College Employee Misuses Student Identities in School Loan Fraud

Beyond the Numbers

Tuesday, April 14, 2015
Posted by: 
The Communications Division

Identity theft can take many forms and affect many people, but it’s especially troubling when it happens to young adults, who might have to deal with the consequences long after the crime occurs.  

According to the Federal Trade Commission (FTC), in 2013, 20 percent of all identity theft victims were age 20 to 29 (the highest percentage of any age group).

This age group—which includes college students and young professionals—is susceptible to identity theft because, at this point in their lives, young adults might not have a credit history. They’re also less likely to regularly monitor bank and credit activity or pay for identity theft monitoring services, and may be more likely to share personal information online or through social media.   

In a recent example of this, our investigators worked with the Department of Education OIG on a significant identity theft and bank fraud case out of Merrimack College in North Andover, Massachusetts. The Department of Education OIG coordinated with our investigators when it learned the case involved Social Security number misuse.  

The investigation found that, from 1998 to 2007, Merrimack’s former financial aid director fraudulently obtained millions of dollars in loans using students’ identities, without the school’s or the students’ knowledge. Through various schemes, she either replaced students’ grant money with Federal Perkins Loans or obtained Perkins Loans for students without their knowledge or approval.

The Perkins Loan Program provides low-interest loans to help needy students finance the costs of post‑secondary education. Students must repay these loans directly to their school; in this case, Merrimack.

The investigation determined that this employee misused the identities of more than 250 students to secure student loans—and concealed it from the students, their parents, and the college. This fraud scheme resulted in a loss of more than $2.5 million to the Perkins Loan Program.

Last November, the former Merrimack employee pled guilty to mail and wire fraud; she was sentenced in late March to a year in prison and three years’ probation. She was later ordered to repay more than $1.5 million to the Department of Education.

As for the students whose information was misused, they may have to work with the FTC and credit reporting agencies to address any problems resulting from this scheme. It could take a lot of time and effort on the part of the victims to resolve these problems.

The Social Security number is key to various identity theft schemes and financial crimes, so we are committed to pursuing high-impact Social Security number misuse cases. Each year, these investigations lead to about 400 convictions nationwide.

The case at Merrimack College reminds us of the seriousness of this issue. We urge everyone, especially young adults, to keep your personal information secure to the greatest extent possible, and regularly monitor your financial accounts and credit record, to guard against identify theft and financial crimes. 

The FTC, the national clearinghouse for identity theft allegations, provides specific information on how college students can limit the risk of identity theft. You can find even more information on identity theft protections here.