Student Loan Fraud
By Jon Coss, CEONovember 16, 2017
Anyone who has recently attended college or has a family member in college likely has some familiarity with student loans. In fact, 40 million Americans currently have student loans totaling an astounding $1.2 trillion dollars. Many of those who have applied for loans have been victimized by methods such as “advanced fee scams” that promise the best rate for an upfront service fee, or the ever-present loan elimination scams.
With easy access to stolen identities, fraudsters are now targeting the more lucrative loans themselves. Using stolen IDs, they enroll in classes which they, of course, never attend. Loans are made by the government, payments are not, and the unsuspecting “owner” of the loan goes into default when the fraudsters don’t make their payments.
In Grand Rapids, Michigan, a man was indicted last month for this exact scheme. He faces up to 20 years in prison for allegedly using stolen IDs to steal $150,000 in loans and grant aid. A quick check of the government’s paymentaccuracy.org website shows that he is not alone. Between the William D. Ford Federal Direct Loan Program and the Federal Pell Grant Program, $6.1 billion was improperly paid in 2016 alone.
While many of the improper payments are made to people who simply do not qualify based on income, an increasing number of loans are being made to outright fraudsters. Some estimates place the number of known fraud ring participants as high as 85,000 people. This victimizes the taxpayer, of course, but even more directly the person whose identity is stolen. It can take months or even years to clean up your credit. That’s one lesson I hope I never need to learn.