Student Loans: Rampant Fraud May Be Affecting Millions of People

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.”