Thursday, March 27, 2014

Strengthening the Federal Student Loan Program

On Thursday, March 27th, the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP) had a hearing on "Strengthening the Federal Student Loan Program for Borrowers. There were several panelists testifying, including Jim Runcie, Chief Operating Officer of Federal Student Aid with the U.S. Department of Education; Dr. Michelle Cooper, President of the Institute for Higher Education Policy; Deanne Loonin from the National Consumer Law Center; Roberta Johnson, Director of Student Financial Aid at Iowa State University; and Marian Dill, Director of Student Financial Aid at Lee University.

You can see a summary of folks who were live-tweeting the hearing below, using the #LoanHELP hashtag. A video of the hearing, as well as written testimony from each panelist, is available on the Senate HELP website.

If you are a member of the National Association of Student Financial Aid Administrators (NASFAA), you should see an article summaring the hearing in NASFAA Today's News tomorrow morning!

In other news, Program Integrity Negotiated Rulemaking is also occurring right now. You can see a good summary of yesterday's negotiations from Rachel Fishman with the New America Foundation. You can follow those tweets by using the #NegReg hashtag. There were more negotiations today and a final session is planned for May to discuss PLUS Loans.


Tuesday, March 25, 2014

Starting a Financial Aid Association Blog

This is part one of two in a series about association blogs.

Blogs are not a fancy new thing. Financial Aid Associations have had newsletters since their beginnings. The Wisconsin Association’s first 1966 meeting notes discuss the creation of a newsletter. At that time it was delivered on paper; now it can be delivered electronically. A blog is a new tool for delivering a newsletter and so much more.

There are advantages to using a blog over a paper or pdf newsletter. Each article adds its own value as a separate blog post. Articles can be spread out as shorter weekly posts rather than a long newsletter monthly or quarterly. It may be easier for association members to find time to read one short post a week rather than a long newsletter monthly.

A blog is timely - it allows a more immediate response to be possible when new information needs to be shared. It also allows flexibility for experimenting with what to share with members. In addition blogs have the capability of real-time metrics to determine the popularity of certain content.

A blog allows interaction - members can comment on the blog and keep the conversation going.
A blog reaches new members –members are increasingly using social media to connect with others. It isn’t just the tech savvy or millenials using social media anymore. Today’s professionals have come to expect immediate and real time communication.

Wisconsin’s blog debuted in 2012 with an updated website. The blog is used to create connections among members, share information about association activities, and provide professional development resources. In order to keep track of what is being shared we use categories of blog posts. Keeping track by category allows us to present a variety of content. Categories are always evolving, but some examples include:
  • Updates from the President
  • Committee Updates
  •  We Are WASFAA – Interviews with WASFAA members (See next week’s blog post for more on this topic.)
  •  Meet ED – Interviews with Department of Education Trainers
  •  Tech Tips – Tips for using technology both in and outside of the workplace.
  •   Pro Dev Tips – Professional Development Tips such as getting the most out of conferences, how to present an interest session for the first time, and how to create enticing slide decks.

Coordinating a blog can be an intimidating undertaking, but it doesn’t have to be. We use a spreadsheet on Google Drive that several administrators can access.  It lists the date to post, the category, topic, author, team member coordinating the post, and the status. We also have a column that lists major events such as holidays and conferences to assist with planning. In my term as president this year I oversaw the creation of a new position in the association, Web Content Manager. This is in addition to the Web Editor position. The Content Management person is the primary contact person for coordinating the blog posts while the Editor has become the person managing the technical aspects of the website.  Dividing up the content and the technical aspects of the website and blog has made it possible to best utilize the strengths of the people filling those roles.

The association blog has fostered new sense of communication and community in the Wisconsin association and a blog can enhance communication in your association too. Listed below are several blogs to take a look at as examples of what can be done with a financial aid association blog.

Regional Student Financial Aid Association Blogs
Eastern (EASFAA) http://easfaa.org/b/
Rocky Mountain (RMASFAA) http://rmasfaa.wordpress.com/
Southern (SASFAA) http://sasfaa.blogspot.com/
Southwest (SWASFAA) http://swasfaa.org/b/
Western (WASFAA) http://wasfaa.org/b/

State Student Financial Aid Association Blogs
Wisconsin (WASFAA)  http://www.wasfaa.net/

Did we miss one? Please add it to the comments below!
Part two of this series coming next week – Tips for Writing a Blog Post

Tuesday, March 4, 2014

OIG Suggests Additional Safeguards Against Financial Aid Fraud

On February 25, 2014, the U.S. Department of Education’s Office of the Inspector General (OIG) released a Final Audit Report, titled “Title IV of the Higher Education Act Programs: Additional Safeguards Are Needed to Help Mitigate the Risks That Are Unique to the Distance Education Environment.” The report is a culmination of in depth review of eight institutions of higher education in their handling of Title IV funds for distance education students. The objective of the review focused on the “susceptibility to fraud and abuse to Title IV programs delivered to students enrolled in programs of study offered through distance education.”

In general, the results of the investigation demonstrated that institutions have problems verifying students’ identities, determining attendance at an academic-related activity, and determining cost of attendance. The OIG summarizes that “the regulations and guidance as they relate to verifying the identity of distance education students and the definition of attendance do not sufficiently mitigate the risks of fraud, abuse, and noncompliance.” Through this investigation, the OIG determined that the eight schools investigated “disbursed nearly $222 million to more than 42,000 distance education students who did not earn any credits during a payment period.”

Reports indicate there has been a vast increase in higher education enrollment in distance education courses as well as reports of fraud rings taking advantage of such programs to defraud the financial aid system (enrolling only to receive financial aid without an educational purpose). But, as the report indicates, Title IV programs are large and complex and require numerous entities to administer. The changing student population, technological advancement, and educational delivery methods offer increased challenges to awarding and disbursing Title IV funds. Although the U.S. Department of Education released final Program Integrity regulations on October 29, 2010, the OIG believes “further actions are needed to protect the integrity of the Title IV programs.”

It should be noted that, according to the cover letter, the Department is compelled to develop a final corrective action plan as a result of this audit within 30 days of the issuance of the report. This timeframe is not unusual, but gives very little time for financial aid administrators or the distance education community to have input or response in these important matters that affect us greatly.

Below is a summary of OIG’s recommendations:

Finding No. 1 - Regulations Related to Verifying Student Identity and Disbursing Title IV Funds Should Be Strengthened

Under this section, the OIG cites the Department’s current regulation (34 CFR §602.17(g)), which allows secure logins and passwords, but states “this requirement is not sufficient to protect Title IV funds.” The OIG asserts that a login and password do not confirm the student’s identity nor ensures the person is using it under a valid name or intending to obtain an education. The OIG also cites the fact that a school may hold a credit balance from financial aid that exceeds allowable charges, but only with the student’s explicit written permission (34 CFR §668.164(d) and (e) and 668.165(b)). A school may delay the disbursement of funds to determine whether a student is eligible for Title IV aid. Delaying disbursement or implementing smaller, more frequent disbursements “decreases the risk of unscrupulous people targeting the school.” Disbursing aid incrementally across a payment period has other benefits, as noted by Ware, Weismann, and McDermott (2013).

OIG Recommendation 1.1 Require schools that offer distance education to verify the student’s identity as part of the enrollment process through means such as high school diploma, transcripts, and test scores before issuing a secure login and passcode.
OIG Recommendation 1.2 Require state auditors to review the above stated requirement that schools are verifying the identity of distance education students.
OIG Recommendation 1.3 Require more frequent disbursements of Title IV funds to coincide with the timing of institutional and other charges.

Strengthening identity verification prior to enrollment in distance education is reasonable and the initial administrative burden would likely be on the academic programs offering the distance education programs. Technological solutions for identity verification could make the process efficient. State auditors to reviewing these processes appears reasonable on the surface, but since it would be for Title IV purposes, the financial aid office would be involved, requiring additional burden on financial aid administrators. Furthermore, the academic integrity of a program should rest with the academic program and its accreditors. As Russ Poulin writes, financial aid fraud and academic integrity should not be confused with each other as “such a quality issue is appropriate for accrediting agencies to address and is a separable issue from deterring financial aid fraud.”

Incremental disbursements may benefit low-income students by ameliorating poor financial management or by reinforcing positive student behavior, such as staying enrolled to receive full aid eligibility. The OIG asserts incremental disbursements can reduce fraud, which is reasonable to encourage. However, it requires considerable additional administrative burden on the part of a financial aid office, especially with regard to Return of Title IV calculations and ensuring eligibility at time of disbursement. Return of Title IV processes would become increasingly complicated and are already consistently found to be one of the most vulnerable areas of compliance (see the Top 10 Audit and Program Review Findings). Multiple disbursements would be occurring throughout the term, requiring very tedious processes to ensure accuracy and documentation of attendance prior to disbursement (the rules change when you disburse prior to the beginning of a term, which is allowed, and disbursing funds after the first day of classes as noted in Volume 4, Chapter 1 of the 2013-2014 Federal Student Aid Handbook, pg 4-27). And, what potential problems could this cause for students who legitimately need more money at the beginning of the term for educational expenses versus later in the term? Would financial aid administrators be given the authority of professional judgment to disburse aid earlier than the newly required scheduled disbursements? As Ware, Weismann, and McDermott (2013) suggest, further research needs to be conducted regarding the impact on such a policy shift. I would suggest this be encouraged, but not required, and tested thoroughly, especially through the Department’s Experimental Sites initiative prior to considering full implementation.

Finding No. 2 - Current Regulations Defining Attendance at an Academically-Related Activity Should Also Apply to Student Eligibility and Disbursement Requirements

In this section, the OIG comments that the definition of attendance only appears in the regulations under Return of Title IV processing (for students who withdraw) and goes on to describe the list of activities that may be considered academic attendance, which is listed in the regulations (34 CFR §668.22(1)(7). The regulations also describe what activities may not be considered academic attendance, such as logging in to an online class without active participation. The OIG considers this insufficient since academic attendance should be determined when a student initially receives Title IV aid, not just for those who withdraw. The OIG also noted that three of the schools allowed faculty members to define attendance on their own, but that faculty members were not responsible for knowing Title IV regulations. Additionally, the OIG found that “none of the eight schools [...] retained adequate evidence of a student’s academic attendance, as required in regulation that became effective July 1, 2010 to support the student’s withdrawal date.”

OIG Recommendation 2.1 Amend the regulations to cross-reference the definitions of “academic attendance” and “attendance at an academically related activity” in 34 CFR § 668.22(1)(7).
OIG Recommendation 2.2 Issue further guidance to clearly explain what is considered acceptable evidence to support a distance education student’s academic attendance and last date of attendance.

Cross-referencing the definition of academic attendance and issuing further guidance is a superficial recommendation. No school under review was found to be properly applying the regulations, which demonstrates the complexity and burdensome nature regarding gathering attendance information, especially for schools who do not require instructors to take attendance. The OIG infers that faculty are incapable of providing attendance information, or at least be permitted to define it (and most faculty would probably agree that it’s not their job), but under what circumstances would it be incumbent upon a financial aid administrator to question the academic integrity of a faculty member who states a student has attended? Is it possible the attendance requirements are too rigorous? How many students who begin attendance might be disadvantaged because the institution cannot document said attendance and therefore require repayment post-withdrawal when the student may very well have attended and participated in academic activity? Furthermore, compliance with the attendance regulation, in general, requires an extreme amount of data collection and storage regarding every student because you will not know who will withdraw, officially or unofficially. These sentiments seem indicative of a disconnect with the OIG, the Department, and practitioners, whereas on one hand, there is the presumption that all students are attempting to defraud the government and on the other, that all students are attempting to pursue an education.

Finding No. 3 - Cost of Attendance Components for Distance Education Students Should be Revised

The OIG states in this section that “no distinction is to be made between on-campus or distance education programs when determining a student’s cost of attendance” per section 472 of the HEA, which also limits the cost of attendance for students who are enrolled in programs of correspondence study. Those imposed restrictions limit the budget to only include tuition and fees and, only if required, books, supplies, travel, and room and board costs during times of required residency. The OIG asserts that “only components that directly relate to a student’s educational expenses should be included in cost of attendance budgets” and that “schools need to apply cost of attendance budgets based on students’ characteristics.” According to the OIG, “specific circumstances should dictate a student’s Title IV award” and cites section 484(1)(2) of the HEA, permitting a financial aid officer to reduce Title IV aid for a student if it’s determined that distance education results in a reduced cost of attendance, through the use of professional judgment.

OIG Recommendation 3.1 Specify that a school’s cost of attendance budget for a student include only costs that reflect actual educational expenses (would require Congress to amend section 472 of the Higher Education Act of 1965, as amended).
OIG Recommendation 3.2 Explain to schools that a distance education student’s cost of attendance budget should not include expenses not incurred and that a financial aid officer can exercise professional judgment on a case-by-case basis and reduce a student’s Title IV aid by reducing the cost of attendance budget for a student.

 
The intention behind these recommendations is on point, but the recommendations themselves are poorly explicated. Distance education programs should, essentially, be treated the same as correspondence programs. The only difference is the amount of instructor interaction. It is reasonable to expect a limited COA for both correspondence and distance education students. This requirement would also not be too burdensome for institutions, so long as there is not the expectation of a limited COA for students who are enrolled in a combination of on-campus and distance education courses. The recommendation is written to include only costs that reflect actual educational expenses, but the cost of attendance is meant to be a standardized cost across a class of students. It is unreasonable to expect financial aid officers to create a cost of attendance budget specific to each individual student and circumstance. It is unclear if this is what the OIG is actually recommending. Instead, developing a cost of attendance for a category of students is permissible and reasonable. The second recommendation is unreasonable because, as the Department affirmed in its response, while schools have the ability to exercise professional judgment, “the law limits such discretion to be exercised only on a case-by-case basis, rather than across an entire category or class of students.” The OIG revised their recommendation to specify on a case-by-case basis; however, in any such circumstance where a financial aid administrator were to reduce a budget would attract extreme scrutiny and likely be accused of discriminatory practices. Professional judgments are usually made in such cases where a student has hardships that require an increased cost of attendance, not to single out students in order to reduce their Title IV aid. And, under what circumstances would a financial aid officer have sufficient information to know a student’s actual costs that necessitates reduction? Even institutional charges change throughout a term as students add/drop coursework and many required textbooks are bought at off-campus bookstores or through online vendors. Again, it’s unclear whether the OIG is referring to an individual student or to a category of students.

Finding No. 4 - FSA Could Improve Its Monitoring of Schools’ Compliance by Targeting Its Reviews on High-Risk Areas

In this section, the OIG maintains that FSA program reviews could be more effective and fail to target the highest risk areas. The OIG also notes that FSA itself has identified distance education as one of the highest risk areas in FY2010 and FY2011, yet fails to target reviews in this area. In its review of the eight schools for this report, the OIG found that none of the schools “properly determined and documented students’ academic attendance in accordance with the requirements promulgated in 34 CFR §668.22(c)(3) as of July 1, 2010. When reviewing schools, FSA samples its files from the general population, which is insufficient in targeting high risk areas of fraud. The OIG found that FSA has failed to come to similar conclusions on a consistent basis, inferring they must not be either targeting the high risk areas or not following procedures.

 
OIG Recommendation 4.1 Sample students from specific high-risk areas, such as distance education.
OIG Recommendation 4.2 Analyze the results of program reviews conducted and if the reviews are not identifying attendance issues, research why and provide training to staff.

 
It would be reasonable to review the areas that have been found to be at highest risk for fraud, which is probably why program reviews have been widely inconsistent. Few schools have been cited with attendance issues by FSA, but the OIG happened to conclude that every school it reviewed failed to comply with the attendance regulations (it is important to note that the OIG judgmentally selected the schools for this audit; two from each of the following sectors: 4-year public, 2-year public, private nonprofit, and proprietary). This problem could be resolved through these recommendations. However, what is also disturbing is the amount of time it takes FSA to complete a program review, which the OIG fails to mention. Reports have shown that it could take over a decade to complete a program review. As Michael Stratford from Inside Higher Ed writes, “it’s a case of either colossal inefficiency or supreme accountability.” I’d like to say it’s probably both. And, FSA should not only target the files it would like to review at schools, but also target the scope of its review rather than conducting a full review of each school selected for a program review. Much like the Department conducts targeted verification of student-submitted information on the Free Application for Federal Student Aid (FAFSA), FSA should reduce the overly ambitious scope for each program review. In an effort to increase transparency and accountability, FSA should release data on its completed and active program reviews. If stakeholders can access the data, the reviews could be more informative and effective in improving compliance.

Finding No. 5 - More Useful Data on Distance Education Is Needed to Adequately Assess Risk and Direct Monitoring Efforts
 
Under this section, the OIG asserts that the Department cannot adequately manage its programs in the current educational environment without data to analyze characteristics, trends, and risks. Due to the increased enrollment in distance education, the OIG states the Department needs to take steps now to design a plan to collect the necessary data, which would help policy makers and program managers better understand the educational environment and identify needed statutory and regulatory changes to protect students and taxpayers.

 
OIG Recommendation 5.1 Collect data, monitor growth, assess risks, and formulate strategies specific to the distance education environment.
OIG Recommendation 5.2 Incorporate the above-recommended data collection into FSA’s risk assessment procedure.

 
These recommendations are reasonable. Education data is important and it’s unfortunate it has taken this long to come to this conclusion. The Department agreed to these recommendations and agreed to send comments and recommendations to NCES for updated data elements in IPEDS (although, it would take years). This would be helpful to many other constituents rather than just the Department, especially researchers and policy analysts.

 
Conclusion

Under these recommendations, students and institutions will be held to higher standards of accountability and higher levels of scrutiny. Students legitimately wanting to pursue an education in distance education programs at lower risk institutions, such as those with negligible (by comparison) default rates, would have a more difficult time navigating through unnecessary barriers. Although, a lot of what is recommended makes sense, but while the OIG cited in its report that the eight schools it reviewed disbursed nearly $222 million to more than 42,000 students, it failed to identify or estimate how much of that is estimated to have been received fraudulently. We know from the report that it identified fraud rings through its review, so how much (in dollars) fraud was identified? To what extent should institutions, students, state auditors, and the Department expect additional administrative burden and comply with institutionalized bureaucratic red tape in order to mitigate risks? It might be incumbent upon the Department to scrutinize intentionally abusive practices amongst a certain sector or group of schools who recruit low-income students with the promise of jobs unlikely to become salaries. But, as we know with gainful employment regulations, these groups lobby Congress as well as they deceptively recruit students. And, although the Department has the statutory authority to deny Title IV funds to school who misrepresent themselves, the Consumer Financial Protection Bureau seems to be the only federal agency willing to fight this battle, which, by the way, includes one of the schools reviewed in this audit.

 
The OIG cited attendance issues at all eight of its schools, yet only recommends increased training and scrutiny with regard to program reviews. The larger issue here is the complexity and burdensome nature regarding gathering attendance information. And, although attendance regulations are already in effect, research needs to be conducted to identify whether such regulation actually reduces fraud.

 
While many of these recommendations make sense, neither the OIG nor the Department have provided sufficient information to show whether this actually mitigates risk and how much it impacts individual students and their attempt to legitimately pursue an education. While it was a thoughtful report and approach, I would suggest additional empirical research through randomized sampling be performed using these recommendations to identify their impact. This might be possible through the Experimental Sites initiative if the Department allowed experiments with randomized trials. The impact of some of these changes would need to be known rather than simply hypothesized.

Finally, I agree with Poulin’s sentiment that “we should all be in the business of helping the Department battle against those stealing money that is earmarked for needy students.” While I disagree with several items in this report, I support the prevention of fraud so long as it is not at the expense of students attempting to pursue an education.

Related articles: