Request a live demo for Students,
Institutions, or Professionals

Request a Demo

Financial Aid Fraud Rings and What They Mean for Institutions

Published: October 27, 2016 | Category: Blog Posts, Latest News

A financial aid fraud ring is a form of theft that takes advantage of the large amounts of federal student aid afforded each year.

A financial aid fraud ring is a form of theft that takes advantage of the large amounts of federal student aid afforded each year.

Simply put, a financial aid fraud ring is a form of theft that takes advantage of the large amounts of federal student aid afforded each year. As part of a scam, a straw student takes on the role of a student. A recent white paper explains, “Using the straw student’s information, the ring can . . . apply for admission to online education programs and secure financial aid.”

If an operation uses a straw student, identity theft is not committed because the person whose identity they are using gives permission in exchange for a portion of the money. However, some operations attack unsuspecting people, stealing their identities and enrolling them in college classes in order to collect financial aid such as student loans or grants.

Individuals taking part in these types of operations are advanced criminals. The above-mentioned white paper states: “[a]ccording to a report from the U.S. Department of Education Office of Inspector General, financial aid fraud rings caused a loss of $187 million in federal student aid between 2009 and 2012.” During this time, it is estimated that financial aid fraud grew about 82 percent, involving more than 85,000 persons in these scams. Red flags to look for include: students repeatedly attempting to receive the maximum amount from their student loans; students signing up for certain classes, never attending, and then dropping the courses after the first couple of weeks; and students who never complete any work associated with a course for which they’ve signed up.

Columbia College in Missouri, one of the institutions hit by this type of theft in recent years, is hitting back. A case study shows that the college has saved “nearly $6 million in financial aid funds” by using “[i]dentity management systems and authentication services. . . provided by ProctorU.” Columbia College and many other institutions are benefiting from ProctorU’s innovative, multi-layer authentication process that prevents criminals from committing fraud against the financial aid system. For more information, please visit www.proctoru.com.