Years of hard work had finally paid off for Colby Nolan--or so it seemed.

After paying his dues working at a fast food restaurant, babysitting and taking classes at a local community college, Nolan managed to attain a master's degree in business administration.

The only catch: Nolan is a cat. 

Nolan was used as a prop in a 2004 Pennsylvania investigation into Trinity Southern University, one of hundreds of institutions accused of being a diploma mill. His degree had cost just $399 and his qualifications were clearly phony.

Diploma mills have brought in well more than $1 billion by selling fraudulent degrees to millions of students. Experts have said 85% of the industry comes from the U.S. and Canada.

Far from harmless, phony diplomas can hurt the reputation of unknowing students, cast a negative light on companies and lead to unwarranted promotions and pay raises. 

“I think it’s a very scary issue. Knowing you can short-cut this system is frightening,” said Kathy Dillaman, associate director for federal investigative services at the U.S. Office of Personnel Management.

Degree mills are unaccredited organizations that charge a fee for a degree with little to no educational work required. These fraudulent institutions typically give credit for life experiences and often have no physical facilities. To be sure, not all unaccredited institutions are diploma mills--some may be striving toward accreditation, and others may simply be training schools.

The average bogus diploma costs about $2,000, though that price is often negotiable. Diploma mills typically charge more for higher grades, letters of recommendation and phony transcripts, as well as answering services in case employers want to check credentials.

“Think about how much profit there is in a piece of paper. The only thing [they need] to pay for is spam and a printer... It’s all a scam,” said Allen Ezell, co-author of Degree Mills and former FBI agent who established the agency’s “DIPSCAM” (Diploma Scam) task force in 1980.

There have been a number of high-profile incidents where institutions were shut down by the government for operating diploma mills.

According to John Bear, co-author of “Degree Mills,” a Secret Service sting operation took down Washington-based St. Regis University. In this operation, investigators created a fictitious Middle Eastern bomb engineer who was given a degree for his life experiences.

Columbia State University was one of the largest U.S.-based diploma mills to be shut down, said Bear. The school allegedly sold more than $72 million of phony diplomas and was investigated after Bear received extensive, internal documents from an inside source.

There have been a slew of headline-grabbing examples of individuals who were forced to give up their jobs or pay raises when their credentials were questioned. 

In 2004, Laura Callahan, a senior official with the Department of Homeland Security, resigned when her bachelor’s and master’s degrees from Hamilton University were questioned.

More recently, H. James Wasser, a superintendent from New Jersey, was forced to give up a pay raise after it became known his doctoral degree was from Breyer State University, a school dubbed a diploma mill.

It appears that despite growing recognition from the government and private employers, degree mills have become more prevalent. 

“As the job market tightens up and we put more importance on educational credentials… it’s just blossomed and bloomed,” said Ezell, who once worked in J. Edgar Hoover’s office at the FBI.

Diploma mills have been able to drastically cut down on advertising costs thanks to technology.

“The Internet has been what these people dreamed of to operate cheaply and anonymously,” said Bear.

Diploma mills have become more savvy in recent years, with many of them obtaining the coveted .edu Web suffix. Others have created phony accreditation companies that lack accrediting authority.

To check the credentials of a given institution, the Department of Education and the Council for Higher Education Accreditation have set up extensive databases on their Web sites.

Like many employers, government agencies often entice employees to attain advanced degrees by offering to pay for them. At times, these degrees are from fraudulent schools that lack accreditation. Not only do taxpayers foot the bills for these occasional phony degrees, but also the salary and pension upgrades that go along with them.

A 2004 report from the Government Accountability Office, showed 28 senior-level employees from eight agencies had degrees from diploma mills and other unaccredited schools. However, the GAO said it believes the actual numbers of phony degrees to be much higher.

“There is no federal criminal statue that covers degree mills, accreditation mills, counterfeit diplomas or [phony] transcripts,” said Ezell.

Instead, law enforcement officials rely on state laws, which vary in strength, and other charges such as wire fraud, tax fraud, mail fraud to nab those running deceptive operations.

While there have been efforts to curb diploma mills on a national level, none have succeeded so far. 

The diploma mill industry "is never going to stop. It’s there because people want it. The only way a dent will ever be made will be through more and more publicity,” said Bear.