Acton Institute Powerblog

DOJ: Government grants induced Christians to commit fraud

(Photo credit: AP Photo/Jon Elswick.)

Even the federal government now admits that its federal financial aid policy is so immoral it can turn theology students into criminals. The Justice Department accuses a Christian theological institute of creating phantom students in order to cash in on federal college funding.

According to prosecutors, the North Carolina-based Apex School of Theology set up a satellite in Georgia to serve students in Georgia, Alabama, and Florida. There’s just one problem: There were no students.

The DOJ says that Apex’s Georgia/Alabama Learning Center recruited people to pose as students and submit fraudulent federal financial aid applications for Pell grants and other federal aid. The center would then pocket part of the funding and give the individual posing as a student a cut of the proceeds. To maintain the charade, Apex employees would “submit falsified homework, tests, and other course work as if they were the student, to deceive” the Department of Education “and falsely show the student in good standing and eligible for additional federal financial aid.”

According to a federal indictment, one Apex recruiter “told individuals that they could obtain ‘free’ money without doing any schoolwork and without attending any classes.” She just needed their Social Security numbers and personal information. Then, she allegedly created “fictitious ‘spiritual autobiographies’ to reflect that student’s ‘spiritual journey’ which were an integral part of the application.” Sometimes, Apex falsified GEDs.

Apex would then receive federal aid equal to $11,796 per enrollee and give each “student” approximately $3,300 of the take. Meanwhile, Apex employees would write pseudonymous research papers on the finer points of Christian ethics to keep the deposits coming.

This is, of course, the federal government’s version of the now-shuttered school’s story, and everyone is presumed innocent until proven guilty. If true, the story shows how federal funding can tempt students of God’s Word to violate at least two of the Ten Commandments. It is yet another example of how big government is a near occasion of sin.

But the tale of government-induced fraud and frailty only probes one level of this story. One is tempted to believe the DOJ pounced on this alleged fraud for one simple reason: The government hates competition.

In many ways, the alleged Apex scandal is more humane than the way colleges and universities game the labyrinth of federal financial aid programs. Unlike Apex’s purported fraud, colleges and universities victimize very real students.

Colleges receive government aid for most students enrolled in their institutions. Therefore, universities have a financial incentive to accept as many students as possible, regardless of their ability to complete college-level coursework. In a more balanced world, administrators would only accept students capable of doing the work, while high school guidance counselors would encourage other students to investigate apprenticeships and trade schools.

The students end up bearing a heavy burden for this arrangement. Since the federal government began offering subsidized loans to all students in 1978, the cost of college tuition has skyrocketed by 1,375% (or 238% since 1980 in inflation-adjusted dollars). Researchers have found that every dollar in federal financial aid raises college tuition as much as dollar-for-dollar.

These incentives would only be stronger if the government established “free” college tuition. As it is, tuition and fees accounted for only 21% of public university revenue in 2013. The student loan crisis is so severe that we dedicated the Spring 2019 issue of Religion & Liberty to the topic.

Meanwhile, the universities’ silent partner is the federal government. Since a piece of Obamacare legislation – the Health Care and Education Reconciliation Act of 2010 – virtually nationalized the student loan market, the federal government now holds $1.2 trillion of the $1.5 trillion in student loan debt. Those loans constitute almost 60% of all assets held by a government that is more than $27 trillion in debt. That means the federal government has a financial incentive for the unsustainable status quo to continue. (That value is threatened, however, as 1,400 students default on their student loans every day.)

The federal government incentivizes colleges and universities to admit as many students as possible in order to maximize their share of federal financial aid and loans. Federal aid makes it more palatable for colleges to raise tuition. Two million students a year drop out of college, often deeply indebted to the federal government, whose intervention in the college market drove up prices in the first place.

Federal financial aid and the student loan crisis is a spiral of iniquity the government can, and must, end. Until then, American taxpayers, indebted graduates, and embittered dropouts unable to pay back their federal student loans will continue to pay the price.

As the alleged Apex scandal shows, federal financial aid’s perverse incentives are enough to turn good people bad.

Rev. Ben Johnson

Rev. Ben Johnson is Executive Editor of the Acton Institute's flagship journal Religion & Liberty and edits its transatlantic website.