deliver
20

quality distance education, much like the
21

gainful employment regulations.

22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
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15



If there is a negotiated
1

rulemaking session on this subject, then the
2

hope would be that all ins
titutions are
3

equitably representative, including
4

traditional
-
based institutions.

5



Now in the area of using
6

electronic fund transfers, AJCU appreciates
7

the study that was released yesterday by the
8

United States student PIRG organization
9

citing potential c
omplication with excessive
10

fees charged by banks to students.

11



The last thing any of us want in
12

higher education are more fees and higher
13

interest rates. Because of that, we
14

understand that there may be a need to delve
15

deeper into these complications.

16



Some of our Jesuit institutions
17

do not use credit cards, and still prefer
18

using checks for payments, while
19

acknowledging that it would be easier to
20

track payments with debit cards, etcetera,
21

should there be a problem.

22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
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16



There are also now in place
1

third
-
party payment plans, of which everyone
2

is familiar with, such as the 10
-
month
3

paying plan, that a few of our institutions
4

have in place.

5



On one hand, you don't want to
6

interfere with an opportunity to provide
7

payment options for students and parents.
8

On

another hand, you want to protect
9

students from excessive banking fees.

10



If this is the intended focus in
11

a potential negotiating rulemaking session,
12

then the only question AJCU would ask, and
13

truly, we're torn about this issue, if this
14

is really a regul
atory or a legislative
15

issue. Perhaps it's a combination of both.

16



And the final area to address,
17

and the one of more
--

most concern to AJCU,
18

is the campus
-
based aid programs, and this
19

is our main purpose for asking to speak
20

today.

21



The campus
-
based ai
d programs at
22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
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, 201
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17

our Jesuit campuses remain a very high
1

priority, second only to the
Pell Grant

2

program. Each of these three campus
-
based
3

aid programs, the
S
upplemental
E
ducational
4

O
pportunity
G
rant, or SEOG,
F
ederal
W
ork
-
5

S
tudy
P
rogram, and the Perkins
L
oan
P
rogram,
6

all perform important niches in the delivery
7

of federal student aid to needy students.

8



The programs have worked well for
9

decades, the only problem being that there
10

has been insufficient funding to meet the
11

heavy demands by emergent student
12

pop
ulations.

13



Ten years ago, to give an
14

example, our Jesuit institution had a 10
15

percent average of
Pell Grant

student
16

population. Now, we have increased that
17

population to 22 to 23 percent. It has been
18

a goal of our institutions to do so.

19



The SEOG
Progr
am

described lately
20

as duplicative of
Pell Grant
s is hardly the
21

case. SEOG is a campus
-
based aid program
22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
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18

with delivery of funds to the institution's
1

financial aid officer for distribution to
2

the neediest of students. Federal
Work
3

Study

assists students t
o pay their expenses
4

while working in school. And the Perkins
5

Loan

Program
, although not funded since
6

2004, remains an excellent program for
7

students to avoid private loans at higher
8

rates, and provide opportunities for
9

attending college.

10



So in an effor
t to be helpful
11

today, I p
o
lled our AJCU financial aid folks
12

to see if there were any regulatory issues
13

on campus
-
based aid that had to be addressed
14

now through the negotiated rulemaking
15

process. And all unanimously said no.

16



One institution wrote, "Any
17

changes to the campus
-
based aid program
18

should be done during the
reauthorization

19

process, where program policy is foremost,
20

rather than budgetary issues, and where
21

public comment is more easily and readily
22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
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19

attained from a wide population."

1



Other institu
tions had similar
2

comments.

3



So the real question is, is there
4

a compelling reason to have a negotiated
5

rulemaking session on campus
-
based aid at
6

this time? We would answer, no, there is
7

not.

8



In looking at the Department of
9

Education's plan for retrosp
ective analysis
10

of existing regulations dated August 22,
11

2011, on page 17, multiple questions are
12

posed that the Department will focus on.

13



One was, has Congress amended the
14

authorizing statute such that prompt review
15

of regulations is necessary? That an
swer is
16

no.

17



Does the Department of Ed
18

anticipate
reauthorization

of the
19

authorizing statute in the near term, such
20

that prompt review of existing regulations
21

would likely be disrupted or not lead to
22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
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20

regulatory revisions that could be
1

implemented before
r
eauthorization
? And we
2

would say the answer is yes to that.

3



All of our Jesuit institutions
4

are concerned about the closeness of time to
5

reauthorization

of the Higher Education Act.
6

Next year, hearings will begin, and the
7

process of
reauthorization

will

start. Why
8

waste the time and effort of regulatory
9

rulemaking when Congress is beginning the
10

reauthorization

phase? It simply makes no
11

sense.

12



And on one particular program,
13

the Perkins
Loan

Program
, of which AJCU is
14

extremely involved with, we are wor
king with
15

the administration on the redesign of that
16

program, which was articulated in the
17

beginning on the FY `10 budget. As we go
18

through this process, we ask if it would be
19

helpful to spend time on regulatory
20

rulemaking when this effort is underway.
21

Cl
early, Congress has to decide many of
22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
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21

those issues.

1



And finally, there was serious
2

concern when the Department issued this
3

rulemaking notice that included campus
-
based
4

aid as a potential rulemaking opportunity
5

that it possibly meant that the Department
6

w
as trying to implement the administration's
7

FY `13 budget priorities for attaching net
8

tuition pricing, needy student issues, and
9

graduation rates to campus
-
based aid
10

programs.

11



Clearly, that has been
12

articulated by the White House and officials
13

at the De
partment of Education that that is
14

not the case. And we appreciate that.

15



So AJCU strongly encourages the
16

Department of Education to not include
17

campus
-
based aid programs in the upcoming
18

negotiated rulemaking session, because
19

reauthorization

is months aw
ay, and there is
20

no overriding concern that regulatory relief
21

is needed because the programs function
22




Proposed Regulations Designed to Prevent Fraud and Abuse in the Title IV
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22

well.

1



It will be in the
reauthorization

2

process where a healthy national debate will
3

occur on the viability of these campus
-
based
4

aid programs.

5



And fi
nally, for the record, AJCU
6

supports the Department trying to minimize
7

regulatory burden for our colleges and
8

universities. It is just in the instance of
9

campus
-
based aid that the timing, we
10

believe, is not appropriate.

11



I want to thank you for this
12

oppo
rtunity.

13



ASST. SEC. OCHOA: Our next
14

speaker is Angelia Millender from Broward
15

College.

16



MS. MILLENDER: Good morning, and
17

thank you. My name is Angelia Millender,
18

and I'm the Vice President for Student
19

Affairs and Enrollment Management at Broward
20

Co
llege.

21



I don't stand here today speaking
22




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23

for all community colleges in the United
1

States of America, nor do I stand here
2

speaking on behalf of just Broward College.
3

I stand here as a 30
-
year administrator and
4

faculty and teacher in the K through 12
5

sy
stem that
has a
n

interest in this issue
6

since we disperse aid to 30,000 in an open
7

access institution.

8



I agree with the dialogue and
9

will support any action to curtail the fraud
10

associated with federal student aid funds.
11

I further support the recommenda
tions made
12

to eliminate checks and use electronic funds
13

disbursements and making adjustments to the
14

cost of attendance for distance learning
15

students.

16



However, these two elements will
17

not fully resolve the issue, because
18

students who don't have bank acco
unts will
19

get their funds on pre
-
paid debit cards,
20

which could be no different from the recent
21

fraud rings around the federal tax returns.

22




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24



As such, I would also include
1

additional components for a more
2

comprehensive approach to this issue.
3

People who te
nd to commit fraud and other
4

crimes usually know, the longer they stay
5

around, the chance is, they might get
6

caught.

7



Certainly, the payoff comes too
8

soon in the semester, and this process alone
9

breeds Pell runners, which also lowers the
10

institution's s
tudent success rate.

11



If the
ED
does not change the
12

disbursement timing for online with these
13

other strategies, then the problem may
14

continue. As such, regulations that modify
15

these processes to include unequal
16

disbursements should allow direct cost,
17

tui
tion, books, and fees to disburse first,
18

and no balance funds immediately.

19



The balance could be disbursed
20

later in the term, which is similar to
21

incremental budgeting model by the grant
22




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25

funders in California. Also, mandates on
1

institutions to include
in their policies
2

that more than physical presence, as is
3

required in face
-
to
-
face instruction, be the
4

same as required in online instructional
5

modalities.

6



Institutional officers also want
7

and need more flexibility and the discretion
8

to limit sub and uns
ubsidized loans for
9

certain groups of students, and require
10

these students, at minimum, to achieve a
11

certain level of academic success before
12

loan debt is incurred.

13



Not limiting loans for students
14

who enter institutions like ours many times
15

under
-
prepare
d creates defaulters. The
16

amounts of money students can get prior to
17

showing signs of successful completion
18

invites fraud, whether online or in person.

19



Additionally, I would like to
20

bring focus to what I believe will be an
21

unintended consequence of the
elimination of
22




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26

ATB. I know that that is not the focus of
1

the discussion today, but I do recall that
2

you indicated we could make comments.

3



Students who earn high school
4

credentials not defined in the current

ED
5

definition of high school diploma or its
6

eq
uivalency are still allowed admissions to
7

open access institutions, such as community
8

colleges, but not
--

will be allowed to get
9

federal student aid when the ATB provision
10

is eliminated.

11



Currently, prior to this
12

regulation being effective July 1st, thes
e
13

students could take and pass an improved ATB
14

test and qualify for federal student aid.
15

For example, students who hold certificates
16

of completion, in most cases, have completed
17

all credits and compulsory attendance, but
18

after July 1st, 2012, will not qua
lify for
19

federal student aid.

20



This specific language eliminates
21

students who cannot pass high
-
stakes exit
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exams and earn a credential with the word
1

diploma in its title.

2



This issue is deeper than the
3

name. Yet those who complete their GED at a
4

minimum

cut score quality. The federal
5

definition allows homeschooled students who
6

are not required to pass high
-
stakes testing
7

but only require parental certification of
8

high school completion eligible for aid.

9



Further, a foreign diploma is
10

eligible for aid,
as well as these others,
11

based on an equivalency determination that
12

is not always uniform.

13



And when you add diploma mills to
14

the picture, and those who get through our
15

system because even with our best efforts to
16

try to catch them, some will get aid.

17



In my opinion, states should
18

regulate those diploma mills as businesses,
19

in the business of education, rather than
20

institutions validating the paper they sell.

21



Make no mistakes, high school
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graduates are no better prepared for college
1

as a result of the

numerous high school
2

completion types than they were before we
3

had them.

4



Many children are still being
5

left behind, and more will be left behind if
6

the E
D

allows the different definition of
7

high school completion to include the word
8

diploma.

9



I could

be
--

it could simply be
10

stated that high school completion or its
11

equivalent in the language provided. These
12

credentials, regardless of what they are
13

called, will define these young adults for a
14

lifetime, add to their struggles to get a
15

job, and may cau
se them to eventually give
16

up.

17



I stand here as an advocate
18

making a case for an opportunity for many.
19

I respectfully ask the E
D

to modify this
20

language in the federal student aid is under
21

your purview. I don't know what that takes.

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These states' def
inition of high
1

school completion is too disparate for any
2

uniformity to make any sense. And back
-
and
-
3

forth politics between the states'
4

Department of Ed and the US Department of Ed
5

must end on this issue.

6



I strongly believe that if
7

measures are impleme
nted to curtail the
8

fraud and require students to show progress
9

before mounds of money are thrown at them,
10

then we should have no worries about these
11

students who need opportunity.

12



When a completion credential is
13

named something that does not qualify, we

14

further contribute to the victimization of
15

No Child Left Behind, literally.

16



Any educator should know that
17

high
-
stakes testing has made no difference
18

but made the testing companies quite
19

profitable, but it has not made any
20

difference in the overall succe
ss rates of
21

students across this nation.

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I am appreciative of this
1

opportunity, and I certainly thank you for
2

your time.

3



ASST. SEC. OCHOA: Thank you.
4

Our next speaker is Dr. Mark Sarver.

5



DR. SARVER: Good morning. Thank
6

you for the opportunity to
address this
7

group and present suggestions for regulatory
8

changes to further help institutions combat
9

fraud and protect students and taxpayers
10

from fraudulent activity.

11



As noted by the Inspector
12

General, fraud rings have taken advantage of
13

the expansion
of distance education to
14

commit significant fraud against Title IV
15

programs and the higher education community.
16

I am here to represent that community.

17



My name is Dr. Mark Sarver, and I
18

am the Chief Executive Officer of
Edu
Kan, a
19

consortium of community
colleges in Kansas.
20

And we have been delivering online education
21

since 1999.

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The federal Pell
Program

is an
1

integral part of
E
duKan's mission to be
2

convenient, accessible, and affordable for
3

our students, many of whom are first
-
4

generation, non
-
traditi
onal learners who
5

simply cannot afford to enroll in
6

postsecondary

programs without the
7

assistance Pell provides.

8



It is my hope that my testimony
9

today will facilitate continued discussion
10

on the development of regulations designed
11

to prevent fraud and ot
herwise ensure the
12

proper use of Title IV
,

HEA program funds
13

within the context of current technologies.

14



I intend to illustrate the ways
15

in which a practical application of an
16

existing technology has the potential to
17

deliver direct benefits to
postsecond
ary

18

institutions, the federal government, and
19

taxpayers, by detecting and preventing
20

fraud, while also indirectly benefitting the
21

administration and efficiency of financial
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aid programs by reducing the burden on
1

regulated parties as mandated by
E
xecutive
2

O
rder 22866.

3



Recognized in the distance
4

education arena for its innovation,
E
duKan
5

has pioneered many industry firsts,
6

including the use of gesture
-
based
7

biometrics for student authentication.

8



Although we were initially driven
9

by our commitment to redu
ce the cost and
10

burden of physical proctoring of tests, once
11

launched, we quickly realized the potential
12

value of biometrics to address the issues of
13

academic integrity, particularly financial
14

fraud.

15



EduKan is the first institution
16

in the country to full
y implement this
17

technology into our learning management
18

system as a way to not only corroborate
19

identity, but to also systematically and
20

proactively analyze available data to detect
21

and deter possible fraud.

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When a student enrolls in an
1

E
duKan class, he

or she is required to
2

establish a biometric profile using an input
3

method they already have on their computer,
4

such as a mouse, touch pad, keypad or
5

stylus.

6



Because each student's gestures
7

are as unique as a fingerprint, each time a
8

student authentica
tes his or her identity,
9

the system captures those unique gestures.

10



For example, I created a
11

biometric profile using my finger and my
12

touch pad. My unique identifier or password
13

is 224. Even if you watch me create the
14

profile, you would not be able to
15

authenticate the identity successfully
16

because you cannot replicate my gestures.
17

My speed, height, angle and approach is
18

unique as my fingerprint.

19



In addition to recording the
20

original gesture and comparing it to data
21

points from previous authentication
s to
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ensure accuracy, the program also captures
1

the IP address of the person's computer,
2

which allows us to identify those students
3

who are working together or in the same
4

location at the same time or submitting the
5

same answers.

6



Dynamic gesture
-
based bi
ometrics
7

like the system
used at E
duKan can be used
8

to identify Pell runners and straw students
9

participating in a fraud ring.

10



Although many schools are front
-
11

loading courses with mandatory faculty
-
12

student engagement activities, Pell runners
13

have learn
ed how to circumvent these
14

preventative measures.

15



Even if a ringleader enrolls a
16

large number of straw students, a biometric
17

authentication program will prevent
18

successful authentications, while a close
19

examination of IP addresses will reveal the
20

ident
ity and location of the fraudulent
21

activities.

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Furthermore, the random
-
generated
1

requests for authentication will expose
2

individuals attempting to complete and
3

submit fraudulent academic work. Logging
4

off before an authentication is an indicator
5

of pote
ntial fraud.

6



A biometric
program like the one
7

we use at E
duKan will provide data to
8

support further investigation into the
9

students' activities and resulting
10

disciplinary action.

11



It was our intent to have a
12

program in which the average, honest student
13

can easily enroll and successfully complete
14

their coursework. However, I firmly believe
15

that institutions must expand, that the
16

practical application of biometrics to
17

confirm student identity across multiple
18

events as part of the application,
19

enrollment,
and attendance process, in
20

combination with retaining IP information in
21

the student data system, will set the
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standard for fraud detection and prevention
1

in higher education.

2



I would ask the members of this
3

committee to consider how the use of dynamic
4

ge
sture
-
based biometrics can be deployed at
5

college campuses, particularly those that
6

are primary targets of Pell runners.

7



And I thank you for the
8

opportunity to address this committee. I
9

would entertain any questions, if you have
10

any.

11



ASST. SEC. OCHOA
: Any questions?

12



DEP. ASST. SEC. BERGERON: No
13

questions.

14



ASST. SEC. OCHOA: Our next
15

speaker is Megan McClean.

16



MS. McCLEAN: Good morning,
17

everyone. On behalf of the National
18

Association of Student Financial Aid
19

Administrators, I thank you very mu
ch for
20

the opportunity to comment on proposed
21

negotiated rulemaking issues this morning.

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NASFAA has always believed that
1

negotiated rulemaking remains the best
2

process for promulgating regulations, and
3

appreciates the history of collegiality that
4

ED has
developed in its approach to this
5

statutory requirement.

6



We'd like to begin with just a
7

general observation, that the biggest
8

problem we've seen with the negotiated
9

rulemaking is the tendency to overload a
10

single team with more issues than it can
11

reasona
bly and effectively cover.

12



Therefore, we urge ED to invest
13

sufficient resources in this endeavor to
14

maximize its effectiveness.

15



On today's topics, we offer the
16

following comments. Related to the campus
-
17

based programs, we appreciate ED's ongoing
18

effort
s to meet the President's directive to
19

conduct a retrospective analysis of
20

regulations. The campus
-
based program
21

regulations are generally well
-
constructed,
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but have not been given a comprehensive
1

review for some time.

2



Given how close we are to
3

reauthor
ization
, this may not be the most
4

optimal time, but should it occur, we do
5

have a few suggestions.

6



In the federal
W
ork
-
S
tudy
7

Program
, we suggest a review of time sheet
8

and record
-
keeping rules and disbursement
9

options to determine whether changes are
10

n
eeded to allow or maximize the use of
11

current technologies.

12



We also suggest reviewing the
13

program's specific disbursement rules to
14

determine whether they can more efficiently
15

be incorporated into the general provision
16

cash management rules.

17



In the FSEO
G
Program
, one of the
18

persistent issues that institutions find
19

difficult is the order of awarding. The law
20

requires priority for Pell Grant recipients,
21

and that within that priority, awards must
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be made to students with the lowest EFCs.
1

However, the requi
rement to award strictly
2

in lowest EFC order is an interpretation of
3

the law.

4



We would like to see more
5

flexibility in how the institution could
6

identify the lowest EFCs, including a
7

reasonable cutoff that the school can set,
8

based on its experience in

packaging its
9

student population.

10



On another topic, two issues
11

related to the return of Title IV funds got
12

short shrift due to lack of timing during
13

the program integrity negotiations. Our
14

members continue to express confusion over
15

the treatment of mod
ules and the definition
16

of withdrawn.

17



We believe those issues should be
18

revisited, and given the opportunity for a
19

fuller discussion than occurred at the
20

previous negotiation.

21



With regard to fraud, we believe
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that due diligence is more common than
1

ind
ifference on the part of schools. It's
2

important to bear in mind that fraud does
3

not look the same everywhere, and that one
4

school's indicator of fraud may be another
5

school's normal student characteristic.

6



We urge ED to recognize that
7

schools know thei
r populations best.

8



At the same time, we believe ED
9

can help support and expand institutional
10

efforts in a number of ways: providing
11

training in recognized fraud and
12

facilitating best practices on institutions
13

of similar types would be very useful.

14



In
addition, many schools are
15

fearful of invoking professional
judgment
,
16

and therefore, ED could more strongly
17

support school use of this provision.

18



A report on fraud in distance
19

education by the OIG released last September
20

pointed out other actions that ED

could take
21

to assist schools in identifying potential
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fraud.

1



OIG suggested that ED establish
2

computer
-
matching agreements with prison
3

systems to help identify applicants that are
4

incarcerated and therefore ineligible for
5

most forms of federal student
aid, as we've
6

seen that inmates are apparently a target of
7

some fraud rings.

8



The OIG report also observed that
9

ED has the ability to collect and analyze
10

web server logs for IP information in its
11

own systems, as well as examine and correct
12

vulnerabilities

in its systems that create
13

opportunities for the fraud rings to
14

operate.

15



Centralizing the effort to
16

identify potential fraud as much as possible
17

would greatly improve the efficiency of
18

those efforts.

19



We also believe that ED needs to
20

improve its own re
sponse to reported fraud
21

from schools. One of the biggest
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frustrations that we have heard from schools
1

is that when they report suspected fraud,
2

nothing happens.

3



Schools should not be expected to
4

act as enforcement agencies, but should be
5

able to rely o
n government agencies that are
6

responsible for investigation and
7

enforcement.

8



And finally, this morning, we
9

just want to wrap up by saying that we think
10

it's important as a community to recognize
11

that despite its challenges, distance
12

education is here to

stay, and is a fixture
13

of our modern world. It will get more
14

sophisticated, and we don't want to inhibit
15

innovation or the ability to react to new
16

threats.

17



Thank you very much for your
18

time.

19



ASST. SEC. OCHOA: Next speaker
20

is Vickie S
c
hray.

21



MS. SCH
RAY: Good morning. My
22




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name is Vickie S
c
hray, Vice President of
1

regulatory affairs for Bridgepoint
2

Education.

3



The mission of Bridgepoint
4

Education is to provide high
-
quality
5

innovative education services to enrich the
6

lives and communities the company s
erves.

7



Bridgepoint owns and operates two
8

regionally
-
accredited universities, Ashford
9

University and University of the Rockies.

10



Bridgepoint Education's
11

institutions offered over 1,400 courses, 85
12

degree programs with 140 specializations.
13

Our total enr
ollment, as of March 31st,
14

2012, was 94,863 students, of which 99
15

percent were exclusively attending classes
16

online.

17



Before I offer my
18

recommendations, I would like to commend the
19

US Department of Education for their
20

approach in responding to the Inspect
or
21

General's investigative program advisory
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report.

1



Rather than immediately launching
2

into rulemaking, the Department sought to
3

better understand the issue by meeting with
4

institutions and creating an internal task
5

force to better explore the issue.

6



I encourage the Department to
7

continue this collaborative approach to
8

addressing important issues that affect
9

taxpayer investment in higher education and
10

our nation's students.

11



While the proliferation of
12

distance education has been a major driver
13

in help
ing to provide greater access to
14

students who did not previously have access
15

to higher education, it has also created new
16

vulnerabilities in the administration of
17

Title IV.

18



The growth of online education
19

has been viewed by some as contributing to
20

the tra
nsformation of higher education and
21

playing an instrumental role in helping to
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meet the President's completion agenda.

1



Development of burdensome
2

regulations that lag best practice would be
3

detrimental to the promise of increased
4

access and choice to our
nation's students,
5

especially those that have been
6

traditionally under
-
served.

7



No fraud or abuse of the Title IV
8

funds can be tolerated. The issue of
9

preventing fraud in higher education is far
10

too important to wait for the promulgation
11

of final regulat
ions.

12



Instead, we encourage the
13

Department to work collaboratively with
14

institutions to identify those issues that
15

can be addressed immediately under current
16

authority, and second, those issues that may
17

require regulatory or statutory changes.

18



First, i
ssues that should be
19

addressed under current authority. As the
20

OIG reported, the scope of this problem is
21

too large for the OIG to investigate on its
22




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own.

1



Conversely, given the complexity
2

and national scope of the issue,
3

institutions need assistance f
rom the
4

Department to effectively thwart the efforts
5

of the fraud rings.

6



As my colleague from Ashford
7

University testified at the Phoenix hearing,
8

our institution has invested in technology,
9

policies, procedures, training, and staff to
10

detect and prevent

fraud in our distance
11

education programs.

12



Institutions are clearly the
13

first line of defense, but greater
14

communication and sharing of pertinent
15

information related to potentially
16

fraudulent activity by individuals is
17

needed.

18



An important role for the

19

Department of Education is to collect
20

information that would be used to alert and
21

assist institutions in their detection and
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prevention of fraud. For example, the
1

Department could create a centralized
2

database or watch list of students that have
3

been ide
ntified as potentially engaging in
4

student identify fraud and suggest
5

particular safeguards or actions by the
6

institutions prior to certifying or
7

releasing loan funds.

8



We also support the OIG's
9

recommendation that the Department should
10

immediately deploy

the
N
ational
S
tudent
L
oan
11

D
ata
S
ystem to provide institutions with
12

real
-
time data through flags regarding data
13

elements such as common student addresses,
14

student attendance patterns, and loan
15

activity on the institutional student
16

information record data t
o assist
17

institutions in the detection and prevention
18

of fraud.

19



The Department in the October 20,
20

2011 Dear Colleague letter stated that
21

institutions have the authority to make more
22




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frequent disbursements of Title IV funds so
1

that not all the payment per
iod's award is
2

disbursed at the beginning of the period.

3



We agree that spreading the
4

disbursements would delay the creating and
5

release of a credit balance, and discourage
6

fraud ring participants.

7



We urge the Department to provide
8

additional guidance t
o assist institutions
9

in developing new policies for distance
10

education students, and would welcome the
11

opportunity to work collaboratively with you
12

on this important issue.

13



The second set of recommendations
14

focus on those issues that may require
15

statuto
ry or regulatory change. We
16

encourage the Department to work with
17

Congress to amend the Higher Education Act
18

to exclude room and board from the cost of
19

attendance calculation and limit student
20

borrowing to direct educational cost for
21

online students.

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As

our institution provides one
1

of the lowest
-
cost options for earning an
2

online degree resulting in credit balance,
3

we are also attractive to those who are
4

intent on fraudulently accessing financial
5

aid funds.

6



Our online student population is
7

predominantl
y independent adults working
8

full time, and allowing them to borrow for
9

room and board may not be in their best
10

interest.

11



We believe limiting the cost of
12

attendance is a commonsense approach to
13

addressing this issue, and will likely
14

decrease the amount

of debt incurred by
15

online students and reduce funds available
16

as a credit balance or refund to those
17

individuals who want to defraud the
18

government.

19



While the OIG recommends that
20

institutions serve as the entity collecting
21

and retaining the IP addresse
s, we
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understand that institutions would carry out
1

those duties at the direction of the
2

D
epartment as manager of the federal
D
irect
3

L
oan
Program
.

4



In other words, the institution
5

would simply carry out an administrative
6

task for the
D
epartment. We urge t
he
7

Department to ensure that any new
8

regulations protect the institution from
9

liability for carrying out these IP data
10

collection tasks.

11



We encourage the Department to
12

develop through negotiated rulemaking
13

regulations that provide explicit guidance
14

and f
lexibility to institutions to take
15

necessary steps if they suspect a student is
16

engaging in student identity fraud.

17



These steps may include delaying
18

release of stipend funds and/or credit
19

balances beyond 14 days while investigating
20

suspicious situations,

and/or while
21

requiring and weighting documentation
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providing the student's identity as deemed
1

appropriate by the institution.

2



Holding institutions responsible
3

only for taking action on what they know and
4

when they know it, providing assurance that
5

insti
tutions acting in good faith or having
6

certain safeguards in place will not be
7

blamed for fraudulent or criminal behavior
8

of students, providing that institutions who
9

have taken the appropriate steps to prevent
10

fraud are not penalized by those fraudulent
11

s
tudents who do succeed in enrolling and who
12

ultimately drop out by excluding these
13

students from the institution's cohort
14

default rate and gainful employment measures
15

such as repayment rate and debt
-
to
-
income
16

ratios, establish clear guidelines for what
17

an
institution should do in cases whereby
18

fraud cannot be proven by the institution,
19

but behaviors indicate that it is likely,
20

for example, hold loans, return loan funds,
21

hold stipends, require notarized identity
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52

documents, and report to the OIG.

1



In closing
, we agree that
2

institutions are the first line of defense
3

in combating fraud, but believe that a
4

collective and collaborative approach with
5

the OIG, the Department, and the
6

institutions is needed to share important
7

information, identify tools, and develop

8

guidance to assist institutions in detecting
9

and preventing fraudulent activity.

10



Thank you very much for this
11

opportunity this morning.

12



ASST. SEC. OCHOA: Our next
13

speaker is Joan Zanders.

14



MS. ZANDERS: Good morning. I am
15

Joan Zanders. I'm just be
ginning my 26th
16

year as a director of financial aid, and
17

currently serve as the Director of Financial
18

Aid and Student Support Services at Northern
19

Virginia Community College.

20



We are a school of six full
21

campuses, many sites, and over 78,000
22




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53

students in N
orthern Virginia. Our students
1

come from 180 countries. We are in close
2

proximity to Washington, DC and we really
3

are a microcosm of the world.

4



About three weeks ago, I had the
5

opportunity to watch 7,700 students graduate
6

from NoVa. We are educating N
orthern
7

Virginia. Community colleges are completing
8

degrees.

9



What I see generally are the
10

problem areas, and that's what I'm here to
11

address this morning. I really needed that
12

graduation to see the other side of it.

13



I'm largely speaking from my own
14

e
xperiences this morning, not necessarily
15

for my college, but from things that I have
16

seen, especially in the last few years.

17



I am a true believer in higher
18

education as an equalizer, but I also know
19

full well that we must be good fiduciaries
20

of the pub
lic trust and tax dollars, or we
21

will likely loose public support for these
22




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54

programs and risk the futures of many of our
1

nation's children and grandchildren. I am
2

speaking for our future.

3



It has to be about access and
4

accountability. We must have both,

not just
5

for the colleges, but for the students. And
6

I think to some extent, we have gone so far
7

on the side of access that we have forgotten
8

a little bit about the accountability side.

9



Since the
Federal Register

did
10

give us the leeway to address addit
ional
11

issues, I am going to use that opportunity.
12

I will start with the fraud and abuse,
13

however. But I want to mention that fraud
14

and abuse come in many disguises. It's not
15

just all about distance education.

16



The first batch of I
SI
Rs I pulled
17

in this
year at NoVA included over 300
18

independent students with nothing but zeros
19

on the
ISIRs
. Over 100 dependent files were
20

pulled in with all zeros for both the
21

student and the parents.

22




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Of these, less than ten indicated
1

any means
-
tested benefits. I'm not s
ure how
2

one lives in Northern Virginia on nothing,
3

but, none of these were selected for
4

verification by the Department of Education.

5



Of those who were independent,
6

and these were independent for a variety of
7

reasons, we found one student who was 19
8

years

old, not married, and claiming six
9

dependents with no income. We had another
10

one who was claiming dependents
--

or many
11

who were claiming dependents other than
12

children or spouse without any income,
13

emancipated minors in states with no
14

emancipation right
s, to many, many homeless
15

students.

16



I have a colleague who said she
17

tracked homeless students for a year, and of
18

the 300 who claimed homelessness, when all
19

was said and done, five of them were
20

actually qualified to be homeless. Because
21

that question m
akes a student independent,
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it changes everything. It changes the EFC
1

completely.

2



Some of these I know are
3

mistakes, but are some attempts to defraud?
4

We don't know.

5



More and more people seem to be
6

being paid under the table, not reporting
7

taxes at

all. And since we're using current
8

year, I also wonder how many students have
9

just not filed their taxes yet, they're
10

putting in all zeroes, they're not flagged
11

for verification, and nothing ever comes of
12

a change in those figures. I don't know why
13

thes
e files are not of more concern.

14



Item number two, each year,
15

largely because of where we are in the
16

country, we receive hundreds and hundreds of
17

files where students do not meet the
18

citizenship match.

19



In most instances, these students
20

are going to th
e social security
21

administration to update their citizenship
22




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status, which I was told would happen within
1

a few days, but which seems to be taking
2

months.

3



Why cannot the Department of
4

Homeland Security share information in a
5

timely fashion with the Socia
l Security
6

Administration? We are asked as financial
7

aid directors to view citizenship documents
8

and determine aid eligibility when we know
9

that there are websites that allow creation
10

of citizenship documents.

11



How can we, as lay people,
12

possibly know th
at we have a valid document?
13

I am a huge vocal advocate for the DREAM
14

Act, so please don't take this the wrong
15

way. I truly believe in the DREAM Act.

16



But that's not optional at this
17

point, because Congress can't make a
18

decision on it. But why must f
inancial aid
19

administrators determine the validity of
20

citizenship documents when we, as a country,
21

have the means to do that if departments
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would communicate with one another in a
1

timely fashion?

2



Online classes are the likely
3

targets for scammers, since
students have
4

never had to appear on campus in many
5

instances.

6



But contrary to that premise, the
7

only fraud ring we have found thus far
8

involved on
-
campus students who were
9

otherwise dependent filing as recently
10

married with spouses who didn't make eno
ugh
11

to file taxes, thus making the student
12

independent and much more eligible for grant
13

aid.

14



None of these students were
15

selected for verification, and were found
16

due to red flags coming from communications
17

with the students.

18



I actually had to push t
he OIG to
19

investigate further because on initial view,
20

it appeared there wasn't enough money at
21

risk to continue the investigation.

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When all was said and done, two
1

colleges were involved and a ring was
2

established, but it was very, very difficult
3

to ge
t the OIG to pursue it. I'm now on a
4

first
-
name basis with the OIG.

5



The formula continues to be
6

streamlined in an attempt to simplify the
7

process for students and families. I
8

realize how very difficult it is to verify
9

the value of assets if a family ch
ooses not
10

to be forthcoming with the information.

11



For some reason, one of my staff
12

members recently had a reason to ask further
13

questions of a parent. Listed on this file
14

were $30,000 in assets. When all was said
15

and done, we found two beach houses of
over
16

$1.5 million value each.

17



At the same time, in years past,
18

because of the farm crisis, farms were
19

eliminated, family farms were eliminated as
20

an asset in the formula. Then, because
21

family farms were eliminated, family
22




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businesses were eliminated, or
small
1

businesses were eliminated.

2



I come from an area where farms
3

are selling for about $10,000 an acre or
4

more, but the formula hasn't changed. I'm
5

sorry, but these are not normally needy
6

people.

7



I've had farmers ask me what
8

their AGI could be to g
et a
Pell Grant
.
9

Though I couldn't and wouldn't provide a
10

figure due to the many variables the farmer
11

needed to know, indicating that he can make
12

his AGI say anything it needed to say to get
13

a
Pell Grant
, and all they have to do is buy
14

seed early, buy fer