Guarding Against Student Aid Scams

by | Mar 23, 2026 | Scams | 0 comments

The U.S. Education Department (ED) conducts most of its business with students and colleges over the Internet. Although far more secure than paper-based systems, there is risk inherent in  using the Internet as a medium for monetary exchange. Ingenious scammers use a range of methods to steal student identities so they can misdirect aid funds and commit other crimes. Participants in the student financial aid payment cycle should be wary of scammers.

Scams Directed at College Students

Criminals are always on the lookout for new ways to obtain the personal financial information of students. In most of these scams, criminals rely on victims acting precipitously before they examine the situation closely. Students should consider the potential for fraud in any communication that concerns financial aid before they take action.

The major types of student aid scams are described below:

  1. Financial Aid and Scholarship Scams
    • FAFSA Filing Fees:Students should be aware that the FAFSA is always free. Scammers often try to charge fees for FAFSA-related services.
    • Private Scholarship Processing Fees:Students should be wary of service offers that require upfront “redemption” or “administrative” fees for scholarships. Legitimate scholarships do not require applicants to pay any fees.
    • Ghost Student Identity Theft:Using AI, scammers can steal student identities and emulate them to commit crimes that leave the student with debt.
    • Guaranteed Aid and Secret Lists:Scammers often claim they have access to a secret database of winners and they can guarantee a student will win a scholarship in exchange for a fee.
  1. Debt Relief Scams
    • Loan Forgiveness:Criminals promise immediate loan forgiveness in exchange for upfront fees. Representatives of fraudulent debt relief companies contact students with promises to reduce or eliminate their student debt for a fee. They use pressure tactics such as limited-time offers to get students to react quickly.
    • Phishing:Scammers pose as the Financial Student Aid (FSA) office of the ED to induce students to share their gov account login credentials. Using it, they change fields in the record to suit their purposes.
    • Loan Consolidation Fees:Criminals charge unsuspecting students hundreds of dollars for loan consolidation or repayment plan changes even though the student’s designated Federal Student Loan Services Provider (FSLSP) provides these and other services for free.
    • Unsolicited Scholarships:A student may be contacted by a fraudulent scholarship entity. The caller will tell the student that they have been won a scholarship from a legitimate organization. They then ask them to provide key personal information to confirm that they are the intended recipient. They then use this ID information to commit a range of financial crimes.
  1. Fraudulent Offers to New Students
    • Student Needs: These scammers advertise locally for apartments, books, movers, and similar services at the beginning of a semester. They offers products and services that students need quickly at attractively low prices. They urge students to pay now. The product or service is never delivered.
    • Job Offers: An online or print advertisement lists a job at a small company that pays well and fits the schedule of most students. When students contact the “employer” they are asked to pay a fee or provide sensitive personal information in order to complete the application process. The student complies and then never hears from the “employer” again.
    • Social Media Scams: The social media accounts of students often include details such as home addresses, friends, groups they have joined, and other information that criminals can use to impersonate someone with a similar background and interests. They establish trust and then ask for personal financial information.
  1. Assertions That Indicate Fraud

Students may hear or read assertions by phone, email, or in person that indicate fraud. They should avoid a person or firm making these assertions:

    • “Buy now or miss this opportunity.” Students shouldn’t yield to time pressure. All information that a student needs to obtain financial aid is free.
    • “We guarantee you’ll get financial aid.” No guarantee of aid should be taken seriously.
    • “I’ve got aid for you. All I need is your credit card or bank account information.” A student should never divulge credit or debit card information.

Relying on Legitimate Professionals

There are many individuals and firms that perform valuable and legitimate services to students and families. They are licensed financial professionals who are qualified to share prudent tax, financial, cash flow, and lending advice to families. Licensing organizations assure that members  adhere to high standards of professionalism and ethics and that they participate in ongoing education in the college financial planning field.

Fraudulent “Legitimate” Services

 A licensed fee-based service firm would never imply that their assistance is essential in obtaining financial aid. A claim that a firm is indispensable in any way is false. This is important in identifying legitimate-seeming criminals who use tricks to fleece students by inducing them to divulge personal financial information. Students may be lured by con artists who claim to be affiliated with the ED or an FSLSP. Firms or individual “consultants” are illegitimate if:

      1. They charge a fee for assisting students in completing the FAFSA,
      1. They require payment pay up-front for any services,
      1. They promise immediate loan forgiveness or cancellation,
      1. They ask for the FSA account username and password,
      1. They ask for third-party authorization authority,
      1. They claim that their offer is limited and the student must act now, or
      1. Emails contains spelling or grammatical errors.

Students should check that the “Sent From” address on an email is legitimate. This can be determined by the domain name to the right of the “@” symbol. It is fake if it is anything other than the domain name of the purported sender, such as “finaid.gov” or “umich.ed”. A domain name can be spoofed, but the real domain name is usable only by its owner.

 Free Legitimate Advice for Students

 Students can obtain help from their FSLSP at no cost regarding tasks including:

      • Terminating an FSA account that is in danger of being accessed illegitimately,
      • Creating a new FSA account and password,
      • Considering a request to lower the monthly payment and extend the term,
      • Changing the repayment plan,
      • Consolidating multiple Federal student loans,
      • Postponing repayments while the student resumes their education,
      • Postponing repayments while the student is unemployed,
      • Checking to see if a student qualifies for an ED loan forgiveness program, and
      • Assisting in getting a student loan out of default.

 Recommended Steps for Victims of Scams

  1. Report Identity Theft Immediately

A student should assume that their information is in the possession of criminal will be used to illegally obtain credit cards, take out loans, make ATM withdrawals, or make purchases. Anyone who knows or suspects that their identify has been or is in danger of being compromised should immediately report this to the authorities. The public agencies and credit bureaus listed below will help determine what steps should be taken next based on the circumstances:

      • The local police,
      • ED Office of Inspector General – Fraud Hotline,
      • Federal Trade Commission,
      • Social Security Administration,
      • Equifax Credit Bureau,
      • Experian Information Solutions, and
      • TransUnion Credit Bureau.
  1. If Personal Aid Information is Compromised

 If a security breach is suspected, the account-holder should log into the account to change some of the “Account Information” settings. First, an account-holder will be prompted to enter the current password and then choose a new one. If an account-holder cannot log in because they have forgotten the username or password, he or she will need to satisfy the following security procedure: FSA will send a six-digit code to the mobile phone or email address of record. If an electronic device is unavailable, ED will ask pre-set challenge questions as the basis for changing or terminating an FSA account.

If an account-holder no longer possesses the mobile phone number or email address associated with their FSA account, they should contact the Federal Student Aid Information Center at 1-800-433-3243. If an account-holder is unable to access their account through any of the methods above, they will need to undergo the full FSA Account Recovery protocol by submitting copies of identification documents.

  1. Reporting Possible Fraudulent Activity by a College

Students should contact the ED’s Office of Inspector General Fraud Hotline to make a confidential report of a college’s suspected engagement in fraud, waste, or abuse involving student aid programs. They can contact the ED’s Federal Student Aid Feedback Center if they believe the college has misrepresented educational programs or prices, or if the college’s administration of financial aid may have violated Federal regulations. The identity of the whistleblower will not be revealed.

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