A 59-year-old woman was able to scam the federal student aid program for millions of dollars by fraudulently applying for financial aid at several community colleges in North Carolina, the Department of Justice (DOJ) said in a press release on Wednesday.
Cynthia Denise Melvin pled guilty to conspiracy to commit wire fraud related to the $5 million fraudulent financial aid disbursements.
Why It Matters
Millions of Americans rely on federal financial aid to attend college. Pell Grants, which have a maximum value of $7,395, for example, help roughly 40 percent of students attend college.
President Donald Trump, meanwhile, has been leading an effort to restructure the Department of Education (DOE).
What To Know
According to the DOJ, Melvin helped the more than 70 “straw students” falsely apply for the financial aid at several community colleges in North Carolina between 2016 and 2023.
Now she will have to pay back the money as part of her sentencing as the Federal Student Aid (FSA), which is an office within the DOE, looks to get back the $5 million it lost in fraudulent aid payments.
FSA payments can include grants, loan, work study funds and other types of disbursements paid directly to students. Typically, a school will apply the financial aid award to a student’s tuition and fees, and offer the remaining balance refunded to the student to use for any education-related expenses.
Melvin was able to commit the con by using personal identifying information (PII) of these “straw students” to apply for admission at certain colleges in the Tar Heel State. Then, Melvin would make it look like the students were attending classes and completing coursework.
During the scam, Melvin falsely submitted the Free Application for Federal Student Aid (FAFSA) forms through the FSA’s website using fake identities and kept a majority of the refunds awarded to the fake students.
Office of Inspector General investigators figured out Melvin was committing fraud after getting a federal search warrant and finding PII and coursework evidence for the straw students at her home. They also located several FSA account usernames and passwords as well as bank account and routing numbers involved in the scam.
What People Are Saying
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “With fraud through government agencies garnering numerous headlines in recent weeks, details of this particular scam come at a bad time… We don’t know just exactly how rampant fraud is within the federal student loan program. Independent studies have put the possible amount in the billions, but again, there’s no concrete evidence to back those claims. Still, for supporters of cutting and revising different government agencies, scams like this add fuel to their arguments.”
Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek: “This wasn’t just a scam, but a masterclass in institutional fraud that exploited every weakness in our financial aid system. Cynthia Melvin essentially created a ghost student army over 70 strong.
He added: “Unlike typical student loan scams targeting individual borrowers, Melvin attacked the system itself. Creating the illusion of legitimate students attending classes and completing coursework across multiple North Carolina community colleges. The genius—if we can call fraud ‘genius’—was in the approach. She handled everything from admissions applications to FAFSA submissions while carefully concealing her identity.”
Ryan said the fraud was able to reach $5 million because of the loan refunds sent directly to the fake students.
“The tuition payments wired directly to schools and the loan refunds kicked back after tuition was collected. Multiply that by 70 plus fake students across multiple institutions, and suddenly $5 million doesn’t seem so impossible,” he said.
Kevin Thompson, a finance expert and the founder of 9i Capital Group, told Newsweek: “The FAFSA process itself isn’t exactly user-friendly—I have clients struggling with reporting assets and proving their kids’ loan eligibility all the time. So, the fact that she was able to manipulate the system at this scale is concerning, but not entirely shocking.”
What Happens Next?
At sentencing later this year, Melvin could face a maximum sentence of 20 years, a $250,000 fine and three years of supervised release.
Melvin’s case could spark greater concerns for the DOE that others are able to get away with the same level of fraud.
“While Melvin’s institutional approach is less common than individual-targeted scams, both exploit the same issue: a complex system that’s difficult for average people to navigate,” Ryan said. “The truth is, where there’s confusion and desperation, predators will gather.
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