Student Loan Fraud (Part II)
by TheCommuter 2,524 Views | 5 Comments Senior Moderator
An increasing number of scams involving government and private student loans are flourishing in this currently sluggish economy. The intended purpose of this two-part essay is to examine the growing problem of student loan fraud.
- 4 Published Aug 2, '12
Financial aid fraud is on the rise in the United States during a slumping economic situation that has prompted record numbers of nontraditional students to return to college. Due to the steep increase in the quantity of online courses, the evolution of technology, and the cloak of anonymity bestowed upon shady individuals by the world wide web, slick criminals are perpetrating student loan fraud in record numbers.
But with thousands of colleges and universities potentially eligible to receive federal money, and more than $100 billion in new aid disbursed annually to some 14 million borrowers, the Department of Education "faces a formidable challenge in ensuring that...funds reach the intended recipients," Deputy Inspector General Mary Mitchelson said in a recent report (Khalfani-Cox, 2010). Part one of this two-part essay discussed several types of student loan scams such as 'Pell-running,' straw students, and falsifying documents to get admitted into schools with selective admissions. You are now reading part two, which will examine other types of student loan fraud.
The advance fee scam is growing in popularity. This fraudulent scheme involves con artists who offer student loans, but convince unsuspecting borrowers that they must first pay an origination fee upfront before the money can be disbursed. This 'origination fee' is usually 3% to 5% of the entire loan amount, but the con artists disappear once they receive the money. Legitimate government and private student loans usually do not demand upfront fees. If any fees are involved, the financial entity who originated the loan will deduct from the disbursement check, but no money is ever required upfront to secure legitimate student loans.
The debt elimination scam is another way to defraud people. Under this scheme, a crook posing as a financial counselor will lie to unsuspecting applicants by claiming that, in exchange for a fee, he or she will discharge one's entire student loan debt balance. Once the so-called 'financial counselor' collects the fees, he or she vanishes with the applicant's money. Student loan debt cannot be written off or discharged in bankruptcy unless the circumstances are extenuating, so anyone who claims to be able to eliminate this type of balance is most likely a con artist.
The student loan consolidation scam is an additional way to bilk people out of their hard-earned dollars. This scheme preys upon borrowers who want to consolidate their student loans to reduce their monthly payments. A con artist posing as a loan officer will claim to consolidate the potential borrower's loans in exchange for upfront monies disguised as 'processing fees,' or 'consolidation surcharges,' but the so-called 'loan officer' is never to be seen again once he or she collects the money. Here's a rule of thumb: government student loans can be consolidated for free. Any person who demands upfront fees for consolidating student loans is most likely a crook.
Student loan fraud is an increasing problem during a time when millions of students desperately need the money from federal and private sources in order to pursue their educational goals. If something seems too good to be true, it probably is.Last edit by Joe V on Aug 2, '12
TheCommuter is a moderator of allnurses.com and has varied workplace experiences upon which to draw for her articles. She was an LPN/LVN for four years prior to earning RN licensure.
TheCommuter joined Feb '05 - from 'Fort Worth, Texas, USA'. Age: 33 TheCommuter has '8' year(s) of experience and specializes in 'acute rehab, long term care, and psych'. Posts: 27,219 Likes: 38,668; Learn more about TheCommuter by visiting their allnursesPage Website0Aug 4, '12 by ctmedWhen I went to school for IT for the AAS (hmmm... see where that got me...CNA...lol), there was another scam common on IT boards like DICE. Now, medical is a bit protected from it because you have a pretty well regulated liscensing system. But there are zero standards in that field. You would have folks come in offering expensive week long boot camps for extremely hard IT certifications like CCNA. They also claimed they where part of an agency who would hire if they passed.
Here is the catch - The CCNA cert is insanely hard and requires many semesters study. Many with BS in Computer Science flunk this 2-3 times routinely. So, taking it in a week? Even if you do pass, they are off in another state and you are stuck with no cert and about 2-3k in debt. And, even if you DO pass, the cert is worthless without experience. A feather in the cap, because everyone knows how hard it is, but worthless.
Of course, you used to could take out "continuing education" loans for that, and they would be happy to set you up.0Aug 4, '12 by TheCommuter Senior ModeratorQuote from ctmedYes. Fraud is ripe in most, if not all careers. Con artists have a knack for feeling a person out and taking advantage of peoples' desire for anything that seems quicker and easier. If anything seems too good to be true, it probably is!Of course, you used to could take out "continuing education" loans for that, and they would be happy to set you up.0Aug 5, '12 by TheCommuter Senior ModeratorQuote from Bloomgirl118And due to the sluggish economy, more con artists and unethical people are coming out of the woodwork to try to extract as many dollars as possible from unsuspecting victims who desperately need their money. The aftermath of financial scams is usually devastating, especially for low-income people and moderate-income workers who do not have much of a monetary cushion to begin with.Great article. There is always someone out there trying to part people from their money.0Aug 6, '12 by SsgKenNothing new. I bought a 1953 Popular Mechanics magazine for a dime at a rummage sale and it was full of scam schools to lure GI bill money from veterans. I once paid $10 for a sale of text books from an electronics school because it had state of the art Photovoltaic panels. How could I lose to only pay $10 for university level books? Turns out they were from 1937.