Scammers exploit AI to steal millions in college financial aid

Financial aid fraud has become rampant in the United States, particularly in California, where scammers have taken advantage of advances in artificial intelligence. In 2024 alone, public colleges reported 1.2 million fraudulent applications, leading to 223,000 suspected fake enrollments. Reports indicate that criminals were able to steal over $11.1 million from federal, state, and local financial aid programs that could not be recovered. The process typically involved the creation of 'ghost students'—individual identities constructed and used to enroll in online classes, which allowed scammers to collect financial aid intended for real students. Heather Brady, a San Francisco resident, found herself an unwitting victim when police visited her to inquire about her supposed application to Arizona Western College. Someone had fraudulently enrolled there in her name, resulting in a $9,000 loan issued for coursework at a California college. Similar experiences have echoed throughout the state as identity theft coupled with the use of chatbots and AI technology creates an environment ripe for exploitation. Victims are left to navigate a complex process to clear their names, often taking months to call various institutions and fight to erase illegitimate debts. The problem is exacerbated by federal actions that weakened enforcement measures against educational fraud. The Trump administration's decision to cut more than 300 positions from the Federal Student Aid office left fewer resources for detecting fraudulent activity. Alongside these staffing reductions, the Office of Inspector General has suffered attrition issues—making it more challenging for authorities to investigate and prosecute fraud cases effectively. Cases such as that of Brittnee Nelson highlight the personal impacts of this alarming trend. After she received a notification that her credit score had dropped due to loans taken out in her name for community colleges in California and Louisiana, she learned the hard way about the implications of identity theft. Although she managed to stop one loan before it was disbursed, another of over $5,000 for Delgado Community College proceeded without her consent. Victims like Brady and Nelson are calling for stronger verification processes to prevent this type of fraud from continuing to affect innocent individuals, asserting that protective measures need to be taken to safeguard against such rampant identity exploitation.