AI scammers steal $11M in student aid using fake “ghost students”

Scammers are deploying AI-powered “ghost students” to fraudulently enroll in online college courses and steal millions in federal financial aid, prompting the U.S. Education Department to introduce emergency identity verification requirements. The scheme has exploded alongside the rise of artificial intelligence and online learning, with California community colleges alone reporting 1.2 million fraudulent applications in 2024 that resulted in 223,000 suspected fake enrollments and $11.1 million in stolen aid.

The big picture: Criminal organizations are using chatbots to impersonate students in online classes, staying enrolled just long enough to collect financial aid checks before disappearing.

• Professors report discovering that almost no one in their classes is real, while legitimate students get locked out of courses as bots push enrollment over capacity limits.
• Victims of identity theft find themselves saddled with thousands of dollars in student loans they never applied for, requiring months of bureaucratic navigation to clear their names.

How the fraud works: Scammers target online courses that allow students to complete work on their own schedule, using stolen Social Security numbers to create fake applications.

• AI chatbots join virtual classrooms and complete assignments to maintain the appearance of legitimate enrollment.
• Community colleges are particularly vulnerable because their lower tuition means larger percentages of grants and loans go directly to students rather than institutions.
• The fraud often involves energy management and other technical courses that can be completed remotely.

Real victims, real consequences: Identity theft victims like Heather Brady and Brittnee Nelson discovered fraudulent loans worth thousands of dollars taken out in their names.

• Brady, a San Francisco resident, found a $9,000 loan had been disbursed to someone else for California college coursework she never pursued.
• Nelson’s credit score dropped 27 points when scammers took out over $5,000 in loans at Delgado Community College in New Orleans, nearly sending her debt to collections.
• Wayne Chaw received emails about an energy management class at De Anza Community College where someone was submitting homework assignments impersonating him using likely chatbot-generated responses.

Government response: The Education Department introduced a temporary rule requiring first-time federal aid applicants to show government-issued ID to colleges, affecting about 125,000 borrowers for the summer term.

• Officials said “the rate of fraud through stolen identities has reached a level that imperils the federal student aid program.”
• More advanced screening measures are being developed for the fall semester.

Scale of the problem: An Associated Press analysis reveals the massive scope of financial aid fraud targeting public colleges.

• California’s 116 community colleges reported 1.2 million fraudulent applications in 2024 alone.
• At least $11.1 million in federal, state and local aid was stolen from California community colleges and could not be recovered.
• Recent criminal cases include a Texas fraud ring pursuing $1.5 million in student aid and a decade-long New York scam worth $450,000.

What they’re saying: Victims express frustration with the bureaucratic maze of resolving fraudulent debt.

• “I just can’t imagine how many people this is happening to that have no idea,” Brady said after discovering the fake loans.
• “It’s like if someone came into your house and robbed you,” Nelson explained about the identity theft experience.
• Barbara Waiters, a Delgado Community College spokesperson, said “responsibility for approving loans ultimately lies with federal agencies.”

Why this matters now: Potential federal budget cuts could hamper fraud detection and victim assistance efforts as the Trump administration moves to dismantle the Education Department.

• The Federal Student Aid office lost over 300 employees in March, while the department’s fraud investigation unit has shed more than 20% of its staff since October.
• Brady worries about being “stuck with those $9,000” in loans if “the agency is going to be so broken down and disintegrated that I won’t be able to do anything.”