Student Loans: Rampant Fraud May Be Affecting Millions of People


PG Veer Contributor
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A vast network of identity theft may have affected as many as 5 million people in order to get fraudulent student loans, reports Watchdog.

In total, these thefts gave the fraudsters $187 million (over 36 percent of all loans) according to a 2013 report by the inspector general for the Department of Education.

Well-organized “fraud rings” received all this money, and their numbers swelled from 18,000 people in 2009 to 34,000 in 2012. To date, the IG got back a mere $10.8 million — less than 6 percent of the total amount.

This massive fraud happened, among others, with online education, according to a previous report from the IG in 2011. The report stated that online education, while improving access, helps with anonymity and increases fraud. At the time, some 10,000 people allegedly participated in fraud rings registering “straw students.”

“Applicants and enrollees are not required to have their identities confirmed, and because institutions do not always otherwise verify students’ identities,” the report states. With a valid date of birth, name and Social Security number, anyone can get a loan – especially online — since the system is “designed to encourage electronic access to [student loan] assistance.”

2014 report exposed other weaknesses. The IG affirmed that every private collection agency collecting personal information had operated an average of eight months – sometimes up to 12 months – without the proper security clearance during the renewal of their three-year security clearance. “Without a valid authorization to operate, the Department has no assurance that the PCAs’ systems had effective security controls, which means that they could have been vulnerable to attack,” he stated.

And according to his data, there were many vulnerabilities – 833 as of December 2013. The PCAs addressed nearly all of them, but in an average of two months.

In addition, the IG reports that the PCAs did not monitor attendance to “the mandatory annual security awareness training required by the contracts between [them] and the Department.” Nor does the Federal Student Loan Administration actually give any official certifications.

And learning about whether this fraud affected you or not will take time, if at all. “You may never know, because government funds like a Pell Grant doesn’t show up on your credit report. Or you may find out [when] you fill out [for] Federal Student Aid,” said Haywood Talcove, CEO of LexisNexis to Watchdog.

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