Earning a college degree says a couple of things about someone.  It shows that the individual can finish what he or she starts; that he or she has met certain, often rigorous, educational requirements; and that he or she values an education.  It is also means that someone has a pretty important credential for getting a job.  Of course, receiving a college degree is a lot of hard work and can be expensive.   Fortunately, for those who are financially strapped and would be otherwise unable to pay for school, the federal government offers a student loan program.  High school graduates and equivalents that plan to further their education are eligible to complete the Free Application for Federal Student Aid (FAFSA) form and apply for federal student aid.  Today’s Fraud of the Day, courtesy of a Tampa Bay Online article, shows us that this federally funded program is yet another target of fraudsters.

The article reports that a husband and wife duo (part of a family fraud business) decided to rip off the federal student loan program.  They were pretty deliberate about it.  They created a corporation called Graduate Assistance and Consolidation (GAC) (certainly sounds legit), that helped individuals without a high school diploma or general education equivalent to enroll in a Florida college (not good) and then apply for federal student aid.  (And, here’s where the taxpayer gets taken for a ride.  You must have a high school diploma or a GED to qualify for federal student aid.)

So, how did it work?  The deceptive duo applied for federal student loans on behalf of these ineligible students “providing false information on the applications.”  They then received “dozens of financial aid checks for various individuals that were mailed to addresses associated with GAC.”  Sometimes our fraudsters received a percentage (kick back, baby) of the money paid to the ineligible students.  Other times, they simply “endorsed the checks without the individuals’ knowledge, and deposited the money” into their bank accounts.  (Why take a percentage, when you can just have it all?  This is really Uncle Sam’s money; he won’t miss it anyway, right?)

The financial aid fraudsters got away with $400,000.  The husband recently pleaded guilty to charges stemming from this student loan scam.  He faces up to 12 years in prison.  His wife pled guilty in August and is awaiting sentencing, as well.

Okay, we see the problem.  A couple of fraudsters helped some ineligible students apply for college,  used fake information to fill out the FAFSA form to apply for federal student loans, had the checks mailed to certain addresses and then took at least a cut of the money – or in some cases all of it.  Now, the factors that create the problem also help to create the solution.  The key words here are:  “ineligible students,” “fake information” and “addresses.”  Government agencies with loan or benefit programs can easily identify potential indicators for fraud by leveraging public records and data analytics technology to examine a population (in this case, the students) against key indicators (e.g., address information, whether the individual is on a list of students accepted to attend a university, etc.).

So, here’s today’s question of the day:  shouldn’t an agency choose to leverage public records and data analytics to find fraud before sending out $400,000 in checks to fraudsters?  Anyone?  Anyone?

  1. It is a huge cause for concern that the FAFSA system does not run a data check to confirm that applicants for federal aid have indeed graduated from high school. I would imagine that this would be a standard component of the verification process, wouldn’t you say???

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