Wanting your children to succeed in life is a goal that all parents share, and one road to a prosperous future has always been through higher education. However, for the average middle-class family, this can be a real financial challenge even when both parents are working, sometimes more than one job, to make ends meet. If college seems to be getting more and more expensive, that’s because it is.
As an example, take a look at these shocking facts. In 1974, the median American family earned just under $13,000 a year. A new home could be had for $36,000, an average new car for $4,400. Attending a four-year private college cost around $2,000 a year, while a public university averaged $510 a year. To put these figures in current dollars, we’re talking about a median family income of $62,000, a house for $174,000 and a sticker price of $21,300 for the car, $10,300 for the private college and $2,500 for the public one.
How these costs relate today is telling when you realize that median family income has risen slightly to about $64,000, while median home prices have increased by about two-thirds, car prices have remained steady, but the real outlier is higher education. Tuition at a private college is now roughly three times as expensive as it was in 1974, costing an average of $31,000 a year; public tuition, at $9,000, has risen by nearly four times. This is a painful bill for all but the very richest. For the average American household that doesn’t receive a lot of financial aid, higher education is simply out of reach.
Student loan debt is increasing because government grants and support for postsecondary education have failed to keep pace with increases in college costs. Subsequently, much of the burden of paying for college has shifted from the federal and state governments to families. The government no longer carries its fair share of college costs, even though it gets a big increase in income tax revenue from college graduates.
Ever-increasing tuition costs at state and private colleges and universities, coupled with the lack of adequate wage increases, make it a real struggle for many families to provide a college education for their children. With this struggle comes risk, and debt is often a consequence, the penalties for which can be more severe than just debt collection calls and a bad credit score. Young college graduates these days who receive incredibly expensive degrees also leave with an average of $35,000 in student debt, and the parents are the ones who are increasingly being held responsible, putting their very freedom on the line in the process.
With college being so expensive, it might come as a shock to some parents and students when they start the financing process to learn that one form—the Free Application for Federal Student Aid (FAFSA)—may largely determine their financial fate when it comes to federal student aid. FAFSA forms are prepared annually by all current and prospective college students in the United States to determine their eligibility for student financial aid. During the process, there might be an overwhelming temptation to “fudge” the numbers on the FAFSA to get more money to help pay for your child’s education. However, getting caught could spell big trouble.
Filing a fraudulent claim for student financial aid is a direct violation of federal law, specifically 20 U.S.C. section 1097, which makes it a federal offense to knowingly and willfully obtain student aid funds by means of making false statements to the government. Unfortunately, federal student loan fraud is a growing trend, with more and more parents of college students being prosecuted for giving misinformation on the FAFSA. If you are convicted of this federal offense, you may have to pay a substantial fine, serve time in prison, or both. A recent decision by the United States Court of Appeals for the Ninth Circuit, US v. Carlos Javier Ezeta (Case No. 12-10304, May 23, 2014), illustrates how you can be charged with committing financial aid fraud.
Between 2008 and 2011, Carlos Javier Ezeta worked as a counselor and professor at the College of Southern Nevada. Motivated by his interest in helping the Hispanic community, Ezeta often assisted Spanish-speaking students in their college applications and course selections. He also helped the students obtain federal financial aid by falsifying several FAFSA applications. Based on false representations made on the forms, student aid money was dispersed to several students, including some who had not completed high school, received a GED, or passed an “ability-to-benefit” test.
The U.S. Department of Education requires that at least one of these conditions be satisfied in order for an applicant for federal student aid to be eligible. On the forms, Ezeta falsely reported that the students satisfied the education requirements and submitted the forms without the students’ knowledge that they contained false information. Eight applications were generated, and six students obtained funding in the amount of $8,709. One application was intercepted before money could be dispersed, and another was never sent because the student had yet to obtain a phony certificate of high school completion. In all, the falsified documents sought financial aid amounting to over $37,000. An undercover sting operation was launched, and Ezeta eventually admitted to falsifying the applications. Although he did not personally obtain any funding, Ezeta was arrested and charged with four felony counts of financial aid fraud in violation of 20 U.S.C. section 1097(a). The Ninth Circuit Court concluded that although Ezeta did not receive any money himself, criminal liability under federal law extends to knowingly and willfully causing the funds to be disbursed to a third party by fraud, false statement, or forgery.
The law is clear and the consequences severe on this statute, which prohibits anyone from knowingly and willfully embezzling, stealing, or obtaining by fraud, false statement, or forgery any funds provided for higher education purposes. If the amount of the funds provided is $200 or more, you could be charged with a felony. If you are convicted of a felony violation of financial aid fraud under federal law, you could be imprisoned for up to five years, fined a maximum of $20,000, or both. Plus, you’d have to return any aid you had received. If the funds are less than $200, you face a misdemeanor charge. A misdemeanor violation under 20 U.S.C. 1097(a) carries a sentence of not more than one year in prison, up to a $5,000 fine, or both. While this law has been in existence for decades, the prosecution for federal student loan aid is growing steadily.
Federal law also prohibits the acceptance of a loan made under false pretenses. If you are convicted of intentionally providing false information in order to obtain a federal student aid loan, you face a misdemeanor, punishable by up to one year in prison, a maximum fine of $10,000, or both. Because fraud is considered a crime of moral turpitude, a phrase used in criminal law to describe conduct that is considered contrary to community standards of justice, honesty, or good morals, a federal fraud conviction can also result in disciplinary proceedings—such as loss of a professional license (including a teaching license)—and may also lead to your deportation if you are not a US citizen.
Falsifying an Application for Financial Aid is risky and foolish. In the example above, the defendant seemed to have good intentions. After all, he simply wanted to help students from the Hispanic community to pay for their college education. However, as the court pointed out, a crime committed with a “good heart” is still a crime. Additionally, the court noted the professor stood to benefit indirectly from his wrongdoing since the unlawfully obtained funding provided to his students would go to the college where he was employed.
According to Fox Business (July 2015), one commenter in the College Confidential forums said her parents were planning to claim they were separated in an attempt to maximize their chances of financial aid. “I was definitely NOT on board with this but they refuse to listen to anything I’m saying,” the student wrote.
In 2014, the Boston Globe reported that a father of a former Harvard student pleaded guilty to charges of falsifying income information to get more than $160,000 in financial aid. He apparently filed false tax returns, which likely carries additional penalties. In another example, a college professor and counselor was charged with fraud after he allegedly falsified applications for students he said he was just trying to help. And there is the case of a mother and daughter who pleaded guilty in 2014 for making false statements to federal agents in connection with an investigation of student aid fraud. The mother reported no income for a period during which she reportedly received over $521,000 in income.
So, if you’re thinking of falsifying your FAFSA, just don’t. And if you think you can’t get caught, think again. College financial aid administrators are more skilled and experienced at detecting lies than families are at perpetrating them. In fact, about one-third of all FAFSA applications are selected for verification by the Department of Education. If yours is chosen, additional documentation will be required. An example of a red flag: the tax return shows dividends and interest on investments, but little or no assets are reported on the application.
Then there are other examples such as parents who pretend they are separated. Separation is prevalent enough in society today, but in the instances where there is an informal separation, the parents must be living apart for this to be a legitimate claim, and you have to be ready to show divergent utility bills or some other form of proof that the parents are occupying two separate households. That’s just one of the ways in which a lie like this can be discouraged, or uncovered.
Not telling the truth about which parent a child is living with in order to get more financial aid is another common occurrence. You can get caught easily in this lie, as well. It can slip out accidentally if a student reveals contradictory information about his or her living arrangements to a teacher or authority figure. And this is fraud. Schools are aware of this and have a compulsory responsibility to look into any instances where they suspect fraud.
A college education is expensive, and parents and students who want to avoid student loan debt may be tempted to fudge facts. But it’s not worth it. If federal student loans aren’t enough to cover your total student loan bill, you have other options. Private student loans are available for students and parents, but private loans (unlike federal student loans) will most likely require a credit check to determine your interest rate, and a cosigner if the borrower has a limited or nonexistent credit history. You can get a free credit report summary every month on Credit.com to see where you stand. If you have great credit, private student loans may even get you a better interest rate than Parent PLUS loans, so doing your research, improving your credit, and monitoring your progress are key.