‘Ghost student’ scammers are using AI to steal financial aid, federal investigators warn

Scammers are using artificial intelligence (AI) to steal tens of millions of dollars in college financial aid, and they’re doing it by stealing identities. It’s part of an ABC News investigation.

Investigators are warning Americans about so-called “ghost students,” an army of digital thieves stealing identities and using them to submit AI-generated applications to community colleges across the country.

They enroll fake students, receive financial aid, and leave the victims on the hook to repay loans they didn’t take out.

“These loans are not being repaid,” said Jason Williams, the assistant inspector general for investigations at the U.S. Department of Education’s Office of Inspector General. “They’re being assigned to people (who) don’t even know they have a debt with U.S. Department of Education… (until) the Internal Revenue Service says you owe the Department of Education money.”

In Southern California, community colleges are facing a flood of fraudulent applications generated almost effortlessly by AI.

“These systems are able to fill out applications by the second, where in the past, a human being had to take 20 to 30 minutes to fill out an application,” said Dr. Nicole Ablo-Lopez, the Deputy Chancellor of the Los Angeles Community College District.

Statewide, the battle is exhausting. California has 116 community colleges with 2.2 million full and part-time students.

In 2024, those schools found nearly a third of all applications were fraudulent, costing $13 million in lost state and federal funds.

Coast to coast, over the past five years, the federal government has investigated more than $350 million in “ghost student” fraud.

“It’s a huge issue,” said Williams. “Right now, we have about 200 investigations open nationwide.”

But now, some California schools say they’re using AI to beat AI.

Cerritos College installed new vetting systems and live verification to make sure they’re actually dealing with humans.

“Our latest report actually shows that only one of them was able to get through and seek financial aid to the cost of about $5,000, which we were quickly able to trace and take care of the situation,” said Dr. Jose Fierro, President of the Cerritos Community College District.

The Los Angeles Community College District is doing the same, and says it’s costing about half a million dollars a year to keep “ghost students” in check.

“They are knocking at our door, but we are no longer letting them in without verifying that they are, in fact, a live person,” said Albo-Lopez.