Neal McCluskey
Fraud in federal programs has become a hot topic lately, and federal student aid is no exception. Indeed, it seems to be a big, glowing target for fraud.
ABC News has reported on massive fraud in community college enrollment. It says that “in California alone, nearly a third of all community college applicants in 2024 were identified as fraudulent.” For some schools, it was maybe even worse than that:
Gina Macklin, a senior administrator at Delaware County Community College, told WPVI-TV in Philadelphia that the school found more than 500 fake students enrolled in its classes in 2023, which she described as “a terrible year” for the school, not least of which because those fraudsters “had taken seats from legitimate students.”
Dr. Beatriz Chaidez, the chancellor of the San Jose Evergreen Community College District, told KGO-TV in San Francisco that at one point, a 50-person online class was booked in minutes and had 100 individuals on its waitlist. The school later learned that just six of those “students” were real people trying to get an education.
Basically, scammers enroll fake students, especially in online classes, and the money starts flowing. The ABC report states that “over the past five years, the federal government has investigated more than $350 million in fraud perpetrated by ‘ghost student’ schemes.” In December, the US Department of Education reported that in less than a year it had stopped more than $1 billion in attempted student aid fraud.
As Chris Edwards has written about federal aid-to-state programs, when someone is getting money from the federal government—money taken from taxpayers—they have limited incentive to make sure it is used responsibly. And because federal bureaucracies are sprawling and, unlike the states, Washington does not have to balance its budget, the worst place to provide “help” is at the federal level.
Of course, the most painful effect of federal third-party funding in higher ed is on prices. Federal aid enables colleges to raise prices and bring in more money, and it often incentivizes students to demand more expensive options that have little to do with education. Oh, and funding more and more degrees artificially inflates demand for credentials in the workforce.
Basically, federal student aid fuels tuition inflation, credential inflation, and fraud. It is also unconstitutional … and time for it to end.
