Fraud in federal and state education programs may be reported by whistleblowers. Under the False Claims Act and other statutes, whistleblowers are entitled to significant financial rewards and are protected from retaliation.
The U.S. higher education system is excellent. But like many things, it requires significant financial investment. Each year, federal, state, and municipal governments invest money in higher education through financial aid, research funding, and supporting children with disabilities. Sadly, educational funding is a prime target for fraud. Through this article, I will outline common areas of education fraud.
Student Loan Fraud
The U.S. Department of Education provides over $110 billion in student loans every year. The loans include money for work-study funds, low-interest loans, and grants. These federal funds go to colleges, universities, trade schools, community colleges, or other post-secondary educational organizations. The schools may be public or private, non-profit or for-profit.
The federal Higher Education Act has specific requirements schools must meet in order to receive funds, including accreditation by an independent agency; entering into a participation agreement with the U.S. Department of Education; and continuing to meet accreditation standards.
Common student loan fraud schemes include:
- Coercive student recruitment techniques that provide incentives for recruiters
- Paying kickbacks to student recruiters
- Obtaining student loan funds for ineligible students
- Misrepresenting job placement or graduation rates
College Recruitment Fraud
One of the most common types of education fraud involves coercive incentives for university recruiters. Federal and state laws ban universities from receiving student aid when recruiters receive compensation based on their success in signing up new students.
Although not as common, the sheer amount of federal funding for university research presents an alluring avenue for fraudsters. The federal government alone awards more than $500 billion per year in grants for university research.
In our area of southwest Virginia, Virginia Tech spent $513 million on research projects in fiscal year 2014. In fact, Virginia Tech ranked number 38 in the nation for highest education research expenditures.
Carilion Clinic and the Fralin Biomedical Institute in Roanoke, Virginia receive millions of dollars in aid from federal and state agencies to conduct medical research. Most recently, the facility announced a $90 million expansion to accommodate an additional 400 researchers, students, and staff.
Grant fraud can take many forms, including:
- Lying on a grant application
- Misrepresenting grant-funded activities or research results
- Misappropriating grant funds
- Paying bribes to obtain a grant in the first instance
We know such fraud is occurring in Southwest Virginia. By way of example, in 2019, a Virginia Tech professor researching artificial sweeteners was sentenced for committing research grant fraud for making false statements and obstruction by falsifying records.
Elementary and Secondary School Fraud
While federal funding controls much of higher education, state and local governments contribute significant funds to elementary and secondary school education.
Types of elementary and secondary school fraud can include:
- Charter schools inflating attendance rates for higher reimbursements
- Admitting unqualified students into disability programs
- Overcharging for goods and services
- Paying kickbacks or embezzling public funds
If you or someone you know has information concerning education fraud, please reach out to the attorneys at Frith & Ellerman law firm.
 U.S. Dep’t of Educ. Federal Student Aid (Accessed Mar. 25, 2022). Available at https://studentaid.gov/about.
 Sargent, John. U.S. Research and Development Funding and Performance: Fact Sheet. Congressional Research Service (Oct. 4, 2021). Available at https://sgp.fas.org/crs/misc/R44307.pdf.
 Adams, Mason. After Eclipsing the $500 Million Mark in Funding, Tech Plots the Future of University Research. Virginia Tech Magazine. Vol. 37, No. 3 (2015). Available at https://www.archive.vtmag.vt.edu/spring15/virginia-tech-research-funding-grows.html.
 Yonick, Kim. Fralin Biomedical Research Institute Expanding Facility With a $90 Million Addition. WFXR Fox (Oct. 13, 2021). Available at https://www.wfxrtv.com/news/local-news/roanoke-valley-news/fralin-biomedical-research-institute-expanding-facility-with-a-90-million-addition/.
 Press Release, U.S. Dep’t of Justice, Former Virginia Tech Professor Sentenced for Grant Fraud, False Statements, Obstruction (Sept. 9, 2019). Available at https://www.justice.gov/usao-wdva/pr/former-virginia-tech-professor-sentenced-grant-fraud-false-statements-obstruction.