Federal Student Loan Fraud

Every year the Department of Education makes billions of dollars of loans available to students to help them pay for higher education at public, private non-profit, and private for-profit (also known as proprietary) schools. In order to qualify for these funds, however, both students and schools must satisfy certain eligibility requirements. Cases of student loan fraud often involve institutions of higher learning making false statements to the Department of Education in order to meet these requirements. The following are common fraudulent schemes employed by schools to enable otherwise ineligible students to qualify for federal student loans:

• Students without a high-school diploma or GED can qualify for federal loans, grants, and campus-based aid if they pass an “ability to benefit” test, which is an independently administered test of basic math and English skills. Giving out the answers to, or falsifying the result of, such tests can result in False Claims Act violations.
• Violating regulations governing the administration of ability-to-benefit tests, such as school officials administering the test instead of independent test administrators or failing to follow rules governing when students can retake the test on the same form.
• Assisting students to obtain invalid high-school diplomas from diploma mills.
• Falsifying student financial information on the Free Application for Federal Student Aid (FAFSA).

Educational institutions may also commit fraud by failing to abide by certain Department of Education regulations for which compliance is required in order to qualify and maintain eligibility for receipt of federal student loan funds. Examples of such fraud, generating potential whistleblowing cases, include:

• Compensating employees based on their success in securing student enrollments.
• False reporting regarding student loan default rates.
• False reporting of student enrollment, graduation and job placement data.

If you have information that an educational institution has committed one of these types of frauds, you may be able to blow the whistle by pursuing a qui tam lawsuit. Under the False Claims Act, a successful qui tam whistleblowers can receive an award of between 15% and 30% of the amount recovered.

Contact Our Qui Tam Attorneys

If you’re aware of fraudulent actions on the part of an educational institution, contact the whistleblower attorneys of Tycko & Zavareei LLP at 202-973-0900 to learn how we may be able to help.