In a new form of identity theft, fraud rings are stealing personal information then applying to low-cost, online colleges to milk money from federal student loan programs. But Uncle Sam is hardly the only victim here. Trapped in red tape, one San Francisco Bay area woman has spent more than a year trying to clear her name and repair her damaged credit report.
In October 2011, Christina Benson*, 71, a teaching coordinator, first received a phone call from a U.S. Department of Education investigator, which handles fraudulent federal loan claims. The inspector wanted to verify some of Benson’s information, but Benson knew better than to divulge that data over the phone since her purse had been stolen and her mail raided by identity thieves. “If you don’t cooperate,” the inspector told her, “we’ll assume you’re the ringleader.”
Benson wisely met the inspector at a local police station and verified his credentials. She had become a victim of a new type of identity theft, the inspector told her. Crooks used her personal information to apply to two online community colleges. They received federal funding through the school, and after tuition and fees were deducted, the school remanded the balance to the “student”—presumably for cost of living and books. But the criminal up and ran, leaving the school, the federal government, and, ultimately, Benson on the hook for the debt.
After more than a year of trying to clear her name, Benson mentioned the case to her insurance agent. Under her insurance policy, Benson received identity management services from CyberScout. Benson was put in touch with Vicki Volkert, a senior investigator in the company's Fraud Resolution Center.
“Traditionally, a student would present herself to the student aid and college registration office, she’d get a photo ID, and then be cleared to attend college,” Volkert said. “When it's all online they don’t do any of that. There’s no verification of your identity with these online schools.”
Volkert worked the phones on Benson’s behalf, and confirmed much of what the victim had learned from Education Department inspectors: one loan taken out fraudulently at Cerritos College went into collections and damaged Benson’s credit record; a second loan, for Cabrillo Valley Community College District, had been falsely paid by docking Benson’s 2012 state tax return.
Benson, who’s in the process of refinancing her home, first thought she’d pay off the debt and move on with her life. “It's a small amount of money. But then I thought, no, it's a matter of principle,” she said. There was also the fear that she could then become liable for several thousand dollars that went through the school, which the crook didn’t manage to capture.
Today, Benson is still stuck in limbo. The collections agency won’t restore her credit report until they receive letters from the colleges that state the collection was an error. The colleges won’t do that until they get an official report from the Department of Education. The inspector won’t return her calls, and anyone she’s managed to get on the phone from the federal government hasn’t helped, citing a pending investigation. Mind you, an investigation that's been pending a year and a half. Benson feels as if she’s being held hostage.
“At least now I have someone returning my calls,” Benson said of Volkert and CyberScout. “Vicki is more upset than I am at this point. She’s fired up, and thank goodness someone is.”
As of a few days ago, the Ombudsman for the Department of Education, which handles loan disputes, reached out to Benson after Volker's repeat calling on her behalf. Still, the end of this case is not quite in sight.
“I’m not going to give up now,” Benson said. “It's a matter of principle.”
* Names and identifying details have been changed to protect the victim’s privacy.