Philadelphia, PA – United States Attorney Jacqueline C. Romero announced today that Thomas Jefferson University will pay $2.7 million to resolve allegations that it misused and improperly retained federal funds intended to be used for student loans.
The allegations arise from a loan program established by Congress to address the nation’s shortage of primary care physicians. Under the program administered by the U.S. Department of Health and Human Services’ Health Resources and Services Administration (“HRSA”), the government issues a Primary Care Loan award to a medical school to establish a revolving loan account to provide loans on favorable terms to students willing to commit to practicing in primary care for ten years after completing their medical degree (a “PCL Fund”). Under the terms of the program, participating medical schools must loan monies in the PCL Fund to medical students who meet the program’s qualifications. The school is to add any earnings that accrue on the PCL Fund back into the fund, thereby increasing the monies available to lend and expanding the program’s impact. Any monies in the PCL Fund that exceed a school’s PCL Program lending needs must be returned to HRSA annually so they can be made available to students at other medical schools participating in the program.
The settlement resolves allegations that between 2009 and 2016, Jefferson invested nearly all of its PCL Fund with its endowment, and retained the resulting earnings for its own purposes, in violation of loan program terms. Specifically, the settlement resolves allegations that Jefferson improperly invested federal monies expressly intended to be loaned to qualified medical students to finance their medical education, and retained all returns gained from that investment. These actions allegedly violated HRSA student loan program requirements that: (1) program monies be used only for loans to students and program-related expenditures; (2) any excess cash in the PCL Fund (any amount of the monies not actively on loan or projected to be in the near future) be kept in federally insured accounts “whenever possible;” (3) all earnings accrued on the PCL Fund be placed into the fund to be used to further the program’s purpose; and (4) any excess funds not needed for student loans, including any earnings accrued on any idle funds, be returned to HRSA annually.
Jefferson returned approximately $5.6 million of excess cash in the PCL Fund to HRSA in 2017. The settlement announced today resolves claims relating to the earnings Jefferson is alleged to have gained as a result of its investment of the PCL Fund between 2009 and 2016, and its retention of those earnings, in violation of program terms.
“The Federal financial aid money in the Primary Care Loan program must be used for its intended purpose or returned to the program,” said U.S. Attorney Romero. “When a medical school wrongfully retains Primary Care Loan program funds that exceed its lending needs, it doesn’t just deprive students at other participating schools the opportunity to use that money to finance their educations. It deprives our communities of the very resource the program was implemented by Congress to provide—primary care physicians to keep them healthy and strong. Our office is dedicated to helping HRSA and our other federal partners maintain the integrity of their programs, and to ensure that taxpayer dollars are used for their intended public good and not private investment income.”
“When schools agree to participate in the Primary Care Loan program, they must carefully account for these federal funds to ensure that taxpayer dollars are used for public good. When a school wrongfully keeps these funds from the program, it prevents other recipients from using them to meet the primary care needs of the community,” said Maureen R. Dixon, Special Agent in Charge for the Department of Health and Human Services, Office of Inspector General (HHS-OIG). “We will continue to work with our partners at HRSA and the U.S. Attorney’s Office to investigate allegations relating to any misuse—including wrongful retention—of federal funds.”
“HRSA takes proper management and oversight of financial assistance seriously,” said Cynthia Baugh, HRSA’s Associate Administrator of the Office of Federal Assistance Management and Chief Grants Management Officer. “We appreciate the collaboration with the U.S. Attorney’s Office and will continue to actively work with our law enforcement partners when we identify potential misuse of federal funds.”
The investigation was conducted by the Office of the Inspector General of the U.S. Department of Health and Human Services and the United States Attorney’s Office for the Eastern district of Pennsylvania. The investigation and settlement were handled by Assistant United States Attorney Lauren DeBruicker, Auditor Dawn Wiggins, and Fraud Investigator Jeffrey Braun.
The claims resolved by the settlement are allegations only; there has been no determination of liability.