Answering Your Question First:
Because there is trust in a system until an exploit is found. The more serious and pervasive the discovered exploits, the more bureaucracy expands so as to mitigate the risk of further exploits. This in turn makes normal operations (i.e. enrolling in school) slower, more arduous, less agile, and more expensive.
The Background Info:
American financial aid for higher education is a complex web of fund sources and qualifications. Here's how it breaks down--
1. Scholarships - A "gift" aid (does not require repayment) that is awarded to individuals based on merit. Amounts, qualifications, and even competition varies between scholarships. Most scholarship funding comes from non-government sources.
2. Grants - A "gift" aid that is awarded on the basis of an individual's (household's) financial need assuming certain minimum qualifications are met. Grants come from a wide variety of sources including federal and state governments, local communities, cities, and colleges.
3. Federal Work-Study - An earned aid wherein the federal government pays a portion of the recipient's wage. This makes the recipient more attractive as a prospective employee, helps the recipient get valuable jobs experience, instills a sense of self-sufficiency in the recipient, and reduces of the cost of the employee to the employer.
4. Federal Subsidized Loan - A loan issued to the student at a fixed rate. The federal government pays the interest on the loan while the student is enrolled and making sufficient progress to a degree. Repayment begins 6 months ends enrollment (either leaves school or graduates).
5. Federal Unsubsidized Loan - A loan issued to the student at a fixed rate. Interest accrues and compounds throughout the life of the loan. Repayment begins 6 months ends enrollment (either leaves school or graduates).
6. Parent PLUS Loan - A loan issued to the parents or guardians of a student at a fixed rate. Interest accrues and compounds throughout the life of the loan. Repayment can begin immediately.
7. Private Loans - A loan issued to someone at a variety of rates and repayment structures
Every year, students file Free Applications for Federal Student Aid (or FAFSAs) with the Department of Education. The application is primarily an income reporting tool wherein the students share tax info with the DoE. Using that data, the DoE provides all colleges that inquire with a student's "Estimated Family Contribution" (EFC) which is the maximum amount that a student's family can reasonably expected to contribute to the student's education in the coming year. If you have an EFC of $0, you're almost guaranteed a blend of aid types 1-4 (above) for the full cost of attendance at colleges that have offered you admission.
A financial aid package issued by the school is intended to cover some or all of the following budget categories and in the following priority:
* Tuition & fees
* Room and Board
* Books & supplies
* Transportation
* Personal Expenses
How is the Money Extracted in the Scam?
The campus takes the tuition and fees right off the top of a financial aid award If the campus is providing housing and cafeteria access, they also take out Room & Board. Anything else is surrendered to the student to budget and pay for their own books, supplies, transportation, and other personal expenses. This is sometimes called a financial aid "stipend" or "refund".
That stipend/refund is the target. Thus, the most likely scam target campuses are ones where the scammers can:
1. Be admitted with relative ease (community college)
2. Have cheap enough tuition/fees to facilitate a stipend/refund (community college)
3. Are insufficiently staffed to facilitate their own novel investigations and audits (community college)
Where in the Process is the Scam Happening?
First, at the FAFSA. Colleges, Universities, and governments 100% rely on the submission and validation of financial data via the FAFSA to allocate need-based aid. If FAKE or STOLEN identities are making it through the FAFSA process, then the Department of Education is failing the validation process. Scamming this process is 100% a federal crime. (https://www.justice.gov/usao-edla/pr/new-orleans-woman-pleads-guilty-theft-more-280000-federal-student-aid)
Second, the campus should be validating the physical existence and presence of the student at the stipend/refund phase given the failure at the federal level.