Students missing out on money? Con artists defraud financial aid system

SAN FRANCISCO (WITI) — College students are getting a tough lesson outside the classroom. Many of those seeking financial aid aren't getting the money they need because thieves have figured out how to steal it.

"They were using and stealing identities or wrongfully using identities of others to make applications for financial aid at various universities," said U.S. Postal Inspector, William Zemblidge .

Con-artists have figured out a way to defraud the college financial aid system.

It's a nationwide problem. In 2013, more than 12 million U.S. college students applied for federal aid for the school year starting last fall. According to the Wall Street Journal, more than 126,000 applications were flagged by schools and the government as potential scammers.

"People who really need these funds, and who want to go to school, and who want to reach their goal, whatever it may be - there is a pool of money that's out there and these crooks are stealing that and they`re ultimately leaching from the system," Zemblidge said.

It doesn't stop there. Another problem is students apply for aid with no intention of attending school.

Between 2007 and 2010, the amount of Pell Grant money given out 'improperly' jumped from $400 million to around $1 billion. Officials say Pell Grants are an easy target for scammers because the aid does not get repaid like a loan and requires no credit check.

"If you do this, if you decide the misuse student aid funds, if you decide to misuse these funds by misusing the U.S. Mail, you are committing mail fraud and we will investigate you vigorously and you will be prosecuted to the fullest extent of the law," said Zemblidge.

The Scholarship Fraud Prevention Act created a fraud awareness partnership between the U.S. Department of Education and the Federal Trade Commission. For more information about scholarship scams or to report a scam, you can call 1-877-FTC-HELP (1-877-382-4357) or learn more about it by clicking here.