Former Masters of Cosmetology financial aid head admits to student loan scheme

FORT WAYNE, Ind. (WANE) The former financial aid director at now-shuttered Masters of Cosmetology has pleaded guilty in federal court to fraudulently obtaining school loans for students.

Rachel Crawford, 38, of Fort Wayne has been charged in U.S. District Court in Fort Wayne with obtaining by fraud and materially false statements Family Federal Education Loans while employed as the financial aid director at Masters of Cosmetology. The school at 1732 Bluffton Road was closed in April 2016 amid a federal investigation that brought down its owner, Kaydean Geist.

Federal prosecutors said Crawford has agreed to plead guilty to the charge. They added that she cooperated with the investigation into the beauty school.

Masters of Cosmetology
Masters of Cosmetology

Crawford’s agreement with federal prosecutors comes less than three months after Geist was sentenced in U.S. District Court in Fort Wayne to two years probation for her role as the mastermind behind a student loan scheme at the beauty school that secured nearly $3 million in bad student loans.

Geist pleaded guilty in April to failing to repay student financial aid funds in the millions of dollars she helped students secure illegitimately between April 2009 and August 2010.

Federal officials said Geist and the school “fraudulently schemed to obtain (United States Department of Education) loan funds to which (the school) and its students were not entitled, by using elaborate false statements to conceal from ED, and the students themselves, the fact that Defendant College and its students were receiving loan funds far in excess of their eligibility.” According to the charges, Geist would code the receipt of the federal loan proceeds as cash rather than as federal financial aid funds, then not report them to the college’s third-party student aid processing contractor.

Federal law prohibits students enrolled in programs like those as Masters of Cosmetology from obtaining more than $30,000 in student loans, or obtaining Federal Family Education loans and direct loans concurrently.

Geist’s scheme allowed the school to apply for both Federal Family Education loans and direct loans for the same students for the same academic period. From there, Geist would have the students sign promissory notes for the loans without showing them the details of their debts, the charges alleged. She also told students they were being awarded with false loans, according to the federal charges.

Kaydean Geist, for former owner of Masters of Cosmetology beauty school, walks out of U.S. District Court in Fort Wayne on Thursday, April 14, 2016, after pleading guilty to a illegitimate student loan scheme.
Kaydean Geist, for former owner of Masters of Cosmetology beauty school, walks out of U.S. District Court in Fort Wayne on Thursday, April 14, 2016, after pleading guilty to a illegitimate student loan scheme.

Investigators said Geist and the school told students that the loans were under a new government program that required only minimal payments and did not need to be repaid in full. She also granted students sham loans from the school for their personal expenses that were actually federal loans, and forged more than 150 Family Education loan checks for more than $500,000 that was deposited into the school’s account, the charges said.

All told, more than 50 Masters of Cosmetology students received between $30,000 and $98,000 in loans, and Geist and the school helped secure some $2.9 million in bad student loans, the charges alleged.

As a result of the federal investigation, the Department of Education agreed to cancel certain FFEL loans that were illegally acquired by Masters of Cosmetology, officials said.

Along with the probation, Geist was ordered to repay $300,000 to the United State Department of Education.

Crawford will be sentenced later. A judge will determine her sentenced.