Consumer Alert: Con artists defraud college financial aid system - KTIV News 4 Sioux City IA: News, Weather and Sports

Consumer Alert: Con artists defraud college financial aid system

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

If you think college financial aid is only going to deserving students, think again. Some scam artists have figured out a way to steal money that should be in the pockets of students who need it.

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

Postal inspectors are talking about con artists who figured out a way to defraud the college financial aid system.

"By doing that, you're receiving financial aid or grants that are given to you and ultimately the monies would come into a location or an address that was controlled by the suspects or the people involved in the ring," says Zemblidge.

Nationwide, the problem is growing. In 2013, more than 12 million U.S. college students applied for federal aid for the school year starting last fall. More than 126,000 applications were flagged by schools and the government as potential scammers.

"People who really need these funds, 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 leeching from the system," says Zemblidge.

Another problem is that there are students who apply for this money who have 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. Once the money is paid out, the student can basically do with it as they please, such as leave school and take the money with them.

"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. You will be prosecuted to the fullest extent of the law," says 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.

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