Last Updated on: 27th May 2023, 12:18 pm

The Higher Education Act establishes several programs for providing federal student aid. These include loans and grants. Students are legible for financial aid after completing a Free Application For Federal Student Aid (FAFSA). The State of New York also provides tuition aid through the Tuition Assistance Program (TAP). There are many cases where students submit fraudulent student aid applications or are involved in misleading behavior to improperly acquire money from student loan initiatives. There are also occasions where institutions commit fraud against students. In such cases, the perpetrators may be charged with student loan fraud.
Varieties of Student Loans Fraud
The types of school aid fraud that are illegal include:
Misrepresenting one’s income on financial aid application forms
Using another person’s identity to secure student aid
Applying for loans that apply to non-existent students, or students who either do not qualify, or do not wish to go to school, and taking the funds when the loan exceeds the tuition expenses.
Falsifying or manipulating test scores to qualify for tuition aid
A person may also be guilty of student loans scam for issuing a false statement that help will be given and failing to provide the benefits. Examples of these kinds of student aid fraud include:
Advance fee scams: Soliciting money from students with the promise of securing loans for them at a low interest rate
Student loan forgiveness fraud: Soliciting money from students with the promise that their loans will be forgiven
Student loan debt elimination fraud: Soliciting money from students with the promise that their loans will be discharged
How to Spot Student Loan Fraud
Upfront Payment
According to the Federal Trade Commission, requesting an advance fee for student loans is an illegal practice. Legitimate student aid businesses should not charge any fees until the settlement or service succeeds and the borrower has deposited payment towards their negotiated payment schedule.
Consolidation Application Fee
When a student defaults on a loan or is going through financial troubles, they tend to be desperate for relief. Student loan relief scams offer the promise of consolidating loans or lowering payments. These businesses charge you to fill out paperwork for a repayment plan based on your income or make an application for federal consolidation. However, you can easily perform all these procedures on your own for no fee.
Discharge of Loans In Exchange For Information
One of the compelling scams to look out for is the promise to eliminate your student loan debt entirely. In many cases, these businesses require an advance fee or are after private information like your FSA ID or Social Security number. The only way that a student loan may be eliminated is in the event of permanent disability or death. There are also forgiveness programs that offer loan forgiveness like the Public Service Loan Forgiveness. You can easily apply for these programs on your own without having to pay any fee.
What To Do If You are a Victim of Student Loan Fraud
The first step is to call the major credit bureaus- TransUnion, Experian, and Equifax- to freeze your credit and report the fraud. You should also report the institution to the Consumer Financial Protection Bureau and the Federal Student Aid Feedback System. While some scammers are mainly interested in the money, others are after sensitive personal information such as your FSA ID and social security number and this makes you a target for identity theft. If you provided your FSA ID, it is advisable to talk to the Office of the Inspector General. If the scam involves paying a fee, you should contact your credit card company or bank to stop the transaction before the payment is processed.
Penalties of Student Loan Fraud
Defrauding the government through federal student aid leads to charges for false claims , making misleading or false statements, conspiracy to defraud, and wire or mail fraud. A single false claim is subject to a penalty of five years imprisonment. Multiple false claims are charged separately. Wire or mail fraud is subject to 20 years imprisonment.
Bank fraud and identity theft are felony offenses that one can be charged with if they used another person’s information to secure loans or if they have engaged in any scheme intended to improperly acquire funds from a private institution.
Persons who defraud students do not only face larceny, state and federal fraud charges, they are also liable to be charged with internet fraud if they use the internet to advance their scam.

Student loan fraud is illegal and can take various forms, including misrepresentation of income, identity theft, falsification of test scores, and false statements promising financial benefits. To spot potential student loan fraud, look out for situations where an upfront payment is required, fees for loan consolidation applications, and the promise of loan discharge in exchange for information. If you are a victim of student loan fraud, report it to major credit bureaus, the Consumer Financial Protection Bureau, and the Federal Student Aid Feedback System. Penalties for student loan fraud can range from five to 20 years of imprisonment, depending on the type and severity of the fraud.