"The results of GAO's investigation are troubling because they expose the ease with which an individual with even the most rudimentary computer skills could bilk the federal government out of hundreds of thousands of dollars," said Senator Susan Collins. "In this instance, one phone call from the Department of Education to any one of several sources would have revealed that they were considering a fraudulent application by a phony school for certification to participate in the student loan program."
As the ranking member of the Permanent Subcommittee on Investigations, Senator Collins in 2001 directed the GAO to investigate weaknesses in the Department of Education's administration of student loans under the Federal Family Education Loan (FFEL) Program, which provides more than $60 billion a year in student financial aid assistance.
Through an undercover investigation conducted by GAO, investigators created Y'Hica Institute for the Visual Arts, a fictitious graduate-level foreign school purportedly located in London, England. Using off-the-shelf word processing and publishing tools, investigators created documents that allowed them to obtain certification from the U.S. Department of Education for the phony school to participate in the FFEL program.
In addition, investigators obtained approval for student loans totaling $55,500 from Sallie Mae on behalf of three fictitious students purportedly enrolled at Y'Hica, including one student named Susan M. Collins.
"This investigation reveals real weaknesses in the system that need to be addressed. We have already shared our report with the Department of Education and we will be working with them to ensure that they institute safeguards to prevent criminals from stealing taxpayer funds through frauds such as the one perpetrated by our investigators."
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