Who’s Guilty of Shocking Student Loan Fraud?
June 13, 2013

As if the student loan crisis wasn’t bad enough, a recent semi-annual report to Congress, the Department of Education reveals how high student aid fraud has grown. Some of the student loan fraud in the report is identity theft, but what’s even more shocking is the level of fraud activity perpetrated by colleges themselves in order to rake in bigger profits. Read on for the high points of this exposé: 

#1 Student Aid Fraud Is on the Rise

Between 2009-2012, student aid fraud has risen 82%! Over 85,000 potential fraudsters have been sussed out by DOE and the total dollar amount of fraud over the last four years alone exceeded $874 million. This is the last thing our student loan system needs.

#2 For-Profit Schools Are Abusing the System

Fines ranged from the low six figures to as high as $4 million in penalties for instructing students to lie on the FAFSA, enrolling “ghost” students to get student aid, allowing online sister schools to use the brick and mortar school’s Title IV eligibility to rake in Federal aid and violating the False Claims Act! And by the way, if you work for a college or other entity that’s abusing the Federal student aid system, you can be a whistleblower and blow the lid off the sketchy activities. 

#3 Criminal Fraud Is on the Rise  

In the last six months alone, the Inspector General conducted 126 fraud ring investigations, scored 407 indictments and recovered millions of dollars of ill-gotten student aid booty. Some of the criminal fraud rings recruited participants to provide their information for fake enrollments and FAFSA applications and shared in the booty. Still other fraud rings simply stole identity information to do the same. Punishments rendered included probation, jail time and restitution.

#4 Student Aid “Assistance” Firms Investigated

We’ve said it before, but you don’t need to pay for help to get student aid information that’s available for free. One organization – Graduate Assistance and Consolidations – helped ineligible people enroll in college and scam financial aid, recruited “straw” students to enroll in school and apply for financial aid for a cut of the take and other bogus tactics to syphon money illegally from the student aid system!


There are a couple of points to take away from this. First, don’t pay for help completing your FAFSA or finding financial aid resources. All of this information is available for free and if you need help, your school guidance counselor is a better resource. Also, leave off or mark out your social security number if you’re going to let someone else look over your form before you submit it.

Second, there is no “secret” source of untapped financial aid that companies can magically help you find. Between your high school guidance counselor, the admissions and financial aid office of your college and the internet, you have access to all scholarships, grants and financial aid programs.

Don’t believe anyone who says there are millions (or billions!) of dollars of scholarships and grants that go unused. The ones that aren’t tapped are ones that are highly specific – for instance a scholarship for someone of a specific ethnicity or religion, attending a specific school and majoring in a specific interest may not be applied for because it’s very narrow. But seriously, there is no reservoir of secret scholarships that any of these firms can unlock for you.

Third, if anyone tries to convince you to participate in student aid fraud and promises you that no one will be hurt and you can share in a cut of bounty, RUN in the other direction. Once you’re caught, you’ll have to pay back all of the money plus you’ll face criminal charges! Don’t do it.

For those of you with student loans you got honestly – check out Tuition.io’s free student loan tool! You can see all of your loans (both public and private) in one easy interface, track your status, check out repayment plans and more! Also enjoy some of our other recent blogs:

Beware a Dodgy Service that Promises Financial Aid Resources

Top Resources for Student Loan Borrowers

4 Ways to Get Your Bachelor’s on the Cheap

Countdown to Admissions Deadline: Last Minute Financial Aid Tips