# MANAGEMENT INFORMATION REPORT

## Student Financial Assistance No. 03-01

TO: Sally Stroup

> Assistant Secretary for Postsecondary Education

FROM: Helen Lew

Assistant Inspector General for Audit Services

SUBJECT: PLUS Could Be Disbursed to Ineligible Non-Citizens

Control Number ED-OIG/E06-D0008

Based on our audit work at Fashion Institute of Design and
Merchandising, Los Angeles, California, and at FlightSafety Academy,
Vero Beach, Florida, relating to the citizenship requirements for
Federal PLUS and Federal Direct PLUS program loan borrowers, we
determined that the potential exists for ineligible non-citizens to
receive PLUS loans. Contrary to the requirements of the Higher Education
Act of 1965, as amended (HEA), the Department of Education (Department)
has not established the same verification requirements for parents that
apply to student borrowers.

The Department verifies the citizenship status of students through data
matches with the Social Security Administration (SSA) and the Department
of Homeland Security (DHS)[^1] during the processing of the students'
application for financial aid. If the data matches are unable to
conclude the citizenship status of the students, comments are generated
and passed on to school officials. These data matches are not performed
for parents or endorsers.

At one of the schools we visited, school officials failed to resolve
citizenship-related comments for five of the 50 PLUS loan recipients in
our sample. School officials awarded \$67,221.32 to these five PLUS loan
borrowers without determining if these borrowers met Title IV
citizenship requirements. We contacted the Immigration and
Naturalization Service and confirmed that, fortunately, the five sample
students and their parents were eligible to receive the PLUS loans.
However, the procedures in place at the school were not sufficient to
ensure that only eligible recipients received Title IV aid.

In award year 2000/01, over \$3.3 billion in PLUS loan funds was
disbursed to almost 480,000 PLUS loan borrowers. Of the \$3.3 billion,
over \$65 million was disbursed to approximately 11,000 parents of
students for whom SSA and/or DHS citizenship match results were
inconclusive and did not verify the students' eligibility for Title IV
funds. Because the guidance provided to schools is inadequate, the
potential exists that the Department could have disbursed some of this
\$65 million to parents who are ineligible non-citizens. We suggest that
the Department strengthen guidance to schools regarding verifying
citizenship status of parent borrowers and establish guidance on
verifying citizenship status of loan endorsers.

##### **Citizenship Requirements for Title IV Eligibility**

Under Section 428B(a)(1)(B) of the HEA, a parent borrower must meet all
eligibility requirements established by regulation. Pursuant to 34
C.F.R. §§ 682.201(b)(1)(iii) and 685.200(b)(1)(iii), PLUS loan borrowers
must meet "the requirements pertaining to citizenship and residency that
apply to the student in 34 CFR 668.33."[^2] Section 428B(f)(1) of the
HEA specifies that the immigration status of parents shall be subject to
verification "in the same manner" as students.

The Federal Student Aid Handbook 2002-2003 (Handbook) states---

> If a parent wants to take out a Federal PLUS Loan for a dependent
> undergraduate student, both the parent and the student must be U.S.
> citizens or nationals, permanent residents, or eligible noncitizens.
> The CPS \[Central Processing System\] doesn't match the parent's
> citizenship status with Immigration records, so a parent who is a
> permanent resident or other eligible noncitizen must provide
> documentation of that status to you.

**Lack of Guidance to Schools Could Result in PLUS Loans Disbursed to
Ineligible Non-Citizen Parents and Endorsers**

Although the Department has provided guidance to schools on how schools
should determine and document the eligibility of citizenship status of
students, it has provided little guidance to schools regarding
procedures for determining and documenting the citizenship status of
PLUS loan borrowers. The Handbook devotes a complete chapter (Volume 1,
Chapter 2) on the procedures schools should follow to ensure students
meet the citizenship requirements. For PLUS loan borrowers, the Handbook
includes only one sentence, which simply states that when parents are
permanent residents or other eligible non-citizens, documentation of
this status should be provided by the parents.

Further, the Handbook does not provide any guidance on how schools
should determine and document the citizenship status of PLUS loan
endorsers. In fact, the only place the citizenship status of an endorser
is mentioned appears to be on the Endorser Addendum to the PLUS
application, which states that an endorser must be a citizen.

Additionally, since the Department does not verify the citizenship
status of parents who apply for PLUS loans or of their endorsers, even
when SSA and/or DHS match results are inconclusive concerning the
citizenship eligibility of the parents' undergraduate students, the
potential exists that some of the \$3.3 billion in PLUS loans disbursed
in award year 2000/01 were disbursed to ineligible non-citizens.

The audit work upon which this management information report is based,
at Fashion Institute of Design and Merchandising and at FlightSafety
Academy, was performed in accordance with generally accepted government
auditing standards appropriate to the scope of those audits.

**Suggestions**

We acknowledge that verifying citizenship status of PLUS loan parents
and endorsers can not be performed by the current process used for
students since the citizenship data sent to the SSA and DHS is obtained
from the student's application. PLUS loan parents and endorsers are not
required to submit this application. However, citizenship status of PLUS
loan parents and endorsers must be confirmed to prevent ineligible
non-citizens from receiving Title IV aid. We suggest that the Department
develop procedures to verify the citizenship status of PLUS loan
borrowers and endorsers "in the same manner" as students. The Department
should develop procedures for parent borrowers and endorsers like those
currently in place for student borrowers:

1.  When a parent submits an application for a PLUS loan, or an endorser
    submits an endorser addendum, require the school or lender to
    request a match of the parent's or endorser's citizenship data with
    SSA and/or DHS.

2.  If SSA or DHS data match results are inconclusive, require schools
    to verify the parent or endorser's citizenship status before
    disbursing Title IV aid. Specifically, schools should be required
    to---

    a.  [For U.S. citizens]{.underline}, obtain a copy of the birth
        certificate, U.S. passport, or other applicable citizenship
        documentation.

    b.  [For eligible non-citizens]{.underline}, obtain a copy of
        citizenship documentation (e.g., Form I‑151 and Form I-94), and
        submit the documentation, along with a Form G-845S, to the local
        DHS district office requesting eligibility status confirmation.

#### Comments on the Proposed MIR and OIG's Response

The Department's Office of Postsecondary Education (OPE) did not concur
with our suggestions. We did not change our conclusions based on OPE's
response. A copy of the letter from OPE is included as an Attachment to
this MIR.

[OPE's Comments]{.underline}. OPE stated that our report "suggests that
the Department establish an additional eligibility requirement for all
PLUS borrowers and endorsers: a computer data match of FAFSA information
. . . ." Because our report did not find that Federal funds were
disbursed to ineligible recipients, OPE was not certain whether
additional guidance or other measures, such as imposing an additional
eligibility requirement, are warranted. OPE stated that "the Department
must balance an appropriate level of administrative costs and burden on
students and institutions with effective program integrity measures that
consider the program resources at risk."

However, OPE did state, "\[W\]e recognize the possibility that PLUS
loans could be disbursed to borrowers who are ineligible noncitizens
with respect to the federal student assistance programs." OPE plans to
expand on our audit work by "drawing a sample of PLUS borrowers from the
National Student Loan Data System and assessing the Title IV eligibility
of the students on whose behalf these parents borrowed." The results of
the Department's analysis will inform the Department in its decision
regarding our suggested corrective actions.

[OIG's Response]{.underline}. We are not suggesting an additional
eligibility requirement for PLUS borrowers. The HEA currently requires
that PLUS borrowers satisfy the same conditions as student borrowers,
which include the citizenship requirements in Section 484(a)(5). Section
428B(f) requires that the immigration status of a parent borrower be
subject to verification "in the same manner as immigration status is
verified for students under section 484(g)." (Section 428B(f) similarly
requires that the Social Security Numbers for PLUS borrowers be verified
in the same manner as for students.) While it is true that we did not
find ineligible borrowers in our sample, we do not agree that the
Department has the option of foregoing verification based on the results
of further analysis. We do acknowledge that the Department could, due to
practical considerations, implement alternatives to our suggestions, to
ensure compliance with the HEA\'s verification requirement.

Attachment

cc: Theresa S. Shaw, Chief Operating Officer, FSA

[^1]: Effective March 1, 2003, the service side of the Immigration and
    Naturalization Service which dealt with citizenship, naturalization,
    work permits, and other immigration benefits became the Bureau of
    Citizenship and Immigration Services, Department of Homeland
    Security.

[^2]: Parents who are ineligible for a PLUS loan because of an adverse
    credit history may still receive a loan if they can obtain an
    endorser who has been determined not to have an adverse credit
    history. The guidance does not address PLUS loan endorsers.