NCPA - National Center for Policy Analysis

Going After Financial-

April 13, 1999

The U.S. Department of Education has yet to implement a law designed to apprehend student financial-aid applicants who file false income information. Congress authorized the department last year to compare financial aid applications with income tax returns.

"We're beginning discussions with the IRS to develop procedures for verifying income," an Education Department spokesman says, but there is no "time set" to begin the program.

  • Experts estimate that the law could prevent at least $109 million in fraud each year.
  • In a 1997 audit, the department's inspector general found "widespread inconsistencies" between incomes reported to the IRS and those listed on financial aid forms.
  • The audit found that students sometimes submit phony tax returns with their aid applications and that almost one in 25 underreported their incomes.
  • Data from the audit and the General Accounting Office also revealed that "schools were inappropriately recertified to continue participating in federal student aid programs; state-designated guarantee agencies misused federal funds in their custody; and a contractor failed to properly make, record and account for loans it consolidated on Education's behalf."

Applicants who submit false or misleading information could be fined $10,000, sent to prison, or both.

Source: Barbara J. Saffir, "Law on Financial-Aid Fraud Has Yet to Be Implemented," Washington Times, April 13, 1999.


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