Student Loan Fraud

Identity Fraud Scenario

A is for Accountable, F is for Fraud.

Why pay for school when you can defraud student loans and get paid for not going to school?





  • The Office of the Inspector General identified more than 85,000 recipients who might have participated in student aid fraud rings.

  • According to a report by the Office of the Inspector General, college students who are suspected of engaging in loan fraud increased 82 % in the last four years from 18,719 students to 34,007.

  • Between 2009 and 2012, student aid fraud has risen 82%.

Student loans provide a ripe opportunity for fraud for the simple reason that no one checks the student's credit worthiness during the application process. This allows the fraudster to collect tens of thousands of dollars every year until far down the line--as many as four or five years before a cheater risks being caught, and after a victim discovers that someone else took out fraudulent loans in their name.

First the fraudsters have to enroll, but identification checks at admissions offices are typically not stringent. Fake students can go straight to a campus, or take online classes, and can make up dozens of fake identities, all signed up for the same classes. When the loan checks are sent out, it includes more than tuition, which is typically paid directly to the school,--but also funds for books and living expenses. The fraudsters keep the money used for living expenses--which can be several thousand dollars per class for each fake identity.

Straw students are people who sign up for college classes with no intention of ever attending. This deceptive practice is used to collect financial aid funds, while skipping out on the learning part. U.S. Department of Education (DOE) press release details the story of a California woman who orchestrated a student loan fraud scheme and pocketed nearly $155,000 in financial aid funds before being caught.

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