A student loan and financial aid application.
Financial aid fraud is the attempt to materially deceive a school, funding agency, or guarantor into allowing a student to pay tuition with money for which they would not otherwise qualify. This type of fraud can be perpetrated by parents or students. Schools develop systematic approaches to detect fraud, although one of the main deterrents is often the threat of expulsion if fraud is detected and proven. Fraud that results in money in the perpetrator’s pocket instead of the school’s account to pay tuition is more likely to be criminally prosecuted.
School tuition is a significant expense. Financial aid is designed to help needy students make up the difference between what their families can afford and the cost of attendance. These are a combination of loans and grants from the school, government entities, or private lenders. The pool of funds available for financial aid is limited, so awards given to students who are technically ineligible take resources away from students who really need and qualify for aid.
Establishing need is a key component of the financial aid application process and is the basis for award decisions. Parents are required to disclose their household income, assets and liabilities in order for the school to determine eligibility. One of the traditional forms of financial aid fraud is false statements made by parents when disclosing their finances. Schools exposed cases in which parents lied about their income and assets, the number of children they had in college, their own college enrollment, or their marital status.
Practical examples of financial aid fraud include parents providing doctored versions of tax returns, hiding money in investments that cannot be easily traced through financial records, and claiming to be divorced and listing separate addresses for each parent even though they are still married. married. Parents who engage in this type of fraud tend to think of it as a necessary escape from the system, because determining eligibility presupposes a level of liquidity that parents may not actually have available. However, it is a serious crime, especially when government agencies are involved.
Another type of financial aid fraud involves students. It depends on the misrepresentation of the student’s registration status or even their very existence. Online schools, where students attend classes over the Internet and have few personal contacts with professors, have been the victims of large-scale financial aid fraud schemes. Perpetrators assume the identity of the student to obtain aid in her name, attend online classes in her name, and pocket the balance of aid that did not go directly to tuition.