$6B in Improper Student Aid Payments Found at US Education Department

WASHINGTON — 

Members of Congress criticized the Education Department on Thursday over $6 billion in improper payments made as part of federal student aid programs.

Kathleen Tighe, inspector general at the department, told a House hearing that the department made $2.21 billion in improper payments as part of its Pell Grants program in 2016 and $3.86 billion as part of the Direct Loan program. Overall, the department last year awarded nearly $125 billion in financial aid to nearly 12 million students.

Improper payments are disbursements that should not have been made, went to the wrong recipient, were for an incorrect amount or were not documented properly. Not all improper payments result in a liability for the federal government.

Jay Hurt, chief financial officer for the department's Federal Student Aid office, told a House subcommittee that the department would seek to correct the problem, but he added that a zero-percent rate of improper payments was not feasible because fraud occurs in most organizations. Hurt cited a recent study that found organizations typically lose 5 percent of revenue to fraud.

Representative Virginia Fox, a North Carolina Republican, pushed back.

"I think we should strive for zero mistakes," Fox told Hurt. "You are not dealing with your own money, you are dealing with someone else's money, and I want people in the department to remember that."

Program official resigned

James Runcie, the chief operations officer for the financial aid program, had been scheduled to testify at the hearing, but he resigned abruptly Tuesday night, citing political disagreement with his bosses. Runcie was a political appointee of the Obama administration. The department said Runcie resigned so as not to have to testify.

Representative Mark Meadows, another North Carolina Republican and chairman of the House subcommittee on government operations, was adamant that Runcie be held accountable for the "abysmal" results and suggested he didn't deserve the bonuses he received. Meadows said he was considering issuing a subpoena for Runcie.

"It's a slap in the face to the millions of taxpayers who provided this gentleman with over $430,000 in bonuses since 2010," Meadows said.

Justin Draeger, president of the National Association of Student Financial Aid Administrators, said it was unclear how many of the improper payments were intentional and how much was accidental.

"It's difficult for me to give an exact percentage of how much is fraud and how much is just honest mistakes," Draeger said.

Tighe said that the while the department has been responsive to audits and making reforms, there was a lot of work ahead.

"They've done some work to try to resolve some of our audits, but there are still some ways to go," Tighe said.

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