Fake Students Steal College Grants

"By the time colleges realize they’ve been scammed, it’s too late. Swindlers enroll long enough to receive federal grants paid through the school and then drop out," The Columbus Dispatch reports

"Many never attend a class. They keep the money — totaling an estimated $187 million nationally over four years — and then vanish.

Some schools have raised tuition to cover their losses. Efforts to track down the scammers often lead to unsuspecting people whose identities were stolen and used to take out financial aid. Their credit scores plunge.

New measures to catch scammers at Columbus State Community College have led to some improvement, officials there said. Like other colleges, Columbus State is on the hook to repay the government when someone gets away with the scheme, though the school has not raised tuition in response.

Losses from variations of the scam have grown rapidly in recent years, federal education officials have reported.

Community colleges and online programs have been the primary targets. The Pell grants sought under the scheme must cover tuition costs before schools turn the rest of the money over to students, so lower tuition translates to a larger check. ... 

It’s difficult for schools to pinpoint how much they lose. Students who withdraw and don’t return their financial aid for any reason leave similar paper trails. Columbus State has been losing about $4 million a year from all of those cases, at least some of which is a result of fraud, officials said.

Federal investigators have uncovered rings of as many as 400 people orchestrating schemes to draw federal aid, commonly using stolen identities. One person can enroll under dozens of names at numerous colleges, sometimes collecting as much as $5,000 per name in annual federal financial aid.

Fraud diverts grant money from students and leaves schools in debt, but its ripples reach beyond the world of education. As happened to a Reynoldsburg man, identity-theft victims can end up in debt to schools they never attended.

Changes by schools and the federal government this academic year aim to curtail fraud, but college leaders say security has a tradeoff.

Schools that once took pride in their simple application processes are making them more complex. New national rules require financial-aid offices to spend more time investigating possible fraud. Students must wait longer to receive their financial aid and are asked more often to prove their identity.

'Everybody’s trying to find that right balance,' said Karen McCarthy, a policy analyst for the National Association of Student Financial Aid Administrators. 'You don’t want to completely go overboard and make it such a burden for students doing what they’re supposed to be doing to get the funds they need.'"

 

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