Seventeen people were arrested in the last month alone, from near Sacramento to El Cajon in San Diego County, affecting mostly community colleges and for-profit-schools, like the University of Phoenix.
The U.S. Department of Justice said the 17 defendants were allegedly involved in six schemes that netted $770,000 through fraud. Four defendants were charged in a separate case earlier this year.
"Those who rip off federal aid funds can expect to find themselves in a prison cell instead of a classroom," U.S. Attorney Benjamin Wagner said.
"The defendants sometimes applied in their own names, but more often recruited straw students who had no intention of actually attending college," he explained.
Once the college gets the federal financial aid check and deducts tuition, the rest is given to the students to help cover books, rent, food and transportation.
In this case, it is alleged the thieves planned to drop out of school and spend the money on luxuries instead. It's easy to get away with because of the popularity of online classes, where students hardly ever interact with faculty.
"The participants in these fraud rings really see these schemes as a quick way to make easy money," said Kathleen Tighe, inspector general at the U.S. Department of Education.
Investigators point out that in the instance of Pell Grants, every dollar taken by fraud is a dollar not going to a needy student, and with tuition and the price of textbooks skyrocketing, students are feeling the pinch.
"It's sick because there are people out here, like myself, who really needs the financial aid money," said college student Jameze Hall.
The U.S. Attorney's Office says more cases are under investigation and more indictments are anticipated.