[Fraud Trends Series] Trend #1: Student Loan Debt

Multiracial students are walking in university hall during break and communicating.

To say that the COVID-19 pandemic has disrupted our lives is an understatement. Consider the toll on physical and mental health, the changes in work life, supply chain issues, and problems with the global economy, just to name a few. Prior to the pandemic, many people were already living paycheck to paycheck and trying to figure out how to pay rent, utilities, and other expenses. Not to mention paying off their student loans.

As if the 43.4 million borrowers with federal student loan debt totaling $1.75 trillion didn’t already have enough to worry about, it now looks like there are rising reports of student loan scams. (What else could possibly go wrong, am I right?)

Federal student loan payments which have been on pause since March 2020 when COVID-19 really started ramping up, are set to restart May 2, 2022. (And so will the opportunistic individuals who are using the pandemic as an opportunity to keep ripping off their victims.) In 2021 alone, the Federal Trade Commission (FTC) paid out millions of dollars in refunds to unfortunate victims of student debt-related scams. (Take a look at these scam-related press releases to get an idea of the tremendous impact of many different types of student loan fraud.)

Take, for instance, a scam that recently occurred in California involving 65,000 fraudulent financial aid applications that were filed by “students” who were most likely bots. Officials from the California Community Colleges (CCC) system became suspicious during a routine check of federal financial aid records. To their surprise, there was a dramatic increase in first-time applicants over the age of 30, who earned less than $40,000 a year. (Most likely the scammers were targeting the federal relief money the colleges received during the COVID-19 pandemic.) CCC officials believe that this issue was caught just in time to avoid distributing any financial aid. (Let’s hope so.)

The Student Borrower Protection Center highlights two common types of student loan scams in particular. The first one involves a company charging to enroll the borrower in a benefit that could have been accessed for free, such as a federal income-driven repayment plan. Essentially, scammers enroll a borrower in a loan deferment program in exchange for payment. The second scam offers forgiveness by taking your money and well, basically running. (Remember: Anything that sounds too good to be true…Probably is.) 

What do you do if you’ve already been scammed? Act fast.

If you’ve given out your password, change it immediately. (You don’t want criminals to have access to your FSA ID or your servicer account.) Next, report the scam to the Federal Trade Commission, your state attorney general, and the Consumer Financial Protection Bureau. Lastly, consider hiring a good lawyer. (There are some good ones out there.)

So, if you’ve been fortunate enough to avoid student loan scams thus far, maybe you’re now wondering how can you protect yourself going forward as repayments resume? (Congratulations! You’ve asked the right question.) If you are contacted by a company offering student loan forgiveness, just hang up. (Can you say, “dialing for your dollars?”.)

Verify the legitimacy of a company offering you help by visiting third-party sites such as the Better Business Bureau. Another option is to research the company’s name online and see if any negative information pops up. (Remember: Anyone can buy a domain name and pop up a website. It’s what’s behind the online storefront that is scary.)

So, what’s the bottom line?

Have a plan now to prevent becoming a victim of student loan fraud later. That’s a lot easier than fixing the problem after it has already happened.



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Larry Benson, Senior Director of Strategic Alliances, LexisNexis Risk Solutions - Government

Larry Benson is responsible for developing strategic partnerships and solutions for the government vertical. His expertise focuses on how government programs are defrauded by criminal groups, and the approaches necessary to prevent them from succeeding.

Mr. Benson has 30 years of experience in sales and business development. Before joining LexisNexis® Risk Solutions, he spent 12 years founding and managing two software technology startups. During the 1990s he spent 10 years as a Regional Director helping to grow a New England-based technology company from 300 employees to 7,000. He started his career with Martin Marietta Aerospace working on laser guided weapons and day/night vision systems.

A sought-after speaker and accomplished writer, Mr. Benson is the principal author of “Fraud of the Day,” a website dedicated to educating government officials about how criminals are defrauding government programs. He has co-authored WTF? Where’s the Fraud? How to Unmask and Stop Identity Fraud’s Drain on Our Government, and Data Personified, How Fraud is Changing the Meaning of Identity.

Benson holds a Bachelor of Science in Physics from Albright College, and earned two graduate degrees – a Master of Business Administration from Florida Institute of Technology, and a Master of Science in Engineering from Lehigh University.