Spending Fools Too Cool for School?
CHARLOTTE, N.C. - "'School was not for me,' but the money is," says attorney Brad Smith of a local guy who may have committed student loan fraud.
Smith was in Mecklenburg County District Court just days ago working on an unrelated case when he heard a guy tell the judge that he dropped out of Central Piedmont Community College, took thousands of dollars of his federal school loan money and bought into a tee shirt printing company. "This guy was proud of it, I mean, I am telling you, it was crazy," says Smith.
The guy is in jail for assault charges, so we couldn't ask him ourselves, but we did find pics of his tee shirt business online.
Student loan fraud is an increasing problem, says Smith. He worries that because the federal direct loans are all backed by the government and must be repaid, this could be a bigger burst than the real estate bubble. "I can't even imagine the amount of money that's been lent out with the student loan label on it," he says.
CPCC tells us that since August 2011, its students have taken out nearly $12.4 million in federal direct loans. Nearly three thousand students have them. Some of the students might have more than one loan. The single-largest loan amount has been $9,750.
"It's definitely a loop hole in the program," says CPCC's Jeff Lowrance. He says federal direct loans are transactions between the government and the students. The money just flows through the schools. CPCC cannot put into place additional screening or deny a student. He says, "I do know some of our fellow institutions in North Carolina have already chosen to opt out of the program for the same concerns."
As for the tee shirt entrepreneur, Smith says he could be reported for loan fraud, which is punishable by up to 30 years in prison and $1,000,000 in fines. "I don't think it ever crossed his mind at all that what he was doing was potentially fraudulent," says Smith.
CPCC is going to re-evaluate it's participation in the federal direct loan program once classes end this spring. If a certain percentage of its students default, CPCC would be in danger of losing the ability to offer Pell grants.
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