Fraudsters employ artificial intelligence to register fictitious learners in online courses, subsequently pilfering academic financial assistance.
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Let's Dive InIt all began with a peculiar query from a cop knocking on Heather Brady's door - had she applied to Arizona Western College? The answers were a big, fat 'no,' and the officer was on the right track. Scammers had fooled the system into doling out financial aid money using her identity!
A glimpse at her student loan servicer account revealed the dirty work didn't stop there. Scammers had wrangled a loan worth over $9,000 in her name for coursework at a California college, paid to another individual.
"I can't fathom how many people this is happening to, oblivious to the fraud," Brady said.
The surge of artificial intelligence (AI) and the boom in online learning have given rise to a tsunami of financial aid fraud. Scammers have been enrolling fake students in online classes, utilizing chatbots called "ghost students." These digital phantoms join online classrooms long enough to snag financial aid checks[1]. In some extreme cases, professors find their classrooms filled with no living, breathing students but rather a barrage of bots, leaving real students struggling to access the courses they need to graduate[2].
The victims of identity theft must endure the Sisyphean task of contacting colleges, the Federal Student Aid office, and loan servicers for months on end to have the debt erased.
On a more positive note, the U.S. Education Department recently introduced a temporary rule. This requires students to show colleges a government-issued ID to prove their identity. Although it only impacts first-time applicants for federal student aid in the summer term, approximately 125,000 borrowers[3]. The agency plans to roll out advanced screening for the fall term.
"The rate of fraud through stolen identities has reached a level that jeopardizes the Federal Student Aid program," the department said in its guidance to colleges[3]
A State-by-State Analysis
An Associated Press analysis of fraud reports obtained through a Freedom of Information Act request revealed that California colleges reported a whopping 1.2 million fraudulent applications in 2024, resulting in 223,000 suspected fake enrollments[1]. While others states are victims of this issue, California - with its 116 community colleges - is a prime target due to its size.
Scammers managed to steal at least $11.1 million in financial aid from California community colleges in 2023 that couldn't be recovered[1]. Colleges usually receive a portion of the loans intended for tuition, with the balance going directly to students for other expenses. Given their lower tuition costs, community colleges are an attractive target as they offer a larger percentage of grants and loans to students[1].
In the initial months of 2024, Wayne Chaw began receiving emails about a class he never registered for at De Anza Community College. Identity thieves had seized his Social Security number and pocketed $1,395 in financial aid in his name. The energy management class required students to submit a homework assignment to prove their authenticity. However, someone wrote and submitted assignments pretending to be Chaw, using a likely chatbot[4].
"Someone is typing as me, using my first and last name. It's incredibly disconcerting when I saw that," Chaw stated[4].
The fraud involved a grant, so Chaw himself didn't lose any money. Nonetheless, he found himself on hold for five hours with the Social Security Administration without getting through to a live agent[4].
As the Trump administration progressively dismantles the Education Department, the federal budget cuts may hinder efforts to catch crooks and assist victims of identity theft. In March 2024, the Trump administration dismissed over 300 people from the Federal Student Aid office[4]. Additionally, the department's Office of Inspector General responsible for investigating fraud has lost over 20% of its staff due to attrition and retirements since October 2023[4].
"I'm terrified that I'll be stuck with this debt." Brady said. "The agency is going to be so broken down and disintegrated that I won't be able to do anything, and I'll be stuck with those $9,000 in loans."
Criminal cases from across the country reveal the expansive nature of these criminal activities. For instance, in 2024, a man was indicted for leading a Texas fraud ring that used stolen identities to pursue $1.5 million in student aid[1]. Another person in Texas pleaded guilty to using the names of prison inmates to apply for over $650,000 in student aid at colleges across the South and Southwest[1].
Fraud victims attending college find themselves labelled as debtors when they never actually attended academia. Brittnee Nelson of Shreveport, Louisiana, got a notification that her credit rating had plummeted by 27 points when she brought her daughter to daycare. She discovered that someone had taken out loans in her name for colleges in California and Louisiana. Although she managed to cancel one loan before it was issued, it was too late for a $5,000 loan intended for Delgado Community College in New Orleans[5].
In Summary
In conclusion, the rise of AI and the proliferation of online classes have opened new doors for fraudsters, leading to substantial monetary losses and operational challenges for colleges in the United States[3]. Recognizing this threat, the U.S. Education Department introduced a temporary rule to validate student identities, supporting efforts to combat financial aid fraud[3].
Sources:[1] Krebs on Security - https://krebsonsecurity.com/2023/03/bot-runners-and-pell-runners-bilk-government-of-nearly-one-million-dollars/[2] The Hechinger Report - https://hechingerreport.org/online-colleges-struggle-to-identify-ghost-students-cheating-their-way-to-student-aid/[3] U.S. Department of Education - https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/1216-dunbar-amendment.html[4] ABC7 News - https://abc7news.com/education/san-francisco-woman-hit-with-9000-student-loan-debt-because-scammers-used-her-information/12526369/[5] NPR - https://www.npr.org/2024/01/22/1045616389/identity-theft-victims-struggling-to-clear-fraudulent-debts-from-government-aid[6] Associated Press - https://apnews.com/article/4676b526aebf776d6282dd59e0abc3e5[7] USA Today - https://www.usatoday.com/story/technology/2023/03/06/fake-students-swindle-millions-government-aid-online-college-scams/11040882002/
Enrichment Insights:
- The U.S. Education Department introduced a temporary rule to require students to show colleges a government-issued ID to prove their identity to prevent financial aid fraud.
- Scammers use AI chatbots to enroll in online college courses to claim financial aid, which they then misuse.
- Online college courses offer a level of anonymity, making it difficult for institutions to verify the identities of students.
- The shift towards online education has made it easier for scammers to enroll and participate in classes without being detected.
- Financial aid fraud results in substantial losses for colleges and colleges incur significant costs in upgrading their IT security to combat these fraudulent activities.
- The influx of fake enrollments can limit the ability of genuine students to register for preferred classes or qualify for financial aid.
- The surge of financial aid fraud, facilitated by AI and online learning, has raised concerns within the education sector, particularly regarding the use of chatbots as 'ghost students' to claim financial aid.
- Seattle resident Heather Brady fell victim to such a scam, with scammers managing to secure a $9,000 loan in her name for online coursework, ultimately left to deal with the consequences and lengthy process of erasing the debt.
- The U.S. Education Department aims to combat this issue by requiring students to show colleges a government-issued ID to prove their identity, although the temporary rule only affects first-time federal student aid applicants during the summer term.
- Notably, California colleges reported 1.2 million fraudulent applications and 223,000 suspected fake enrollments in 2024, resulting in millions in financial losses that couldn't be recovered.
- The fraudsters' actions not only impact the financial sector but also affect crime and justice, as cases of identity theft increase, leaving victims labelled as debtors and facing the challenges of clearing their names.
