January 25th, 2012 Fraud is a Problem at For-Profit Colleges
By the AllClearID Team
Juan here from the AllClear ID investigation team. We’ve talked about how college students are at a high risk for identity theft, but for-profit schools (think University of Phoenix and Kaplan University) seem to have an unusual amount of student loan fraud. People who have attended for-profit schools have noticed that they have student loans in default or in collections that supposedly went to their school. Kaplan University is a big perpetrator. In fact, it has been linked to a federal investigation, and many state Attorney General offices have been filing complaints or investigation requests for it.
The fraud cases don’t have a specific geographic center, though I have noticed more cases in California, Nevada, and Arizona. FAFSA student aid can be applied for and accepted online very easily. From the people I’ve spoken with the fraudulent loans seem to have all stemmed from online applications. FAFSA only requires one to create a four-digit PIN to access applications and accept offers from its site. Read this New York Times story about one woman, sent to prison for forgery, who filed applications for financial aid and admission to Webster University on behalf of 23 unknowing inmates, and got the $467,500 in requested aid sent in the form of debit cards to the residential address she supplied.
It becomes incredibly difficult for a victim to prove he did not apply nor accept the offer, and these debts can be very large, going into the tens of thousands. Furthermore, the amount of companies that these student loans and debts can be passed through can make it rather difficult to track down the origin of a student-aid request, as well as who to work with to settle the matter.
FAFSA’s webpage seems to be the biggest problem. It is much too easy to create a PIN with three basic pieces of information – your name, date of birth, and Social Security number. There is no credit check or verification done after submitting a request for a PIN. FAFSA’s site does have a disclaimer that entering false or fraudulent information will result in a $20,000 fine and/or jail time, but it does not appear to be enforced. Also, there are some cases where it seems like the loan officer at these schools is the perpetrator. The U.S. Department of Education seems to be getting more aware of identity theft scams and offers information about how to protect one’s student aid information and how to report scams at its MISUSED website.
Views expressed are the personal views of the author and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.