According to the Office of the Inspector General (OIG) at the U.S. Department of Education, financial aid fraud is increasing, especially financial aid fraud involving on-line education. Fraud rings sometimes use stolen identities to apply for federal student aid, including federal student loans and the Federal Pell Grant.
The victims of student aid fraud often do not discover the problem until they apply for federal student aid. When they submit the FAFSA (Free Application for Federal Student Aid), they may find that a FAFSA has already been submitted using their personal information. Or they may learn that they are ineligible for federal student loans and the Federal Pell Grant because they have exhausted the financial aid program’s limits, even though they have not previously enrolled in a college or university. Federal student loans are subject to annual and cumulative loan limits and the Federal Pell Grant is subject to a lifetime eligibility limit that is the equivalent of 12 academic terms.
When a financial aid fraud ring uses a stolen identity to obtain federal student loans, the victim can seek an identity theft discharge of the student loans falsely obtained in his or her name. This is a difficult process, in part because it requires the student to provide a copy of a court judgment that conclusively determines that the student was the victim of identity theft. The court judgment must identify the perpetrator of the identity theft. Effectively, the victims of identity theft are considered guilty until proven innocent.
But, at least there is a process for cancelling student loan debt for victims of identity theft. There is no formal process for a student to regain eligibility for the Federal Pell Grant after a fraud ring has fraudulently received grants in the student’s name.
To prevent identity theft, be careful about releasing personal information to anybody who does not have a legitimate need for it. Be especially careful with regard to the following types of personal information:
Do not share the FSA PIN or FSA ID with anybody, even if they are helping complete the FAFSA. The FSA PIN and FSA ID are electronic signatures, used to sign loan promissory notes in addition to the FAFSA.
Other tips for preventing identity theft include:
The Office of the Inspector General (OIG) concentrates on shutting down the largest financial aid fraud rings. The OIG also helps develop better tools for detecting and preventing financial aid fraud. For example, the U.S. Department of Education introduced identity verification last year to require schools to verify the identity of students with an unusual enrollment history, such as receiving financial aid at multiple schools in a single year. The new identity verification requirement blocked financial aid fraud involving more than 100,000 victims last year.
Signs of identity theft involving student financial aid may show up in credit reports and in the National Student Loan Data System (NSLDS).
Visit these web sites once a year to monitor for possible identity theft, including identity theft that involves student financial aid funds.
Fraud involving federal student aid funds, including identity theft, may be reported to the OIG at the U.S. Department of Education by calling 1-800-MIS-USED (1-800-647-8733) or sending email to firstname.lastname@example.org. Complaints may also be filed online at www.ed.gov/misused.
Students can also call the Federal Student Aid Information Center, a toll-free help line sponsored by the U.S. Department of Education, at 1-800-4-FED-AID (1-800-433-3243).
Identity theft can also be reported to the Federal Trade Commission (FTC) by calling 1-877-IDTHEFT (1-877-438-4338) or filing a complaint at www.consumer.ftc.gov/idtheft.
Victims of identity theft should also file a police report with their local police and notify the three credit bureaus.
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