On June 6, the Department of Education (ED) announced plans to expand efforts to eliminate identity theft and fraud in federal student aid programs. It revealed that nearly $90 million had been disbursed to ineligible recipients over the past three years, including $30 million to thousands of deceased individuals. Additionally, fraud detection efforts have identified nearly 150,000 suspicious identities in current Free Application for Federal Student Aid (FAFSA) forms.
ED argues that under the Biden administration, fraud prevention was sidelined in favor of advancing Biden’s ambitious—and illegal—student loan bailout agenda. A 2023 Government Accountability Office (GAO) report found, for example, that millions of borrowers received automatic approvals for debt relief with minimal fraud safeguards—such as verifying self-reported income—raising red flags about oversight. Then chairwoman of the House Committee on Education and the Workforce, Virginia Foxx, reacted to the report’s findings, saying that:
Biden’s Education Department is an expert in dropping the ball when it comes to upholding good governance—the findings of this GAO report confirm this. Rather than intervening to mitigate instances of fraud from students who applied for loan ‘forgiveness,’ the Department leaned back in its chair, kicked its feet up, and took a nap. The Department’s lack of appetite for oversight and accountability poses a serious financial risk to the students it purports to serve and the taxpayers of whom it takes advantage.
Meanwhile, during the pandemic, the Biden administration relaxed certain financial aid verification requirements, reducing the number of students who had to confirm their financial information. While this may have eased administrative burdens and sped up disbursements, it also heightened the risk of improper or fraudulent disbursements. According to Secretary of Education Linda McMahon, the ED now has no choice but to address the fraud that is “taking aid away from eligible students, disrupting the operations of colleges, and ripping off taxpayers.”
[RELATED: Fraud Up and Down Our Educational System]
The Cost of Fake Students
The enrollment of “ghost students” has become a growing threat to colleges. This organized scheme, which expanded during the pandemic as fraudsters hid behind online classes, involves individuals signing up for full course loads while falsely reporting low income to maximize financial aid, causing some institutions to lose millions. For example, in 2024 the College of Southern Nevada (CSN) lost $7.4 million in a “ghost student” scheme. An external audit revealed that CSN had accumulated $7.43 million in debt from fraudulent tuition, fees, and write-offs, and was forced to repay the ED for federal loans awarded to the fake students.
That same year, a community college district in Arizona reported that out of 26,000 applications received, at least 10,000 were placed on hold for potential fraud before the spring quarter. And last year, the California Community College (CCC) system faced a similar problem. Hundreds of students were blocked from enrolling in needed classes because fraudsters—using fake or stolen identities—were taking up seats to exploit financial aid.
AI’s Role in Combating Fraud
To combat enrollment fraud, the CCC system adopted LightLeap.AI, an artificial intelligence (AI) platform designed to detect fraudulent applications. Since its implementation, over 79,000 applications have been flagged as fraudulent, allowing staff to clean up class rosters, safeguard financial aid funds, and ensure that legitimate students are moved from waitlists into open seats.
According to Kiran Kodithala, founder of the LightLeap platform, community colleges are frequent targets for student aid fraud because they are “designed to accept pretty much anyone.” These so-called “ghost students” use fake or stolen identities to mass-apply to colleges within minutes, gain quick acceptance, and then disappear with the financial aid.
Kodithala also notes that many college applicants—particularly those aged 18 to 24—do not have standard forms of identification such as a credit card, utility bill, or passport. In such cases, LightLeap relies on advanced analysis of the application itself, scanning for patterns and anomalies that may indicate fraudulent activity. This includes monitoring for vague applications and suspicious inconsistencies in personal information.
By combining these digital tactics with conventional ID checks, LightLeap aims to ensure that legitimate applicants can be verified even without traditional documents—while making it harder for fraudulent applications to succeed. However, there are concerns about the system mistakenly flagging legitimate applicants as fraudulent—and vice versa.
[RELATED: One Clear Way to Stop College Accreditation Fraud]
Stricter Verification Ahead
Currently, the ED seems intent on tightening oversight of federal aid disbursements. Starting this fall, Federal Student Aid (FSA) will implement an enhanced identity screening process for FAFSA applicants to better detect identity fraud, particularly from organized fraud rings. Students selected for verification by the ED will be placed into one of three verification groups—V1, V4, or V5.
Those in the V1—Standard Verification—group must verify specific information, depending on whether they are tax filers or non-filers. This includes details such as family size and income earned from work.
Under the ED’s updated guidance, applicants selected for V4 or V5 verification must present a valid, unexpired government-issued photo ID—either in person or via live video—to an authorized school official, who must then retain a copy of said ID. In the V4—Custom Verification—group, students simply need to verify their identity, while students in the V5—Aggregate Verification—group must verify both their identity and all items required under V1.
Additionally, schools are required to maintain systems for identifying conflicts—such as students knowingly providing false information—related to their eligibility for aid. If fraud is detected, institutions must report it before disbursing any Title IV funds.
Why Not Use AI?
Financial aid fraud and enrollment fraud go hand in hand—both steal limited educational resources from genuine students. Fraudulent enrollments not only strain class capacity but also serve as a gateway to improperly obtained aid, making the two problems inseparable. While the Department of Education has begun tightening security measures, human reviewers alone cannot keep pace with the scale and speed of fraud. Tools like LightLeap show how AI can catch fraudulent applications far faster than humans, streamlining the process and reducing costs. By flagging more bad actors at the front end, colleges can save millions on the back end—protecting financial aid dollars, opening classroom seats, and ensuring that limited resources go where they belong: to real students, not fraudsters.
Image: “Ghostwriting” by hobvias sudoneighm on Wikimedia Commons
” must present a valid, unexpired government-issued photo ID—either in person or via live video—to an authorized school official, who must then retain a copy of said ID”
So we can require an ID to register for college — but not to vote?
“in 2024 the College of Southern Nevada (CSN) lost $7.4 million in a “ghost student” scheme. An external audit revealed that CSN had accumulated $7.43 million in debt from fraudulent tuition, fees, and write-offs, and was forced to repay the ED for federal loans awarded to the fake students.”
No. “Lost income” is not actual debt — and the only actual loss is what they had to repay ED.
The costs are all fixed — it costs you the same price if there are 25 or 30 students in the classroom. So if you have five fraudulent registrations in there (or 5 empty seats), you have lost the income from those five students which is carried as bad debt which is then written off as uncollectable, even though the money never existed.
Say tuition is $100 and each student gets a $25 loan. Five nonexistent students is a paper loss of $500, although the only actual loss is the $125 which has to be paid to ED.
BUT you also increase your headcount by five because you are reporting there being 30 students in that class, not the 25 who actually are. And in most states, state appropriation is based on headcount, both actual and Full Time Equivalent (FTE), with the latter being really important to community colleges. Actually both.
So you actually lose $25 for each fake student, but you might also get an extra $50 from the state because of your increased headcount. Or you might not lose $50 because your enrollment is shrinking. So if you are ethically flexible, would you rather lose $25 or $50?
But the other thing here is that every college I know of will kick you out if you haven’t cleared your Bursar’s bill before the start of the semester. That means that the portion you have to pay in cash yourself has to have already been given to them — which raises two questions no one has asked.
First, the loan is paid to the college — all outside financial aid goes to the Bursar — so if the students are stealing this money, how are they physically getting it? The college has to cut them a check (or electronic transfer) and why is it doing that? It’s money that is owed to the college for the course the student is enrolled in — why would they ever give it to the student?
Second, going back to the $75 student money, $25 ED money for the $100 tuition bill, paying $50 to steal $25 is not going to get you any money. You would have to report a family income so low that it would be over half ED money to gain anything, and for this to be worthwhile, it has to be mostly ED loan money. But why is the college giving it to the student when it is “owed” to the college…
Something else is going on here:
1: Do these fake enrollments create identities that are useful for something else, e.g. applying for credit cards or driver’s licenses?
2: Are the colleges *intentionally* doing this? Remember that even if you have to write off the $75, if you don’t get caught, you keep the $25.
And even if you do get caught, which budget line item repays ED? Your department’s? Or the General Counsel’s?
I’m not saying this isn’t fraud, but there is something missing. Cui bono???