Help! Someone Took Out a Student Loan in My Name

Some students worry about whether they’ll get the financial aid they need to pay for the next semester of college. Others wonder why there is a record of them taking out student loans when they didn’t apply — and now they can’t get the loans they need. Consider these scary scenarios readers have told us about recently:

Trey: I just checked my credit score and [someone] has taking a student loan out in my name what can I do?
Felecia: My tax refund was taken away because they said I [attended] school and I have never been enrolled in school. I don’t even have a GED or high school diploma so how can I get them to refund me my tax refund back?
Theresa: I’m just tired of all the craziness. Someone [has] been able to hack my identity some kind of way and follow my mother’s address and another address that I had and they got student loans in my name, I called the company and they just gave me the runaround, so now I have to figure out what else is there for me to do…

Most victims of student financial aid fraud find out when they apply for a federal loan that they are denied because they already have a loan — only they don’t have it. Instead, someone using their name and birthdate has the loan money, and it’s then the victim’s battle to restore their own credit.

How does somebody who isn’t you apply for a loan that you would be entitled to? We asked Brett Montgomery, fraud operations manager for identity theft and data risk services provider IDT911, and this is how he explains it: “Applicants and enrollees are not required to have their identities confirmed, and because institutions do not always otherwise verify students’ identities. With a valid date of birth, name and Social Security number, anyone can get a loan — especially online — since the system is designed to encourage electronic access to student loan assistance.”

Worse, you may not know that someone has taken a loan out in your name until something bad happens, like the Internal Revenue Service seizing your tax refund to pay the defaulted student loan you knew nothing about, or finding a student loan on your credit report. And sadly, it was probably a lot easier for the identity thief to access the money than it is going to be for you to be able to get a student loan or the tax refund that was rightfully yours. “The amount of documentation needed to prove your innocence is more than what was used or verified to establish the fraudulent loan,” Montgomery said in an email.

But you can’t even begin to try to untangle the mess unless you know it exists. For that, he recommends checking your credit often — though he cautions that not all government loans report to the credit bureaus. “Typically people are made aware through collection notices through the mail or by phone. Another way is when they have to apply for the same type of government student loan and they are informed they already have a loan out.”

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The other question is why someone would take a student loan out in someone else’s name. Presumably it’s not to get an education. After all, a degree in someone else’s name isn’t likely to be valuable long-term. But cash is. While the proceeds of these loans are supposed to only be used for qualified educational expenses, the reality is people use them for just about anything.

How Long Can It Take to Unravel?

If, like Felecia, your tax refund is taken, it can take at least eight months, and possibly much longer, to get your money back, Montgomery said. And if you are refused a student loan because you supposedly already have one? “The government tends to not loan money out when there may already be the same type of loan in the person’s name,” Montgomery said. “All you can do is supply the requested documentation and hope they remove the fraudulent loan from your name and credit.” So if the loan refusal happens shortly before you need the money, you are going to need a Plan B.

If you’re a parent helping a student apply for aid, explain what personally identifiable information (PII) is and how to protect it, Montgomery said. Educate your student to ask why someone is requesting their Social Security number and how it will be protected if they give it to them. (And don’t give your child’s number out yourself unless you are satisfied the person requesting it actually needs it and will protect it.) If you hire a professional to help you fill out the FAFSA and apply for aid, make sure the personal identification number (PIN) is known only to you. While there is not yet a way to be absolutely certain you won’t be a victim, you can reduce the opportunities for a thief to access the data that make it easier to take federal student loans out in your name.

If, despite your best efforts, you become a victim, your best bet is to report it as soon as you discover it. The U.S. Department of Education recommends contacting these offices, as well as the three major credit reporting agencies, depending on your situation:

U.S. Department of Education Office of Inspector General Hotline
Federal Trade Commission
Social Security Administration

Also understand that a fraudulent student loan may not be the end of the story. It clearly indicates that someone was able to access enough of your personal information to get a loan. That information could be re-used at some point to get a credit card, etc. It’s important to regularly monitor your credit and to investigate major changes in credit score (you can get two of your credit scores on Credit.com, updated every 14 days) that you can’t account for as well as credit inquiries or new accounts you don’t recognize. You may want to place a fraud alert or security freeze on your credit reports as well.