Michigan Jewish Institute no longer certified for federal financial aid programs.

The U.S. Department of Education (DOE) stuck by its decision earlier this year to deny the Michigan Jewish Institute (MJI) in West Bloomfield recertification to federal Title IV financial aid programs.

shutterstock_173809025MJI filed a 33-page response to DOE allegations of widespread and long-term misuse of Pell Grants after the federal department first denied the school recertification in a letter it sent to Rabbi Kasriel Shemtov, MJI president, on Feb. 25.

In an 11-page letter sent to Shemtov April 15, the DOE said the denial is now “a final agency decision” and that MJI is ineligible to participate in Title IV programs.

Pell Grants are federal aid given to low-income students to help the pay for college costs. Unlike loans, they do not have to be repaid. For the current academic year, a maximum Pell Grant is $5,775. MJI has previously stated it retains about $2,650 (45.9 percent) of each grant for administrative costs.

According to the Federal Student Aid Data Center, an office of the U.S. Department of Education, from academic years 1999-2015, Pell Grant disbursements associated with the Michigan Jewish Institute have totaled $59,920,600 to 8,931 recipients. Based on what MJI previously stated, the school would have retained about $27.5 million to cover administrative costs.

The nonprofit Michigan Jewish Institute is part of Chabad of Michigan, which maintains the Campus of Living Judaism in West Bloomfield, also home to The Shul, an Orthodox synagogue headed by Kasriel Shemtov. A nearly completed three-story MJI headquarters, funded by private donors, is also located on the campus.

Started in 1994, MJI at first focused on the Orthodox community and Jewish Russian immigrants. The school launched its online program in 2006 and received accreditation in 2009. Rapid growth occurred because of the online program, with the majority of its estimated 2,000 students studying in Israel in its Study Abroad Program. Most are engaged in religious studies at yeshivot or seminaries there.

The alleged misuse was discovered by DOE during MJI’s routine application to renew its Title IV eligibility.

In its letter, the DOE stands by its reasons for denial of recertification: MJI breached its fiduciary duty to the DOE by awarding Pell Grant funds to students who were not “regular students” as required; MJI failed to exercise required standards of administrative capability by not maintaining consistent and reliable student records; and MJI presented false information to its accrediting agency, the Accrediting Council for Independent Colleges and Schools (ACICS) in Washington, D.C.

“The Department’s requirements are really not all that remarkable,” the letter stated. “Nor are they difficult to understand. For an institution to be eligible to receive Title IV funds, it must award those funds only to eligible students. And for a student to be eligible to receive federal student financial assistance, he or she must intend to receive a degree from the institution where he or she has enrolled.”

The DOE noted in its letter that “nearly 2,000 U.S. citizens, who are Israeli residents, received Pell Grants for ‘studying abroad’ at Israeli institutions from 2006-2012 without ever studying or graduating from MJI.”

After reviewing 337 transcripts submitted by MJI, the DOE stated in its letter that “students in Israel who were enrolled in yeshivas and seminaries were studying Jewish texts and rituals, and students in the MJI online classes were studying the same subjects, leading one to question why any student would enroll in MJI other than to obtain financial aid for their otherwise ineligible Israeli program.”

The letter also outlines how 524 students purportedly pursued computer-related degrees yet failed to take a computer-related class until they either completed religious studies or withdrew from MJI without taking any computer classes. Because ACICS is not certified to accredit religious studies programs, the letter says, “MJI apparently led ACICS to believe that some substantial component of its curriculum consisted of technical education, specifically computer and business degree programs …”

In a mid-letter summary, the letter stated, “Title IV funds are not available for the benefit of institutions; they are available for the benefit of students attending those institutions. Here, MJI created a scheme with little or no regard for the integrity of the Title IV programs, and the Department, as steward of these funds, must end MJI’s Title IV eligibility.”

In a painstaking manner, the DOE letter outlines why it discards nearly all of the school’s defenses outlined in its recent appeals letter. The DOE had more than 100 boxes of files and other information from MJI’s administrative offices in Southfield to work with; federal agents seized the information last July.

MJI’s Response

Rabbi Kasriel Shemtov

MJI, in a statement issued April 20, said, “We are disappointed and saddened with the Department’s overall decision and regret the devastating affects it may have on thousands of MJI students.”

In a statement exclusive to the Jewish News, MJI attorney Peter S. Leyton said, “MJI is presently finalizing teach-out arrangements with four institutions, three in Israel and one online institution outside of Israel. Wherever possible, MJI is diligently seeking to make arrangements for these institutions to accept credits earned at MJI toward their degrees or other credentials at the receiving institution and to charge the students no more than what MJI was charging.” MJI is reaching out to students through email.

Leona Schwab of Manhattan contacted the JN before Passover with concern for her 18-year-old granddaughter learning at a seminary in New Zealand on a Pell Grant through MJI.

“I have called MJI two dozen times and no one answers,” Schwab said. “Will the students get their Pell Grants and what’s left of them back? They need the grants because college tuition is so expensive.”

According to Leyton, “Former MJI students will likely be able to continue to obtain Title IV funds provided the institution to which these MJI students transfer or which conducts a teach out by agreement is eligible to participate in the federal student aid (Title IV) programs. Provided they attend an Israeli institution, the students may be able to receive funds under Israeli-operated programs.

“MJI is seeking funds owed by the Department [of Education],” Leyton continued. “There are Title IV funds which MJI earned prior to Feb. 29, 2016, and to which former MJI students are entitled which have not been paid or released by the Department. MJI legal counsel is diligently working to get those monies paid as soon as possible.”

When the DOE issued its Feb. 25 letter denying recertification, Leyton’s statement said, “Management felt it only right to free up MJI employees so they could find other work and not be held in suspense, pending further DOE decisions.”

In similar fashion, MJI ensured that its 34 dual enrollment high school students from nine Metro Detroit schools were able to finish their Hebrew courses quickly. One parent relayed that her son and other students had to put in extra hours to do so. MJI says it hopes to offer the program again in the fall.

Meanwhile, MJI attorneys continue to review the DOE letter. The school’s general statement said, “We note that the Department’s letter does leave the door open for MJI to re-apply for Title IV, HEA [Higher Education Act] program certification in the future, and we are considering that potential.”

In the meantime, the statement exclusive to the JN said, “MJI is exploring the possibilities of restructuring and retooling MJI’s model of delivery and of upgrading MJI’s administrative capabilities in short order — all to determine if a new application as permitted under the Department’s most recent letter will serve the interests of MJI students, current and future … It is also important to note that DOE’s most recent action can negatively impact accreditation.

“As we move forward, we continue to keep foremost in mind that [MJI’s] students are most often Torah-observant young men and women who are socially and economically disadvantaged. Moreover, upon graduation, they possess unique skill sets to step into key staff and support roles in Jewish organizations in Israel and cities around the globe.”

It is unclear whether the Michigan Jewish Institute will face any civil or criminal repercussions on the part of the government because of its alleged actions. MJI’s Leyton wrote in the statement: “We are unaware of the status or future of any IG [Inspector General] investigation, but MJI will continue to cooperate as may be required.”

By Keri Guten Cohen, Story Development Editor


Federal Financial Aid Protection

Pell Grant abuse falls under the College Scholarship Fraud Prevention Act of 2000 that legislates a maximum of five years in prison or fines of up to $20,000 for perpetrators.

The act places the Federal Trade Commission, the U.S. Department of Justice (DOJ) and the U.S. Department of Education jointly as watchdogs of student financial assistance programs. Each year, the three agencies present a report to Congress outlining public awareness efforts as well as dispensation of criminal cases.

“The Act gives them the ability to actually pursue sentencing enhancement where there are examples of criminal behavior,” said James Densley, a Pell Grant fraud expert and an associate law professor at Metropolitan State University in Minneapolis.

“The Act also created an FTC website to educate the public about the most common scams for scholarships as well as a way to alert authorities if they suspect something. And the annual reports enable people to look at trends in financial aid complaints and see it’s reasonably flat — about 150 cases a year across the board. The cases they are dealing with are quite sophisticated … On average, 10 cases annually are prosecuted by the government [DOJ].”

Mark Kantrowitz, a national expert on student financial aid based in Chicago who has written numerous books on the topic and testified before Congress, says the DOE’s Office of the Inspector General handles a fair number of fraud cases a year. So far in 2016, he says, there have been six cases — some included prison time, some called for financial restitution, some required both.

By way of example, both experts outlined several kinds of financial aid fraud schemes.

Densley said Pell Grant fraud is a “specialized access crime,” where employees at a college or in a financial aid office have specialized access to Social Security numbers, addresses, names, dates of birth and can apply for a grant without an applicant’s knowledge.”

Kantrowitz says institutional cases are not uncommon. There is supposed to be a separation of duties at a school. “The person awarding aid must be different from the one who disperses aid, but sometimes they collude,” he said.

He also speaks of Pell Grant fraud rings, where financial information from people in nursing homes or prisons is used to apply for grants. “The ringleader gets the lion’s share and those whose info is used get kickbacks,” he said.

For details on federal financial aid fraud and avoiding scams, visit www.1.usa.gov/1SMvKH2.

By Keri Guten Cohen, Story Development Editor