You dont get to borrow money from an FDIC insured institution by presenting fraudulent information. Banks use the information you present to them to determine whether or not they will be repaid, even if you default on the loan. If she was the guarantor for an entity that borrowed the money than she is 100% liable for the debt if it defaults, which appears to have happened. The school closed citing the overwhelming burden of the $10,000,000 loan.