Financial aid fraud is on the rise. Here’s how scammers are stealing funds

A police officer visited her home to ask if she had applied to Arizona Western College, which she hadn't, and it was discovered that someone had applied in her name to scam financial aid money. The scammers didn't stop there, and a loan for over $9,000 was paid out in her name but to another person for coursework at a California college. The rise of artificial intelligence and online classes has led to an explosion of financial aid fraud, with fake college enrollments surging as crime rings deploy "ghost students" that join online classrooms and stay just long enough to collect a financial aid check. In some cases, professors discover almost no one in their class is real, and students get locked out of the classes they need to graduate as bots push courses over their enrollment limits. Victims of identity theft who discover loans fraudulently taken out in their names must go through months of calling colleges, the Federal Student Aid office, and loan servicers to try to get the debt erased. The US Education Department introduced a temporary rule requiring students to show colleges a government-issued ID to prove their identity, which will apply only to first-time applicants for federal student aid for the summer term. Public colleges have lost millions of dollars to fraud, with California colleges reporting 1.2 million fraudulent applications, resulting in 223,000 suspected fake enrollments. Criminals stole at least $11.1 million in federal, state, and local financial aid from California community colleges last year that could not be recovered. The Education Department said it is developing more advanced screening for the fall, as the rate of fraud through stolen identities has reached a level that imperils the federal student aid program.