Department of Education investigation leads to 17 arrests for financial aid fraud

4:41 PM, Sep 18, 2012   |    comments
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SACRAMENTO, CA - The U.S. Attorney's Office and the U.S. Department of Education busted several major student financial aid fraud rings in California.

The agencies arrested 17 people in the last month alone from near Sacramento, all the way to El Cajon, affecting mostly community colleges and for-profit-schools like University of Phoenix.

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Agents recovered nearly $1 million in California; nationally, the figure is more than $8 million.

"Those who rip off federal aid funds can expect to find themselves in a prison cell instead of a classroom," U.S. Attorney Benjamin Wagner said

The suspects usually worked with another person, Wagner said.

"The defendants sometimes applied in their own names. But more often recruited straw students who had no intention of actually attending college," Wagner explained.

Once the college gets the federal financial aid check and deducts tuition, the rest is given to the students to help cover books, rent, food and transportation.

But the thieves drop out of school and spend the money on luxuries instead.

It's easy to get away with because of the popularity of online classes where students hardly ever interact with school officials or teachers.

"The participants in these fraud rings really see these schemes as a quick way to make easy money," U.S. Department of Education Kathleen Tighe said.

Investigators point out that in the instance of Pell Grants, every dollar taken by fraud is a dollar not going to a needy student.

And with tuition and the price of textbooks skyrocketing, students are feeling the pinch.

"It's sick because there's people out here, like myself, who really needs the financial aid money," College Student Jameze Hall said.

"Some people just come to school to get money and leave," College Student Jaachonn Crawford said. "That's disappointing, but you got people that really need the money."

The U.S. Attorney's Office said this is not the end. More cases are under investigation and more indictments are anticipated.

By Nannette Miranda
ABC7

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