Identity Theft Affects Federal Student Aid Applicants

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.

Tips for Preventing Student Aid Identity Theft

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:

• Social Security Number (SSN)
• Date of Birth
• Bank and Credit Card Numbers
• Federal Student Aid (FSA) PIN or FSA ID

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:

• Review a web site’s privacy policy before using the web site.
• When using a public computer to file the FAFSA or other forms containing sensitive information, close the web browser afterward.
• Shred documents that contain sensitive personal information before discarding them if the documents are no longer needed.
• If the student has a state driver’s license, he or she should provide the driver’s license number when filing the FAFSA.

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.

Tips for Detecting Student Aid Identity Theft

Signs of identity theft involving student financial aid may show up in credit reports and in the National Student Loan Data System (NSLDS).

• Federal education loans are reported to the three major credit bureaus. If a fraud ring is using a student’s personal information to apply for student loans, these loans will show up on the student’s credit reports. Students can get a free copy of each credit report once every 12 months through the web site www.annualcreditreport.com. (Beware of lookalike sites that charge a fee for access to the credit reports or for additional products or services.)
• NSLDS provides a record of all federal student aid received by a student. A student can check whether federal student aid has been received in his or her name by accessing NSLDS at www.nslds.ed.gov.

Visit these web sites once a year to monitor for possible identity theft, including identity theft that involves student financial aid funds.

Tips for Reporting Student Aid Identity Theft

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 oig.hotline@ed.gov. 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.