Student loan scams flourish

A college freshman. A group of prison inmates. An elderly grandmother.

They all have very different backgrounds. But they also share a common characteristic: Each was the victim of identity theft in which someone used their social security numbers to fraudulently obtain student loans.

The Identity Theft Scam
"There's a growing trend in the area of identity theft related to Financial Student Aid programs," says Natalie Forbort, a special agent at the Office of Inspector General, or OIG. Within the U.S. Department of Education, the OIG staff investigates all manner of student loan scams and misused federal financial aid. They do their best -- OIG investigations often root out big cases of fraud totaling hundreds of thousands or even millions of dollars.

But with thousands of colleges and universities potentially eligible to receive federal money, and more than $100 billion in new aid disbursed annually to some 14 million borrowers, the Department of Education "faces a formidable challenge in ensuring that...funds reach the intended recipients," Deputy Inspector General Mary Mitchelson said in a recent report.