The rise in online schooling since the pandemic has given Americans a new way of receiving their education from home. With the simultaneous rise in artificial intelligence use, however, new problems have risen. The growth of AI has led to a massive increase in financial aid fraud online, and many victims aren’t even aware it’s happening.
The rise in artificial intelligence globally has created a multitude of new issues, and with little to no legal regulations put in place, it’s easy for AI companies or individuals using AI tools to truly test the limits of this technology.
Reports state that fake college enrollments are being accomplished using “ghost students,” which are chatbots that join online classrooms and stay long enough to collect a financial aid payment.
There have even been cases where professors have discovered that a majority of their class is made up of students who aren’t real. As more AI “students” enroll, actual people are being locked out of classes that they need to graduate.
Victims of identity theft have also found that scammers have taken out loans in their names, and getting that reversed is a long process involving the colleges, Federal Student aid offices, and loan providers in order to get the debt removed.
The US Education Department recently implemented a temporary rule where students are required to show colleges a government-issued ID in order to prove their identity. For now, this rule only applies to first-time applicants for federal student aid for the upcoming summer term. The agency has stated that they are working on a more complex and advanced screening for the fall semester this year.
“The rate of fraud through stolen identities has reached a level that imperils the federal student aid program.”
The Associated Press formed an analysis of fraud reports in which they utilized public records. They found that in 2024, California colleges reported 1.2 million fraudulent applications which resulted in 223,000 suspected fake enrollments. Other states have felt the same impact as well, however, California has 116 community colleges which makes it a larger target.
According to the reports, scammers stole at least $11.1 million in federal, state, and local financial aid from California community colleges last year that were unable to be recovered. Colleges normally receive a portion of the loans that are meant for tuition. The balance goes directly to students, and community colleges are specifically targeted because of their lower tuition.
Lower tuition costs means that a much larger percentage of grants and loans go to the borrowers. The scammers are using AI chatbots to commit the fraud and targets online classes that give students the freedom to watch lectures and complete their work on their own time.
AP recently spoke to Wayne Chaw, a former student at De Anza Community College, who back in January started to get emails regarding a class he never signed up for. In fact, Chaw hadn’t taken any courses at the College for a decade. Identity thieves were able to get Chaw’s Social Security number and then collected almost $1,400 in financial aid using his name.
Chaw said that the class that the scammer used required students to submit homework to prove they were real, and the thief was writing submissions using a chatbot.
“This person is typing as me, saying my first and last name. It’s very freaky when I saw that.”
Luckily for Chaw, the fraud involved a grant, not a loan, so he didn’t lose any of his own money. While Chaw was able to call the Social Security Administration to report the identity theft, he was left on hold for five hours and never reached an actual person, an unfortunately common experience.
With the Trump administration moving to dismantle the Education Department, federal cuts will make it harder to catch the criminals and help victims of identity theft. In March, the administration fired over 300 people from the Federal Student Aid office, as well as the department’s Office of Inspector General, which is responsible for investigating fraud.
“I’m just nervous that I’m going to be stuck with this,” said Heather Brady, who recently was visited by the police who were investigating her “enrollment” in Arizona Western College. Brady never applied, and found that a loan for over $9,000 was paid out in her name to another person.
“The agency is going to be so broken down and disintegrated that I won’t be able to do anything, and I’m just going to be stuck with those $9,000 in loans.”
Brittnee Nelson recently found that her credit score decreased due to loans being taken out in her name for colleges in California and Louisiana. While she was able to cancel one of them, she wasn’t able to stop a loan of over $5,000 for Delgado Community College in New Orleans.
Delgado spokesperson Barbara Waiters said that the responsibility for approving loans lies within federal agencies.
“This is an unfortunate and serious matter, but it is not the direct or indirect result of Delgado’s internal processes.”
Eric Mastrota is a Contributing Editor at The National Digest based in New York. A graduate of SUNY New Paltz, he reports on world news, culture, and lifestyle. You can reach him at eric.mastrota@thenationaldigest.com.
