Most people have heard of credit card fraud, identity theft and other ways that people can take your sensitive information and use it to their advantage. Perhaps it's even happened to you before. One type of fraud with which many people might not be too familiar is financial aid fraud. Financial aid is money given to college students by the U.S. government to help them pay for school, and sometimes, there are people out there who abuse the system. Because there is only a certain amount of money that can be allocated to individual students each year, those who are not being honest on their FAFSA or lying altogether could potentially be taking away money from those who really need it. Therefore, if you suspect that someone is committing financial aid fraud, it's important to know where you can go to report it.

What Is Financial Aid Fraud?

Financial aid fraud ultimately happens when a person lies on the FAFSA form. The FAFSA form is required for families who want to see if they are eligible to receive financial aid and if they are eligible, for how much. Throughout this process, there are many steps in which people may lie or stretch the truth in order to get more money than they are eligible for. Not only that, but they may be lying about their eligibility altogether in order to try and steal money. Not being truthful about any of these things is considered financial aid fraud, and there can be consequences.

What Are Examples of FAFSA Scams?

Unfortunately, the amount of FAFSA scams that exist would make for a rather lengthy list. The most common types of financial aid fraud are:

  • Lying about the dollar amount of your family's income or rounding it up to a larger number
  • Not reporting other types of income
  • Lying about or not reporting all of your assets
  • Lying about the amount of tax you pay on your income
  • Owning zero-coupon bonds or hiding cash and not reporting it
  • Forging documents or signatures
  • Manipulating test scores to qualify for FAFSA when you otherwise wouldn't
  • Faking school attendance in order to have the leftover loan money paid out to you
  • Using someone else's identity

Consequences of Financial Aid Fraud

Although lying on a FAFSA form may not seem like a big deal to some people, they're very wrong. First of all, it's very easy to be caught. If anything even seems the slightest bit suspicious, those in charge will investigate it by asking for proof of absolutely everything. These people are very experienced in catching people who do this, and it won't be easy to avoid getting caught.

Those who think they're a step ahead and choose to lie anyway should be advised on what the consequences are for committing student loan fraud. First and foremost, if it's discovered that you're lying, then not only will you not get the financial aid, you may also be prohibited from applying again in the future. There's also a chance that you could be expelled from school. Additionally, depending on the severity of the crime, a person can be criminally charged with fraud, submitting fictitious claims to the government, making false statements to the government, mail fraud, wire fraud and identity theft, depending on the nature of the lie. If found guilty of these charges, it can land a person in prison for up to five years. Plus, a person may need to pay lawyer fees to fight the case.

Why You Should Report Student Loan Abuse

Student loan abuse or financial aid fraud typically won't be reported by regular citizens, as FAFSA forms are confidential and will only be shared with the Department of Education and the financial aid offices at colleges and universities. Unless you know for a fact that there's a group of people making money off of financial aid fraud or there's an organization scamming people or helping people to do this, then it's best to leave it to those in charge to handle it appropriately.

Either way, reporting student loan fraud is important. Because the Department of Education can only allocate a certain amount of aid to individual students each year (for example, for the 2018-2019 school year, that number was $6,095), those taking advantage of the system or lying are potentially taking away an opportunity for another student to go to school. After all, those who don't get enough financial assistance may not be able to attend.

How to Report Student Loan Fraud

If you suspect that someone is attempting to take advantage of the financial aid system and you're wondering how to report student loan fraud, then it's advised that you call the inspector general's office at the U.S. Department of Education at 1-800-MIS-USED right away. You can also visit the Office of Inspector General website to report fraud online or download the OIG Hotline Form from the same page and mail or fax it to: U.S. Department of Education Office of Inspector General Hotline, 400 Maryland Avenue S.W., Washington, D.C., 20202-1500.

Institutions of higher education who suspect financial aid fraud should also keep in mind that the FAFSA process can be a bit confusing to many families, and it's easy for people to make unintentional errors.

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About the Author

Hana LaRock is a freelance content writer from New York, currently living in Mexico. She has spent the last 5 years traveling the world and living abroad and has lived in South Korea and Israel. Before becoming a writer, Hana worked as a teacher for several years in the U.S. and around the world. She has her teaching certification in Elementary Education and Special Education, as well as a TESOL certification. Hana spent a semester studying abroad at Tel Aviv University during her undergraduate years at the University of Hartford. She hopes to use her experience to help inform others. Please visit her website, www.hanalarockwriting.com, to learn more.