Stop ghost students stealing college financial aid with biometric liveness

The Associated Press recently documented a vast and fast-growing fraud on the U.S. education system in which scammers use AI to hijack the college financial aid process. The bad actors involved often are part of organized crime rings that deploy AI tools to manufacture fake student identities, manipulate enrollment systems, and exploit weaknesses in federal aid verification. The result is a crisis that threatens to erode trust in public education, squander taxpayer dollars, and leave victims with burdensome debt and few options for redress.

At the heart of this scheme are so-called “ghost students,” AI-generated personas complete with fabricated academic histories and convincing writing samples. With large language models capable of generating fluent essays and chatbot tools that simulate realistic human responses, scammers automate entire application pipelines.

These fraudsters fill out Free Application for Federal Student Aid (FAFSA) forms, enroll in online courses, and even submit introductory homework assignments, all without a human ever setting foot on campus. These synthetic students target asynchronous online classes, which require no real-time interaction, making detection far more difficult for overburdened institutions.

According to data obtained by the Associated Press, California community colleges reported over 1.2 million fraudulent applications in 2024 alone, leading to at least 223,000 suspected fake enrollments and over $11 million in unrecoverable financial aid losses. Many of these applications slipped through because they were too convincing to be flagged during the early stages of processing. Colleges, particularly community institutions already strained by staffing cuts and high turnover, are ill-equipped to vet each student with the level of scrutiny now required.

The financial mechanics of this type of fraud are simple but effective. Once aid is disbursed in the form of grants, loans, or both, a portion is allocated to cover tuition while the remainder is distributed to the student to cover living expenses. That disbursement is where the scammers strike. The fraudulent student drops out, vanishes into digital anonymity, and the funds land in bank accounts opened under stolen or synthetic identities. With automated tools, these operations scale quickly. So much so that entire courses may be overrun by bots crowding out legitimate students and locking them out of required classes.

As these fraud schemes multiply, public colleges are sounding alarms. At the College of Southern Nevada, over $7.4 million in fraudulent aid had to be written off in fall 2024 alone. The Foothill-De Anza Community College District reported more than 26,000 applications flagged for fraud out of 2024’s incoming class. Institutions from Minnesota to New York have reported hundreds of such cases each year. The sheer volume has overwhelmed the fraud detection mechanisms at even the most prepared schools.

This fraud crisis comes amid broader institutional upheaval. In March, the Trump administration implemented sweeping cuts to the Department of Education (DOE), firing over 300 staff from the Federal Student Aid (FSA) office and allowing over 20 percent attrition in the department’s Office of Inspector General, which investigates fraud. Victims of fraud fear that shrinking enforcement capacity will leave them stranded.

Some of the most egregious cases have led to federal indictments. A Texas man was charged in connection with a $1.5 million student aid scam that relied on stolen identities. Another individual pleaded guilty to applying for more than $650,000 in aid using the names of prison inmates. In New York, a decade-long scheme netted $450,000 before it was uncovered.

As the crisis grows, the federal government is beginning to respond. DOE announced a nationwide initiative that is set to begin this fall aimed at eliminating fraudulent activity and safeguarding taxpayer dollars. The new effort will require significantly stricter identity verification for applicants using FAFSA, especially those applying for the first time.

Applicants for federal aid must present a valid government-issued ID, either in person or over a live video call. Roughly 125,000 students will be affected this summer, and a more permanent verification framework is expected this fall. Secretary of Education Linda McMahon emphasized that the current wave of fraud “imperils the federal student aid program,” and that urgent reforms are required to protect taxpayer funds and legitimate students.

A recent review by FSA revealed $90 million in improper disbursements, including funds paid to deceased individuals and others ineligible under immigration rules. The Department of Education has now restored the real-time cross-checks with the Social Security Administration and Department of Homeland Security which had been relaxed under prior rules that focused on debt forgiveness.

Among the new measures is a modernized identity verification framework. The most intensive federal checks, known as V4 and V5 verifications, no longer require the burdensome “Statement of Educational Purpose.” Instead, students can verify their identities via live video while presenting a valid photo ID. Verification by agencies that comply with the National Institute of Standards and Technology’s Identity Assurance Level 2 (IAL2) standard is now accepted, adding flexibility for verifying incarcerated students and others in exceptional circumstances.

Education officials say these changes represent the most aggressive anti-fraud stance in more than a decade. DOE is now mandating that schools report all suspected fraud to the Office of Inspector General and immediately freeze aid disbursements once ineligibility is suspected. Schools are also responsible for tracking overpayments and may face penalties if they fail to enforce the new rules.

The challenges are not just administrative, they are systemic. Bala Kumar, Chief Product and Technology Officer at identity verification firm Jumio, argues that colleges must begin treating student verification like banks treat customer onboarding. “It’s no longer enough to just verify application forms; institutions must verify people,” Kumar said, pointing to AI-powered tools that can instantly validate ID documents, scan selfies, and confirm liveness, all without significant staffing increases.

“In California alone, over 1.2 million fraudulent applications were submitted to community colleges in 2024, resulting in over 223,000 potentially fake enrollments and about $11 million in lost aid,” Kumar said. “At some colleges, bots made up nearly 1 in 5 applicants. This isn’t a minor problem – it is a systemic breach that undermines trust in the very mission of higher education.”

Kumar said, “Colleges and universities need to take a page from the financial services playbook and embrace digital identity proofing as part of the enrollment journey. With today’s AI-powered tools, verifying a real person takes seconds: scan a government-issued ID, take a quick selfie, and confirm liveness and authenticity in real time. This isn’t just about stopping fraud – it’s about ensuring resources go to actual students and that digital-first engagement starts with trust.”

“Imagine a world where the same student who uses a selfie to apply also verifies again when registering for classes or accessing financial aid – without burdening IT or admin staff,” Kumar added. “That’s not just better security – it’s a better student experience. Education is evolving. It’s time the way we protect it evolved too.”

Meanwhile, DOE is expanding the use of machine learning models to flag suspicious FAFSA submissions in real time. After reinstating post-screening checks in May through the National Student Loan Data System, the agency has reportedly prevented $40 million in fraudulent loan disbursements and $6 million in misallocated Pell Grants. Officials say that targeting the Pell Grant program is especially urgent, given its vulnerability and central role in supporting low-income students.

Critics of the Biden-era student loan forgiveness initiative claim that it inadvertently weakened the nation’s fraud prevention infrastructure by relaxing verification standards just as online learning and application volume surged. With digital fraud tools becoming increasingly sophisticated, the absence of robust safeguards left an opening that criminals quickly exploited.

Now, with colleges reporting unprecedented administrative burdens and fear of federal audits, DOE is pushing for a cultural shift. McMahon has said the department’s new philosophy centers on rebuilding integrity and accountability within the financial aid system. Restoring public trust, she argues, is the first step toward more ambitious reforms.

Article Topics

AI fraud  |  biometric liveness detection  |  digital identity  |  financial crime  |  generative AI  |  identity proofing  |  schools  |  selfie biometrics  |  synthetic identity fraud  |  U.S. Government