Beware of Financial Aid Scams

Student financial aid fraud can carry a prison sentence of up to 20 years, but despite these consequences, economic hardships and the growing prevalence of online degree programs has led to an uptick in financial aid scams. As noted in a recent article in The Arizona Republic, large, for-profit schools like the University of Phoenix have stepped up measures to spot suspicious students and monitor their activity in light of these scams.

According to the Department of Education’s Office of the Inspector General, nearly 100 financial aid fraud rings are currently under investigation. The scheme involves setting up fake students to enroll in distance-learning institutions — usually for-profit schools — and keeping a percentage of any federal aid the student acquires through the school. In some recent cases, individuals have been convicted of using stolen personal information in order to fraudulently enroll in online classes. Once enrolled, financial aid refunds were collected, as was the case with an ex-convict in South Carolina who pled guilty to one count of federal student financial aid fraud and was sentenced to four years in prison. A similar case was also recently tried in El Paso, Texas, where one man stole over $37,000 in federal aid by applying to five colleges using other people’s personal information.

While these particular schemes do not directly target students of online schools, many others do. How can students spot the signs of financial aid swindlers and protect themselves?

  • Avoid scholarships or grants that require fees. If you come across any financial aid that charges you to process applications or requires any kind of "up-front investment," it is usually a scam. Remember that filing the FAFSA is free!
  • Avoid sharing bank account or credit card information with anyone who asks for it. Legitimate student aid will be disbursed through your school’s financial aid office. In some instances, you may be given a check. Sharing bank account numbers or credit card numbers is a fraudulent practice used to steal money from your accounts, rather than put any money into it.
  • Avoid misrepresented claims. Maybe you’ve seen statements that "millions of dollars of aid go unclaimed every year" that can lead you to mistakenly believe that there is money out there for the taking. According to the Department of Education, these millions of dollars refer to employee benefits and have little to do with student aid.

Financial aid scams not only cost institutions millions of dollars, but can directly harm students as well. Protect your identity by refusing to share personal information with others, and avoiding scholarships and grants that seem too good to be true. If you suspect that student financial aid fraud is taking place or come across any false applications or suspicious websites, it is best to report it to the Federal Trade Commission.

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