Latest news with #FederalStudentAidoffice
Boston Globe
10-06-2025
- Boston Globe
How scammers are using AI to steal college financial aid
'I just can't imagine how many people this is happening to that have no idea,' Brady said. The rise of artificial intelligence and the popularity of online classes have led to an explosion of financial aid fraud. Fake college enrollments have been surging as crime rings deploy 'ghost students' — chatbots that join online classrooms and stay just long enough to collect a financial aid check. Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up In some cases, professors discover almost no one in their class is real. Students get locked out of the classes they need to graduate as bots push courses over their enrollment limits. And victims of identity theft who discover loans fraudulently taken out in their names must go through months of calling colleges, the Federal Student Aid office and loan servicers to try to get the debt erased. Advertisement On Friday, the US Education Department introduced a temporary rule requiring students to show colleges a government-issued ID to prove their identity. It will apply only to first-time applicants for federal student aid for the summer term, affecting some 125,000 borrowers. The agency said it is developing more advanced screening for the fall. Advertisement 'The rate of fraud through stolen identities has reached a level that imperils the federal student aid program,' the department said in its guidance to colleges. An Associated Press analysis of fraud reports obtained through a public records request shows California colleges in 2024 reported 1.2 million fraudulent applications, which resulted in 223,000 suspected fake enrollments. Other states are affected by the same problem, but with 116 community colleges, California is a particularly large target. Criminals stole at least $11.1 million in federal, state, and local financial aid from California community colleges last year that could not be recovered, according to the reports. Colleges typically receive a portion of the loans intended for tuition, with the balance going directly to students for other expenses. Community colleges are targeted in part because their lower tuition means larger percentages of grants and loans go to borrowers. Scammers frequently use AI chatbots to carry out the fraud, targeting courses that are online and allow students to watch lectures and complete coursework on their own time. In January, Wayne Chaw started getting emails about a class he never signed up for at De Anza Community College, where he had taken coding classes a decade earlier. Identity thieves had obtained his Social Security number and collected $1,395 in financial aid in his name. The energy management class required students to submit a homework assignment to prove they were real. But someone wrote submissions impersonating Chaw, likely using a chatbot. 'This person is typing as me, saying my first and last name. ... It's very freaky when I saw that,' said Chaw. Advertisement The fraud involved a grant, not loans, so Chaw himself did not lose money. He called the Social Security Administration to report the identity theft, but after five hours on hold, he never got through to a person. As the Trump administration moves to dismantle the Education Department, federal cuts may make it harder to catch criminals and help victims of identity theft. In March, the Trump administration fired more than 300 people from the Federal Student Aid office, and the department's Office of Inspector General, which investigates fraud, has lost more than 20 percent of its staff through attrition and retirements since October. 'I'm just nervous that I'm going to be stuck with this,' Brady said. 'The agency is going to be so broken down and disintegrated that I won't be able to do anything, and I'm just going to be stuck with those $9,000' in loans. Criminal cases around the country offer a glimpse of the schemes' pervasiveness. In the past year, investigators indicted a man accused of leading a Texas fraud ring that used stolen identities to pursue $1.5 million in student aid. Another person in Texas pleaded guilty to using the names of prison inmates to apply for over $650,000 in student aid at colleges across the South and Southwest. And a person in New York recently pleaded guilty to a $450,000 student aid scam that lasted a decade. Brittnee Nelson of Shreveport, La., was bringing her daughter to day-care two years ago when she received a notification that her credit score had dropped 27 points. Advertisement Loans had been taken out in her name for colleges in California and Louisiana, she discovered. She canceled one before it was paid out, but it was too late to stop a loan of over $5,000 for Delgado Community College in New Orleans. Nelson runs her own housecleaning business and didn't go to college. She already was signed up for identity theft protection and carefully monitored her credit. Still, her debt almost went into collections before the loan was put in forbearance. She recently got the loans taken off her record after two years of effort. 'It's like if someone came into your house and robbed you,' she said. The federal government's efforts to verify borrowers' identity could help, she said. 'If they can make these hurdles a little bit harder and have these verifications more provable, I think that's really, really, really going to protect people in the long run,' she said.
Boston Globe
10-06-2025
- Boston Globe
Scammers are using AI to enroll fake students in online classes, then steal college financial aid
When she checked her student loan servicer account, Brady saw the scammers hadn't stopped there. A loan for over $9,000 had been paid out in her name — but to another person — for coursework at a California college. 'I just can't imagine how many people this is happening to that have no idea,' Brady said. The rise of artificial intelligence and the popularity of online classes have led to an explosion of financial aid fraud. Fake college enrollments have been surging as crime rings deploy 'ghost students' — chatbots that join online classrooms and stay just long enough to collect a financial aid check. Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up In some cases, professors discover almost no one in their class is real. Students get locked out of the classes they need to graduate as bots push courses over their enrollment limits. And victims of identity theft who discover loans fraudulently taken out in their names must go through months of calling colleges, the Federal Student Aid office and loan servicers to try to get the debt erased. Advertisement On Friday, the U.S. Education Department introduced a temporary rule requiring students to show colleges a government-issued ID to prove their identity. It will apply only to first-time applicants for federal student aid for the summer term, affecting some 125,000 borrowers. The agency said it is developing more advanced screening for the fall. Advertisement 'The rate of fraud through stolen identities has reached a level that imperils the federal student aid program,' the department said in its guidance to colleges. Public colleges have lost millions of dollars to fraud An Associated Press analysis of fraud reports obtained through a public records request shows California colleges in 2024 reported 1.2 million fraudulent applications, which resulted in 223,000 suspected fake enrollments. Other states are affected by the same problem, but with 116 community colleges, California is a particularly large target. Criminals stole at least $11.1 million in federal, state and local financial aid from California community colleges last year that could not be recovered, according to the reports. Colleges typically receive a portion of the loans intended for tuition, with the balance going directly to students for other expenses. Community colleges are targeted in part because their lower tuition means larger percentages of grants and loans go to borrowers. Scammers frequently use AI chatbots to carry out the fraud, targeting courses that are online and allow students to watch lectures and complete coursework on their own time. In January, Wayne Chaw started getting emails about a class he never signed up for at De Anza Community College, where he had taken coding classes a decade earlier. Identity thieves had obtained his Social Security number and collected $1,395 in financial aid in his name. The energy management class required students to submit a homework assignment to prove they were real. But someone wrote submissions impersonating Chaw, likely using a chatbot. 'This person is typing as me, saying my first and last name. ... It's very freaky when I saw that,' said Chaw. Advertisement The fraud involved a grant, not loans, so Chaw himself did not lose money. He called the Social Security Administration to report the identity theft, but after five hours on hold, he never got through to a person. As the Trump administration moves to dismantle the Education Department, federal cuts may make it harder to catch criminals and help victims of identity theft. In March, the Trump administration fired more than 300 people from the Federal Student Aid office, and the department's Office of Inspector General, which investigates fraud, has lost more than 20% of its staff through attrition and retirements since October. 'I'm just nervous that I'm going to be stuck with this,' Brady said. 'The agency is going to be so broken down and disintegrated that I won't be able to do anything, and I'm just going to be stuck with those $9,000' in loans. Criminal cases around the country offer a glimpse of the schemes' pervasiveness. In the past year, investigators indicted a man accused of leading a Texas fraud ring that used stolen identities to pursue $1.5 million in student aid. Another person in Texas pleaded guilty to using the names of prison inmates to apply for over $650,000 in student aid at colleges across the South and Southwest. And a person in New York recently pleaded guilty to a $450,000 student aid scam that lasted a decade. Identify fraud victims who never attended college are hit with student debt Brittnee Nelson of Shreveport, Louisiana, was bringing her daughter to day care two years ago when she received a notification that her credit score had dropped 27 points. Advertisement Loans had been taken out in her name for colleges in California and Louisiana, she discovered. She canceled one before it was paid out, but it was too late to stop a loan of over $5,000 for Delgado Community College in New Orleans. Nelson runs her own housecleaning business and didn't go to college. She already was signed up for identity theft protection and carefully monitored her credit. Still, her debt almost went into collections before the loan was put in forbearance. She recently got the loans taken off her record after two years of effort. 'It's like if someone came into your house and robbed you,' she said. The federal government's efforts to verify borrowers' identity could help, she said. 'If they can make these hurdles a little bit harder and have these verifications more provable, I think that's really, really, really going to protect people in the long run,' she said. Delgado spokesperson Barbara Waiters said responsibility for approving loans ultimately lies with federal agencies. 'This is an unfortunate and serious matter, but it is not the direct or indirect result of Delgado's internal processes,' Waiters said. In San Francisco, the loans taken out in Brady's name are in a grace period, but still on the books. That has not been her only challenge. A few months ago, she was laid off from her job and decided to sign up for a class at City College San Francisco to help her career. But all the classes were full. After a few weeks, Brady finally was able to sign up for a class. The professor apologized for the delay in spots opening up: The college has been struggling with fraudulent applications. Advertisement
Int'l Business Times
06-05-2025
- Business
- Int'l Business Times
Education Department Urges Colleges to Aid Student Loan Borrowers as Collections Resume
WASHINGTON — The U.S. Education Department issued a "Dear Colleague Letter" to colleges and universities Monday, reinforcing their role in supporting student loan borrowers under Title IV of the Higher Education Act of 1965. The guidance, released as involuntary collections on federal student loans resume after a pandemic-era pause, underscores institutions' responsibility to help graduates manage repayment amid rising college costs. The department emphasized that while borrowers are primarily responsible for repaying loans, colleges play a key role in improving repayment outcomes. Institutions are urged to ensure former students understand their obligations and can access accounts for resources. The department will publish nonrepayment rates by institution on the Federal Aid Data Center later this month, using College Scorecard data to promote accountability. "As we begin to help defaulted borrowers back into repayment, we must also fix a broken higher education finance system that has put upward pressure on tuition rates without ensuring that colleges and universities are delivering a high-value degree to students," said Education Secretary Linda McMahon. "For too long, insufficient transparency and accountability structures have allowed U.S. universities to saddle students with enormous debt loads without paying enough attention to whether their own graduates are truly prepared to succeed in the labor market." Under the Higher Education Act, colleges with high cohort default rates risk losing eligibility for federal aid, including Pell Grants and loans. The department called for proactive outreach to delinquent or defaulted borrowers before June 30, 2025, to address loans not in deferment or forbearance. The resumption of involuntary collections affects approximately 195,000 defaulted borrowers, who will receive 30-day notices from the Treasury Department starting Monday. These notices indicate federal benefits, including June checks, will be subject to the Treasury Offset Program. By summer, all 5.3 million defaulted borrowers will face administrative wage garnishment. The Federal Student Aid office is bolstering support with extended call center hours and increased capacity to guide borrowers toward income-driven repayment plans, loan rehabilitation, or affordable payments. Resources are available at Guaranty agencies are also authorized to resume collections on Federal Family Education Loan Program loans, with all actions adhering to legal requirements for notice and repayment opportunities. The department's guidance reflects a broader push for transparency in higher education, leveraging repayment data to ensure colleges prioritize student success and financial literacy. Institutions' engagement with borrowers will be critical to maintaining federal funding eligibility. Originally published on University Herald
Yahoo
05-05-2025
- Business
- Yahoo
Mainers worry about repaying student loans as Education Department resumes collection
May 5—For the first time in five years, the federal government on Monday restarted collections on overdue student loan payments — a process that could impact millions of borrowers across the country and in Maine. The return follows years of lenient COVID-era policies meant to provide relief for borrowers and ever-changing options and rules around payment plans and forgiveness, all as Biden-era affordability plans met court challenges. "Repayment has started at this really confusing time for borrowers, when there are a lot of things already going on in the federal student loan system," said Sophie Laing, a student loan and consumer attorney at Pine Tree Legal Assistance, a nonprofit that offers civil legal assistance to low-income Mainers. According to the U.S. Department of Education, which announced in April that it would resume collections, more than 5 million borrowers haven't made a payment in a year and are in default, and only 38% nationally are current on their payments. Mainers hold a collective $6.5 billion in student loan debt, spread between about 186,700 people (or 13% of people in the state), according to data from the Federal Student Aid office and the Education Data Initiative. The average student loan debt in Maine is $34,280. Maine borrowers say they are anxious about the possibility of their tax refunds or disability benefits being seized, and the end of forgiving Biden-era payment plans. "I want to continue to live and work in Portland, and if things change, $500 a month could be the reason that I have to move away, find a new job and move away from my parents, who I need to take care of," a 2010 University of Maine graduate said. "That's really, really weighing on me." A CHANGING LANDSCAPE Laing at Pine Tree Legal said borrowers in Maine right now are struggling to access accurate information and are concerned about the future of payment plans that they rely on. For three years after the start of the pandemic, she said, borrowers didn't have to make federal student loan payments and couldn't go into default or suffer the consequences. Even when required payments resumed in 2023, there was a yearlong "on-ramp" during which repayment had restarted, but the government wouldn't put people into default for falling behind. But starting last September, Laing said, required payments have restarted in earnest, and now the department has marked a new step by beginning to seize funds from defaulted borrowers. There are several ways the government can collect on defaulted loans, including through tax refunds, Social Security retirement and disability payments and wage garnishing. "So that means they can take your tax refund before it ever gets to you and apply it to your student loan," Laing said. "And that can be really difficult. ... A lot of people rely on their tax refund, or earned income tax credit or child tax credit, as an important source of income through the year, to pay for necessities or unexpected expenses that come up." Right now, the government is only focusing on tax refunds and Social Security benefits, but Laing said she expects the department to begin garnishing paychecks by the summer (up to 15% of your disposable pay). At the same time, the status of several income-driven repayment plans has been uncertain because of court challenges. Millions of people had signed up for the Biden administration's SAVE Plan, which offered low monthly payments based on income and family size. However, in February, a U.S. appeals court blocked the plan, siding with Republican-led states that challenged it. Many of the individuals using the plan will now have to apply for another that will increase their monthly payment. Laing said her message for federal student loan borrowers in default is that there are ways to get out of it, like loan consolidation and loan rehabilitation. And she said there are ways to get some or all of your debt canceled, like for borrowers with a disability, or someone who attended a for-profit college that misled students, or Public Service Loan Forgiveness for government and nonprofit employees. "There are steps people can take to prevent the consequences," Laing said. The state of Maine offers its own relief. Since 2022, Maine has offered a Student Loan Repayment Tax Credit program, which provides a tax credit of $2,500 a year and $25,000 total to anyone living and working at least part time in Maine who is paying off students loans from a college degree program. BORROWERS' REGRET A University of Maine alumna, who agreed to talk to the Press Herald on the condition of anonymity out of concern for her employment, said she graduated in 2010 with about $48,000 in student loans and her final two years covered by federal Pell Grants. Now, she said, she regrets the decision. "I didn't understand what I was signing up for. I was really, really young, and it was just, 'Get into college and sign on the dotted line so that you can be accepted,"' she said. "Obviously, we can't know exactly how things would play out, but if I could have the lifestyle that I have now, without a degree, absolutely, I would have not taken out loans." She wanted to be a teacher, but couldn't afford to work in the field, pay off loans and live in southern Maine, so she switched industries. She said the process of paying off her loans has been incredibly confusing, and has had to constantly reapply to income-based repayment plans. But in 2022, then-President Joe Biden announced up to $20,000 of debt cancellation for Pell Grant recipients. "I was ready to go out and buy a bottle of Champagne. I also knew it was probably too good to be true," the UMaine grad said. She applied, and received notice that her application for debt forgiveness had been accepted. "And then it was not even a week before the court said, 'Nope, just kidding, we're not going to forgive that debt.'" Today, she has a job she's happy with in a field unrelated to her degree, but her Portland rent takes up 35% to 40% of her income, and she's the sole caretaker for her parents, who have high medical needs. If an income-based repayment plan is no longer an option, she said, that might be the final straw. Fifteen years after graduation, she still has over $30,000 in debt. Denver Vandrey took out about $5,500 in loans to attend the University of Southern Maine. He said the path from high school straight to college seemed like the only choice. But he didn't graduate, ended up transferring to Southern Maine Community College, and said he has regrets about signing up for loans. "They seem to make it way too easy for you to apply and acquire, but are not really giving you enough information to effectively pay off," he said. "They asked for a lot of trust, and unfortunately, that is something that many people just cannot afford to do." When it came time to pay off his loans, Vandrey said he received an inaccurate number from a payment calculator that led him to pay just barely above interest, so his debt wasn't really moving. Then when he was between jobs, the calculator told him to pay just $64 a month, which resulted in his debt actually increasing. But once he landed a solid job, he paid off most of his debts in one fell swoop. Today he works as a commercial painter. He said he's lucky that he noticed the problem, and that he has a family support system, but said many of his friends with four years worth of student loans are under enormous stress. Vandrey said the normalization of the high school to college pipeline, and a lack of economics education, are leading to regrettable student loan decisions. If you're interested in talking with the Press Herald about your experiences with student loan default, please email rboard@ Copy the Story Link
Yahoo
30-04-2025
- Business
- Yahoo
Federal student loans in default will be sent to collections next week. Here's what to know
The Trump administration will end the last piece of pandemic-era student loan relief and send defaulted student loans to collections starting May 5. This comes after President Donald Trump paused student loan repayment due to the COVID-19 pandemic in March 2020. President Joe Biden went on to extend this relief, and student loan repayments didn't resume until October 2023. Even then, borrowers still weren't penalized for late payments until last fall. Now, the estimated 5 million people with federal student loans in default could see their wages garnished and their federal payments reduced as their loans are sent to collections. Here's what you need to know about your defaulted student loans: Defaulted student loans begin with delinquency, which happens when you miss a payment. After 90 days, this is reported to national credit bureaus, impacting your credit score. Your loans will go into default if you haven't made a payment in 270 days and haven't made an agreement with your borrower, such as deferment or forbearance. You can log into your federal student loan account to check the status of your loans. The Education Department will begin forced recollections on May 5. That means the agency can garnish portions of your wages to pay the loans without a court order. Your credit score could also suffer, impacting your ability to obtain new loans or rent an apartment. Officials could also withhold any tax refunds or other federal payments to put towards your loan payment. This could also mean withholding up to 15 percent of your monthly Social Security retirement and disability benefits. If your loans are in default, the Federal Student Aid office will reach out in the coming weeks with information about the Default Resolution Group. The office can help you navigate your defaulted student loans. One option is to pay your loans off in full right away — but that isn't feasible for most of the 5 million people in default. The two main options are rehabilitating your loans and consolidating your loans, according to the Federal Student Aid office. Rehabilitating your loan means that you agree in writing to make nine reasonable monthly payments, which are determined by the loan holder, within 20 days of the due date. You must also make all nine payments over 10 consecutive months. Depending on your income, your monthly payment under a rehabilitation plan could be as low as $5. Consolidating your loan allows you to pay off one or multiple federal student loans with a new consolidation loan. To consolidate, you can agree to repay the new loan under an income-driven repayment plan. Alternatively, you can make three consecutive, voluntary, on-time and full monthly payments on the defaulted loan before you consolidate it. You can learn more about reconciliation and consolidation from the Federal Student Aid office. Your loan may be eligible for deferment, which means you don't have to make payments. This also means you aren't making any progress toward repaying your loan. If you're enrolled in college or a career school at least half-time, your loans are automatically in deferment. However, there are various other reasons for deferment, including cancer treatment, economic hardship, graduate fellowship completion, military service, and unemployment. Learn more about deferment from the Federal Student Aid office.
