Woman admits bilking $5M from Department of Education in ‘straw students’ scam

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A North Carolina woman admitted to scamming the Department of Education out of $5 million in financial aid money through an elaborate, years-long “straw student” scheme, officials announced Wednesday.

Cynthia Denise Melvin of Fayetteville orchestrated a scam that involved recruiting over 70 “student participants,” according to federal court filings. She applied to schools on their behalf, applied for federal financial aid and then attempted to even make it appear like they were attending class. Meanwhile, she and the students pocketed the money.

Melvin, 59, pled guilty to conspiracy to commit wire fraud in connection with the theft of millions from the federal student aid program, federal prosecutors said. At sentencing later this year, Melvin faces a statutory maximum sentence of 20 years, a $250,000 fine, and three years of supervised release. Melvin will also be required to pay restitution.

The scam is among the biggest “straw student” schemes in years, according to a Paste BN review of Department of Justice news announcements. Melvin ran the scheme from 2016 to 2023, prosecutors said.

Charging documents out of the Eastern District of North Carolina don’t name the student participants that Melvin recruited for the scheme but state they were recruited to apply for and enroll in college programs across the state. Her attorney, Kevin M. Marcilliat, declined to comment, citing upcoming court proceedings.

Scammer impersonated students

Melvin's class of straw students enrolled in multiple schools of higher education in North Carolina, including community colleges in Wake, Cumberland and New Hanover counties, court filings say.

She applied to the schools on behalf of the students and even went so far as to impersonate them so it appeared they were attending class, completing class assignments and communicating with the schools, according to charging documents.

Melvin applied for financial aid for the students through the Department of Education’s Free Application for Federal Student Aid (FAFSA). The department ultimately spent over $5 million on phony claims. The money went to schools to reimburse the cost of tuition. Funds remaining after reimbursing the schools went to the students and ultimately Melvin, according to prosecutors.

The Department of Education Office of the Inspector General said in a FraudGram February newsletter that scam rings tend to target community college and lower-cost schools more frequently since the cost of attendance is low “so the remaining credit balance refunds are higher.”

Straw students around the nation

The Department of Justice announced another student loan fraud case Wednesday. A Texas woman pled guilty to conspiracy to commit mail fraud and wire fraud as part of a scheme to get nearly half a million dollars in financial aid for straw students. 

But some of the biggest cases are from a few years ago. 

A Louisiana man who was sentenced to 11 years in federal prison for a straw student scam as well as a Covid relief fraud scheme is among the biggest cases on the Justice Department website. 

Elliott Sterling, age 34 at the time, was convicted at trial and ordered to pay $2.8 million in restitution to the Department of Education for a straw student scheme, officials announced in 2023.

Sterling’s straw network was extensive. He had 180 “student participants,” most of whom were unaware they had signed up for student loans, according to the U.S. Attorney’s Office for the Middle District of Louisiana. 

The Baton Rouge man falsified academic qualifications for 168 of the students; 145 lacked even a high school diploma; and a witness at trial testified Sterling paid him $5,000 to create 42 diplomas with made-up grades.

In the Central District of California, there’s an ongoing federal case against a trio of women accused of using the identities of prison inmates to apply to an Orange County community college and obtain nearly $1 million in federal student loans. 

Two of the women - sisters Nyisha and Dionne Ramsey - pled guilty to conspiracy to commit wire fraud and will be sentenced on May 1, according to the U.S. Attorney’s Office. The trial for the case of Sharyn Barney - Nyisha Ramsey’s mother-in-law - is set to begin in 2026.

Spotting bogus students, FAFSA fraud

The Department of Education’s Office of Inspector General said in September 2024 that schools can help spot student aid fraud rings. It added that helping detect fraud would “protect the integrity of the Federal student aid programs.”

One potential red flag that could expose scammers is multiple students sharing the same or similar addresses, names, emails, class schedules and bank accounts, the department said. Certain behaviors to look out for are changing personal information before loan disbursement, if the students attend multiple schools with little to no academic progress, not responding to verification requests, falsifying information on legal documents and using virtual private networks to access a school’s intranet. 

“Although some fraud ring participants do so willingly, fraud rings often steal the personally identifiable information of others to apply for aid,” according to the office.

Fake students typically have low family contributions to obtain need-based grants, receive monetary credits for overpayment, won’t have approved transfer credits and would stop attending classes after securing funds, the office said.

Anyone who suspects a fraud ring is at their college should immediately report it to the OIG. The office accepts complaints online and gives information on what documents are needed for the reports.