Investigators Detail Fraud, Abuse in Pell Grant Program

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Fraud, abuse, and mismanagement have led to the loss of millions of dollars in Pell Grant funds, Senate investigators said last week.

The centerpiece of a report by the Governmental Affairs Subcommittee on Investigations was the revelation that several New York City-based Judaic-studies and "immigrant culture'' programs allegedly paid elderly Russian immigrants to attend English classes, inflated tuition prices so students could qualify for federal aid, and maintained fraudulent records, some using the names of high school students or individuals who had already graduated from college.

In one case, investigators found that 70 residents from a five-block area in Brooklyn were all listed as Pell Grant recipients at Bais Fruma, a nonprofit Judaic-studies school.

Representatives of two programs cited in the report were subpoenaed to appear at last week's hearing, but opted not to testify, invoking the protection against self-incrimination offered by the Fifth Amendment to the U.S. Constitution.

The report suggests that other forms of abuse may also be widespread. In response to a request from the subcommittee, the Education Department identified more than 4,000 individuals who had received Pell Grants for 11 years or more, according to Sen. Sam Nunn, D-Ga, the subcommittee's chairman.

A student can legally continue receiving Pell Grants until he earns a degree, regardless of the number of years it takes.

"It now appears that many of the same systemic weaknesses that plague the student-loan program are also undermining the Pell Grant program,'' Senator Nunn said, referring to 1990 hearings concerning fraud and abuse in federal loan programs.

High loan-default rates "can often be an early-warning sign of a problem school,'' the report says, while it is harder to detect abuse in the Pell program because students do not have to repay their grants.

The Pell Grant program is the nation's largest student-aid program. The government has awarded some 55 million grants totaling $64 billion since the program's inception in 1972, according to a statement from Sen. Edward M. Kennedy, D-Mass.

Officials Cite Anti-Abuse Efforts

Senator Nunn praised the efforts of current Education Department leaders to remedy abuses.

"However,'' he added, "given the magnitude of this program's, and this department's, problems and history, the department still has a long way to go to gain the kind of capabilities that are essential to run this program properly.''

At a news conference earlier in the week, department officials described their efforts to combat fraud.

The 1992 Higher Education Amendments have helped strengthen "gatekeeping'' functions in the student-aid programs by introducing a trial period for institutions new to the programs and greater oversight at the state level, according to David A. Longanecker, the assistant secretary for postsecondary education.

He said the department is scheduled next spring to introduce the National Student Loan Data Bank, a data base that will track all aid on a student-by-student basis.

"We think almost all of the issues that have been raised are ones we have under control today,'' Mr. Longanecker said.

In a separate action last week, the Education Department notified 21 Judaic-studies institutions that they may ineligible for federal student-aid programs because they had been certified as "avocational'' by an independent accrediting agency.

Department officials said that while the list of schools may overlap with the group under investigation for fraud, the 21 schools were cited because they did not have proper accreditation.

To qualify for the Pell Grant program, a school must award students a professional degree or offer training that leads to "gainful employment,'' said Stephanie Babyak, a department spokeswoman. She said some schools may have programs that meet the criteria but have not been accredited.

Vol. 13, Issue 09, Page 22

Published in Print: November 3, 1993, as Investigators Detail Fraud, Abuse in Pell Grant Program
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