My fiance's teacher is messing with his education, I need to know how much of what she's claiming is true.?

My fiance and his little brother are going to a school for students with learning disabilities. Julian (the fiance) is dyslexic and Lucas (the brother) has a high functioning autism. The boys both recieve the McKay scholarship and recieve $7000 a year towards tuition. Last year, while Julian was only 17, the teacher borrowed $1000 from him, and is continuously putting off paying him back. Recently she sent him an email (which she said we misinterpreted) that seemed to put the debt off on him and say that she didn't owe him the money because they didn't pay the full tuitin due at her school, $10,500 per year. When she accepted Julian and Lucas, she knew that this was going to be the case, and she was fine with that knowledge. There are a few other things that were tossed around that don't have real bearing on that part, but the underlying theory is that Julian is not responsible for what she agreed to forfeit when they enrolled and she still owes him the money. Is that right? Also, while we haven't taken action on it, and don't plan to so long as she gets things right from now on, she falsified their transcripts and hasn't yet told the state that Julian is no longer living with his mother and therefore isn't eligible for the scholarship he recieves (she has filed the paperwork for it since his mother did it the first time). We're looking at this as falsifying doents and misappropriation of government funds, in addition to the fact that she still lists a number of other students as still being enrolled in her school when in fact they do not attend. I wrote her an email after she sent Julian the one that we all "misinterpreted" and when she called him afterwards she got angry and said that I was threatening her (I only advised her that if she refused to pay him back we were going to seek legal council and that if she didn't get them on track with school we'd turn her in for her numerous mistakes on the education front), and that we would be the one to get in trouble for the scholarship misappropriation that she files for. What can we do with this?