What to Do If You Are Investigated for Student Loan Fraud

Jerod Gunsberg, Los Angeles Criminal Defense Lawyer

What To Do If You Are Investigated For Student Loan Fraud - The Law Offices of Jerod Gunsberg

With the rise in popularity of distance education and online colleges and universities, federal authorities have turned their attention to investigation and prosecuting student loan fraud. Under 20 USC 1097, if $200 or more of funds are disbursed through any fraudulent activity you will likely be charged with a federal felony (less than $200 in loss is a federal misdemeanor). The felony charge carries a maximum sentence of five years in prison and a maximum fine of $20,000.

  • If you are approached by an Inspector General from the Department of Education about your role in any suspected student loan fraud, you should contact a qualified criminal defense attorney immediately. Make no mistake, talking to an investigator from the Department of Education is no different than talking to a special agent from the FBI, DEA, Secret Service, or any other federal agency. They are federal law enforcement officers and they are investigating a crime.

    The main focus of investigations of distance learning student loan fraud involve allegations of “straw person” students. These straw students are asked to provide their personal information to a third party or fill out a Free Application for Federal Student Aid in exchange for a percentage of the financial aid received. The third party then enrolls the person in an online university and receives the money. If the straw student does not actually participate in the online education program, then both the third party and the straw student could be charged with a student loan fraud.

    You’re probably wondering how the government can even figure this out. After all, it’s online education. The enrollment is unlimited and it’s not like anyone knows who is actually doing or not doing the work, right? Well, online colleges and universities have put in safeguards and fraud detection systems. According to the Office of the Inspector General, indicators of fraud include increased activity in:

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