Student Loan Scam Unravels


College is expensive. The costs add up quickly? books, tuition, and food – students have to eat – and room and board can easily reach into the thousands, if not tens of thousands of dollars, per year. If you’ve ever been a student or are supporting a student, you know what I mean. Fortunately, the federal government provides student loans through the Federal Student Aid (FSA) program, helping countless students afford to get an education. But that program, like so many other government programs, can be defrauded – and that’s the case in today’s fraud from the

The article reports that two Mississippi residents recently pleaded guilty to submitting false Free Applications for Federal Student Aid (FAFSAs). The two defendants, who face up to five years in prison and a $20,000 fine, ”are among 12 individuals indicted in the scam to submit false applications for financial aid.’? In pleading guilty, they admitted to receiving thousands of dollars in financial aid to take online courses at a community college in Colorado. They never took a course; in fact, neither of them had a high school diploma or GED. The college ”reported the situation to the U.S. Department of Education after all the students received failing grades because they didn’t participate in any classes.’? (They get an ”F” for fraud, but an ”A” in paperwork.)

According to the government, ”the scheme netted about $52,800.’? The two defendants referenced by the article received credit vouchers of $6,541 and $2,843 beyond what the government paid the college for the courses. They say a third defendant told them to file ”their applications and told them where to cash the checks. They said they each gave [the third defendant] $800 of the money they received.’? One defendant said she spent $2,500 of the money on a car. (Of course, fraudsters love their cars.)

Student loan fraud – like so many other types of fraud – can be perpetrated by a single fraudster or, as in this example, as part of an elaborate scheme. In either case, the devil (fraud) is in the details (data). And, the solution is simple? by leveraging public records and data analytics technology, government loan and benefits programs can identify red flags for fraud and prioritize cases for further investigation. So, the question for the day is? what’s stopping your program from implementing a public records and data analytics solution?

Source: Today’s ”Fraud of the Day” is based on an article entitled, ”Pair Admit Student Aid Fraud,” written by Jimmy Gates and published by the on April 3, 2012.

Shanika Smith and Cedrick Thomas of Noxubee County received thousands of dollars in federal financial aid to take online college classes at a Colorado Community College, but neither had a high school diploma or a GED.

And neither ever participated in any education work at the college.

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Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.