When a police officer knocked on Heather Brady’s door in San Francisco to ask if she had applied to Arizona Western College, she was baffled. Unknown to her, someone had stolen her identity, enrolled in multiple community colleges, and secured federal student aid in her name. By the time she checked her loan servicer account, more than $9,000 (Rs. 7.9 Lakhs) had already been disbursed to another person.
Brady’s experience is part of a widening fraud crisis that federal officials say is being fueled by artificial intelligence and the growth of online learning. Criminal networks are enrolling thousands of “ghost students” using stolen identities and AI-generated responses, siphoning millions of dollars from the federal student aid system.
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A System Under Siege
Reports from California, which operates the nation’s largest community college system, indicate that 1.2 million fraudulent applications were filed in 2024 alone, with at least 223,000 resulting in suspected fake enrollments. The state’s colleges reported unrecoverable losses of more than $11 million (Rs. 96 Crores) in financial aid, making them a prime target for organized fraud rings.
These scams often rely on AI chatbots that mimic human activity in online classrooms, submitting assignments and interacting with professors long enough to appear legitimate. Some instructors have found entire classes filled with non-existent students, displacing genuine learners from courses they need to graduate.
Victims of identity theft are left entangled in bureaucratic struggles. They spend months trying to reverse fraudulent loans, calling federal agencies and financial institutions, often with little progress.
Federal Cuts and Rising Concerns
The U.S. Education Department recently issued a temporary rule requiring first-time applicants for federal aid to present government-issued identification, covering some 125,000 students this summer. Officials say more advanced fraud detection systems are being prepared for the fall term.
But critics worry that recent staffing cuts, including the dismissal of hundreds of employees at the Federal Student Aid office and attrition in the Inspector General’s office, will weaken oversight. Investigators have already uncovered rings in Texas, New York, and Louisiana that used stolen identities, including those of prison inmates, to claim hundreds of thousands of dollars.
For Brady, whose fraudulent loans remain on the books, the ordeal has collided with her own plans to pursue further education. When she tried to enroll in classes at City College of San Francisco, she was told the courses were already full, crowded in part, administrators admitted, by fraudulent applications.