This blog is part of a special series featuring top fraud trends predicted for 2023.
Hearing the news headlines from this past year, did anything stand out more than others? Supreme Court battles? Ukrainian War? Harry and Meghan? How about Student Loan Forgiveness? Because that is the headline the fraudsters saw for 2022. Student loan fraud was already a fraudster favorite since it’s so easy to steal a child’s identity. But now they had a post-loan scam opportunity as well to make 2022 the best year ever to be a fraudster.
Young adults ages 18-24 are more likely to experience identity theft, for many reasons. First of all, students are filling out forms and applications continuously, for everything from job applications to college applications and for student aid and loans. This age group is very vulnerable because most are doing things on their own for the first time. They tend to be less guarded and less cautious with personal information, making it is easier for a fraudster to gather the personal identifying information.
Second, they are often less vigilant about preventative security measures, like pulling credit reports and safe browsing and social media. This is exactly what criminals are banking on. If you don’t check your credit report regularly, you don’t know if someone else is using your identity for financial gain. Most federal student loans don’t require a credit check. As a result, it’s really easy to qualify for federal student loans.
With that said, we see two big types of student loan identity theft:
- Federal or private student loans opened under the student’s name.
- Parent PLUS Loans where a child opens the loan without the parents’ knowledge or consent (we aren’t going to discuss this particular fraud, because there are a lot more things that need to be talked about here!).
It’s important to know that, in order to get a student loan, the borrower must be enrolled in school. If a fraudster has filed for a student loan with a stolen identity, chances are they have also enrolled the stolen identity into a school.
Case in point, on October 3, 2022, Texas Southern University adjunct professor Emmanuel Finnih was indicted for stealing $600,000 in fraudulent student loans by enrolling thirty-two “students” in Texas colleges and submitting their loan applications for personal gain. Finnih used the students’ personal identifiers to prepare, submit and sign financial aid applications and master promissory notes. He also used mailing addresses, telephone numbers and email accounts he controlled to make sure communications and funds went directly to him.
Finnih wasn’t exactly scrupulous with his identities. At least one of the stolen identities was from a person who was incarcerated at the same time Finnih submitted the application. He sometimes also altered women’s names to appear masculine so he could use his own photos in the applications. And that is how easy it is to get a student loan!
But why would somebody take out student loans if they don’t want an education? The truth is, while federal loans are disbursed to students to use for educational expenses, these identity thieves can in fact take the money and use it for other purposes. No one knows that a loan has been taken out in their name, until they graduate from school. But by then, the fraudster is gone and the student is now a victim.
The Biden Administration’s announcement of student loan forgiveness in 2022 released a whole new slew of fraudsters. Fraudsters thrive on chaos and confusion, and they capitalized on student loan forgiveness scams, stealing about $5 billion from Americans hoping for student loan relief. Before the announcement, fraudsters were sending between 2 million and 3 million student loan scam texts per month. In August, that monthly total rose to 9 million.
We have a responsibility to protect young adults who are being victimized by fraudsters. There is a lot of work to do, at the very least tightening eligibility for student loans and implementing biometric software as part of the application process. Far too many youths remain vulnerable. It is their future that is in our hands.