Stepfather Allegedly Took Out $262K of Student Loans in Daughter's Name

When you take out a student loan, you sign a Master Promissory Note and agree to use the funds only for education-related expenses. However, it’s not unheard of for people to use student loans for non-school things (aka student loan fraud). However, if those loans go unpaid, the lies will likely catch up with the borrower, in the form of collections calls, wage garnishment, a trashed credit standing or legal action.

It’s an unpleasant path to go down — perhaps that’s why one alleged fraudster thought to take the loans out in someone else’s name.

A Pennsylvania man is accused of taking out more than $262,000 of student loans in his stepdaughter’s name, which have now ballooned to more than $440,000 of debt in the young woman’s name, TribLIVE.com reports. According to a Butler County detective, Amanda Murphy’s mom and stepdad, Pamela and Paul Dazen, had agreed to repay the loans she needed for college — about $79,000. Paul Dazen is accused of borrowing much more than was necessary. Murphy signed loan paperwork as her stepfather requested, without looking at the details, a detective on the case said. (It’s another example of why it’s crucial to read and understand documents before signing.)

“She just assumed her parents were doing the paperwork for her,” Scott Roskovski told Credit.com. He’s a detective for the Butler County District Attorney’s Office and an investigator on the case. “She didn’t question it. What 18- or 19-year-old would? Your mom and dad ask you to sign something, and you do it.”

Still, Murphy could be held liable for the loans if prosecutors can’t prove Dazen fraudulently obtained the loans. Roskovski said the loans are only in Murphy’s name, even though her mom and stepdad had said they’d pay the $79,000. (The $262,000 does not include the $79,000 used to pay for Murphy’s education, though Roskovski said he doesn’t think that has been paid, either.)

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How anyone obtained private student loans in the name of a teenager is a bit of a mystery, because such loans tend to require a good credit standing, and most college-bound teens have little or no credit history. Regardless of how it happened, there are 11 loans in Murphy’s name she claimed to be fraudulent in her complaint to Butler County law enforcement. Roskovski said her fraud claims to lenders went unacknowledged, which is why she turned to local authorities.

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Attempts to contact Dazen’s attorney, David Shrager, went unreturned. Dazen’s hearing was originally scheduled for the end of August but has been moved to October, Roskovski said.

Dazen allegedly impersonated his stepdaughter in emails to lenders, added her as a signatory to his business’s bank account and spent her loan money for personal and business uses. He faces charges of theft, receiving stolen property and dealing in proceeds of unlawful activities. Detectives on the case say Murphy has struggled to get a job with the six-figure debt showing up on the credit reports potential employers request when processing her applications.

Murphy’s issues with loan fraud may not be common, but millions of Americans share her struggles with education debt: 6% of borrowers with the most common federal student loans have defaulted, and 17% of borrowers in repayment are delinquent by at least 31 days on those bills, which represents billions of dollars in unpaid balances, including interest (interest charges and late fees are how Murphy’s loan balance grew nearly $200,000).

For federal student loan borrowers, there are several repayment options that can lighten the burden of education debt, and there are also some consolidation and refinancing programs available to private loan borrowers. Because student loan debt is rarely discharged in bankruptcy, it’s crucial to meet education debt obligations — otherwise, you could face years of limited access to credit and high interest rates that often come with low credit scores. To see how your student loans affect your credit and the interest rates you qualify for, you can see two of your credit scores for free every month on Credit.com.