A massive wave of financial aid fraud has hit colleges across the U.S., with scammers using AI and stolen identities to drain federal aid programs and deny real students access to classes and critical funding.
Fraud rings target US colleges using AI to create “ghost students” to flood registration systems and steal financial aid.
Financial Aid Fraud Fueled by AI
The U.S. Department of Education (DOE) has identified nearly 150,000 suspicious student-aid applications submitted through the FAFSA portal. These applications are part of a larger fraud operation exploiting vulnerabilities in higher education systems.
According to the DOE, about $90 million in financial aid has been distributed to ineligible applicants, including $30 million traced to the identities of deceased individuals.
“When rampant fraud is taking aid away from eligible students, disrupting the operations of colleges, and ripping off taxpayers, we have a responsibility to act,” said Secretary of Education Linda McMahon.
Colleges Fighting Back
At Merced College, nearly half of the 15,000 spring 2025 student registrations were deemed fraudulent. Mike McCandless, VP of student services, explained how tech teams now detect fakes through bizarre IPs and disposable email accounts created minutes before enrollment.
