Easy money


Issue: "PAS: The truth hurts," Feb. 8, 2003

Three bogus applicants earning bogus degrees at a bogus college almost collected $55,000 in student loans. Congressional investigators probing the Department of Education pulled off the scam.

One of the phony students was called "Susan M. Collins." She was named after the real GOP Senator from Maine who asked for the investigation. The investigators set up a fake graduate school, the "Y'Hica Institute for the Visual Arts" in London, and federal bureaucrats quickly certified it for student loans. Investigators then went online and applied for money.

Nellie Mae Student Lending and Sallie Mae Servicing approved loans for the "students" under the Federal Family Education Loan Program. Only Bank of America, a private lender, smelled a rat and rejected the fake applications. The GAO released a letter from Sallie Mae congratulating one of the phony students: "We wish you the best as you continue your education," it told "Collins."

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Terri Shaw, chief operating officer for the Federal Student Aid Office, admitted that officials "did not completely follow every step of the procedure" and didn't check to see if "Y'Hica" really existed. She claimed the department would have caught the scam before actually sending money. Now all foreign schools applying for loan programs must receive on-site visits.


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