How AI "ghost students" are stealing financial aid
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Go students, AI, and college loan fraud. We'll explain. From American Public Media, this is Marketplace Tech. I'm Novosafo.

Scammers are stealing financial aid funds at an increasing scale thanks to artificial intelligence tools. They're signing up for college courses, using AI to pretend to be students, and running off with the financial aid. In California alone, the Associated Press found more than 200,000 so-called ghost students. Sometimes that means a real person whose identity is stolen is saddled with debt.

Other times, money is taken from the Pell Grant program, which is supposed to be for students with the most financial need.

The Education Department says this fraud is imperiling the financial aid system itself. I spoke with the AP's Sharon Luria, who has been covering the story. People who have their data leaks, their personal information leaks, and their identity stolen, those identities can then be used to enroll in college courses and then collect monocultures.

money in the form of financial aid, which the scammers run off with. And the reason that this kind of scam has been sort of growing as a big problem in recent years is because, of course, online classes are getting more and more popular. You often even have classes where you don't even have to show up to

Zoom class necessarily. You can take it asynchronously as well. The scammers can use, you know, AI programs to complete coursework and make it seem like they're a real student, at least for a couple of weeks. These are known as ghost students.

And usually that's enough time to collect some financial aid money because not all of it goes to tuition. Sometimes it goes to living expenses as well. So then they can, you know, collect the money. And by the time someone figures out that they're a fake student, they're gone. Your reporting found that this problem is especially acute in the Pell Grant program. Why is that?

This problem is particularly acute for community colleges. And of course, a lot of people who go to community colleges can also be eligible for Pell Grants, but it can happen to all sorts of different kinds of financial aid, both state and federal. And the reason that community colleges are targeted is because, you know, they really have a mission to

of making education accessible to all, and they try to not put up a lot of barriers to entry, which is a very noble mission, but unfortunately it does make them more vulnerable to scammers. And also community colleges have lower tuition, which means if you get something like a Pell Grant, less of that money will go straight to the college in the form of tuition, and more of it will go to you as living expenses if you get the maximum Pell Grant. And so that means more money could go to the scammer.

And Pell Grants are for folks who are the most in need. The fraud impacts folks who can least afford to, say, pay back the amounts that might be stolen. And are they on the hook for that money? How does that work out? Right.

Right. So this is where things get complicated because, you know, sometimes the scam will involve taking a grant. You know, the person, although their identity might be stolen, they don't have to pay it back. It was it was a grant. But sometimes they can also apply for fake loans. And then that person has a loan on their account where they allegedly own this money. You know, it could be thousands of dollars that they just suddenly have on their account. I've talked to

you know, several people who were victims of identity theft. And it's just the most frustrating Kafkaesque process, often involving years and years of work to try and get these loans erased. And it also hurts, you know, regular students who want to go to college because sometimes these ghost students will like literally fill up an entire class and then real students can't get into the class that they need to get into to graduate.

An entire class. Right. You know, I've talked to some professors who said they realized that like an entire class that they had online was essentially not real students. Eventually, they kick out all the fake students. They figure out who's, you know, fake, who's real. But that's a ton of work. It still causes a delay where students, you know, real students are...

you know, not able to get into the class. So, you know, I talked to one woman who had her identity stolen. She had, you know, thousands of dollars of loans taken out in her name. So she had to go through the whole rigmarole of trying to get those deleted from her record. And at the same time, she also actually did want to go to community college and take a class. And she found she couldn't get into the class forever.

for a couple of weeks. When she was finally let into the class, the teacher apologized. She said, I'm sorry, we're dealing with this problem of ghost students. And that's why it took so long for enrollment to open up. So it was like on both ends, this poor lady was just really struggling. We'll be right back. This Marketplace podcast is supported by Dell. Introducing the new Dell AI PC powered by Intel Core Ultra Processor. It's not just an AI computer. It's a computer built for AI.

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You're listening to Marketplace Tech. I'm Novosafo. We're back with the AP's Sharon Luria, who's been covering the growing problem of AI-powered college financial aid fraud.

What is the education department doing to address this problem? You know, one of the first things that they announced was that, you know, during the summer term, they're going to be requiring colleges to make sure that someone, when they show their identity, actually shows it, you know, like shows the identity card in person or over a live video. And you may be wondering why wasn't that the requirement before, but you have to understand certain colleges, they may have literally like tens of thousands of students who

You know, especially if you're a really big state like California, it does take quite a lot of manpower to get every new student to actually do that. And so that's going to be a rule for the summer semester. And then the education department said that they are working on more rules and, you know, more ways to combat this problem that they are going to announce later in the year.

But I will also say that at the same time, the Federal Department of Education has seen massive, massive layoffs since President Trump took office. That includes firing more than 300 people from the Federal Student Aid Office and the department's Office of Inspector General, which is the agency that's supposed to investigate this kind of college aid fraud, has lost more than 20 percent of its staff since October. And you reported that about 11 million dollars

has been stolen just from California colleges through these scams. Do we know how widespread the problem is nationally?

We definitely know that it's a huge problem outside of California. It's definitely not just California. But getting the actual hard numbers of, you know, just how widespread the problem is, is really, really hard because colleges generally don't want to talk about it. The reason that I, you know, focus on California is because they do at least require community colleges to submit monthly fraud reports.

which shows the amount of money that's lost every month because of suspected fraudulent enrollments. But even these fraud reports are anonymized, so you can't see which specific college submitted each report because...

I think there's a fear that, you know, if the problem is publicized, it'll make colleges look bad or it will make them a target for hackers even more. And it was also very hard for me to get, you know, school officials to talk on the record for this story, because, again, it just

really, really looks bad for them to talk about this issue. But if you don't talk about the issue, then often, you know, students themselves have no idea that the reason that they can't get into the class they want may be because ghost students are taking all the seats. That was the AP's Sharon Luria. Daniel Shim produced this episode. I'm Nova Soffo, and that's Marketplace Tech. This is APM.

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