Flying Under the Radar: Student Identity Fraud in Distance Education

The CEO of ProctorU offers advice on how institutions can manage the increasing threat of identity fraud in the Title IV realm.

What if you discovered that more than $187 million of federal student aid had been lost due to elaborate, well-planned identity fraud across the country?

That’s the estimated amount federal aid recipients may have illegally received from 2009 to 2012, according to a 2013 report by the U.S. Department of Education Office of Inspector General (OIG). It sounds like something that should make front-page news. However, the issue of financial aid fraud largely remains under the radar.

Inside a Fraud Ring

Financial aid fraud, sometimes referred to as Title IV fraud, is an elaborate crime. And although the fraud rings often target fully online institutions, traditional institutions offering online degree programs are more and more at risk.

A 2011 OIG report on fraud rings that target distance-education institutions found that a ringleader or associated accomplices secure identifying information from “straw students,” who voluntarily provide their personal information in exchange for some of the funds. The ringleader then applies to online programs and submits financial aid applications using the straw students’ personal information.

A fraud accomplice does the bare minimum needed to show participation in a course in order to qualify for disbursement of funds. After the institution is paid, the straw student receives the remaining balance of the federal aid, which is then split among those who participated in the fraud. The “student” then drops the course or ends up failing, due to lack of participation.

Student Identity Management

Distance education is a target because some institutions fail to confirm student identity at the time of enrollment, financial aid distribution or class attendance. The anonymity of the Internet shields the fraud rings.

In my time as president of an online university and as CEO of the web-based proctoring service ProctorU, I’ve come to understand why institutions may fear shining a spotlight on financial aid fraud and the holes in existing systems and processes. However, we need to break down the illusion of security these fraud rings operate under, ensuring that their crimes do not go unnoticed.

I encourage all institutions, especially those with growing distance and online program offerings, to be proactive in implementing student identity management practices to protect themselves and their students from online and academic fraud.

Technology As a Solution

Developing a process for securing student identity is not a challenge colleges and universities have to overcome on their own. There are a lot of innovative technologies out there that can help protect against financial aid fraud. Face recognition, fingerprint scanning and keystroke biometric technology might sound like they are straight out of a futuristic movie, but these technologies can actually be easily implemented today.

Students confirm their identity at a traditional brick-and-mortar institution by presenting a form of ID in person. Asking students to do the same in an online course by using a technology-based process is simply extending traditional practices to meet the demands of a growing online marketplace.

In establishing ProctorU’s online student authentication service, Ucard, we applied our blended approach of technology and the human element, making it possible to verify a student’s identity in a matter of minutes. Regardless of how a student’s identity is verified, there is no doubt that student identity management is an extremely effective way to battle financial aid fraud. However, doing this also has larger implications and benefits for distance education.

By confirming the identity of students, institutions can ensure academic credibility for their students, their courses and their degree programs and, hopefully, can put these fraud rings out of business.

Hlib Shabashnyi/Thinkstock
Jun 19 2015

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