Man operating Federal Student Loan Discharge Scam sentenced to Prison

De’reek Banks has been sentenced for operating a scheme that caused approximately $48,000,000 in outstanding federal student loans to be fraudulently discharged by exploiting a program intended for disabled military veterans. Banks illegally pocketed about $891,000 in payments from more than 500 student loan borrowers. Many of these borrowers mistakenly believed that they had paid Banks for legitimate student debt relief services.  “This defendant brazenly stole funds from innocent student loan borrowers by exploiting a financial aid program intended to assist military vets who sacrificed their health for the security of our country,” said U.S. Attorney Ryan K. Buchanan. “He tricked borrowers into believing that he could legitimately obtain federal student loan discharges for them while attempting to defraud the U.S. government of almost 50 million dollars.”  According to U.S. Attorney Buchanan, the charges and other information presented in court:  De’reek Banks offered to help student loan borrowers obtain discharges for federal student loans in exchange for a fee. Banks claimed that special government programs existed for authorizing the discharge of the borrowers’ loans. But Banks’s business relied on false statements he made to Federal Student Aid, an office of the U.S. Department of Education responsible for providing billions in financial aid to students.  Banks made false representations to the agency, and fabricated hundreds of Department of Veterans Affairs letters using a fake letterhead, claiming that the borrowers were military veterans who were eligible for student loan discharges due to a total or permanent disability (“TPD”). Banks then used these letters to apply for special TPD discharges with Federal Student Aid that caused the student loan borrowers’ debts to be erased even though the borrowers did not lawfully qualify for the discharge. Banks caused approximately $48,000,000 in student loans to be fraudulently discharged through his scheme.  On August 22, 2022, De’reek Banks, 41, of Lithonia, Georgia, was sentenced to six years in prison to be followed by three years of supervised release and ordered to pay restitution in the amount of $910,416.69.  He pleaded guilty to theft of government property.  This case was investigated by the U.S. Department of Education, Office of Inspector General and the U.S. Postal Inspection Service.  Assistant U.S. Attorney Samir Kaushal, Deputy Chief of the Cyber and Intellectual Property Crime Section, prosecuted the case.