AI ‘ghost students’ are targeting college kids and stealing their financial aid

Cybercriminals are stealing the identities of real college kids to enroll in online classes and apply for student aid. Then, using AI chatbots to attend classes, the bad actors collect the financial aid, leaving unsuspecting students saddled with tens of thousands in debt.

The new scam is likely fueled by the rise in artificial intelligence tools and the popularity of online classes, according to a new report this week by The Associated Press, which states that “college enrollments have been surging” across the US. The question is, how many of them are AI?

Not only are the chatbots fostering the theft of tens of millions of fraudulent financial aid dollars, but they are also creating havoc on college campuses, with some professors reporting full rosters of students – and empty classrooms.

The AI-generated students are also snapping up slots for coveted classes, essentially icing out the real students from enrolling in the courses they need to graduate.

Not surprisingly, the AP found the most popular online classes for AI chatbots to sign up for tended to be ones that allow students “ to watch lectures and complete coursework on their own time.”

Obviously not in it for the education, these AI “ghost students” are said to attend the classes just long enough to cash out the student’s financial aid check, with many real students unaware their identities are being used for fraud.

Millions of college applications per year

Choosing to analyze fraud reports in California due to its size, the AP said in 2024 alone, the west coast state showed nearly 1.2 million fraudulent college applications, leading to the theft of over $11 million in unrecoverable funds awarded to students at the state, local, and federal levels.

And out of those 1.2 million applications, close to 225,000 of them were believed to be fake enrollments, the news outlet said, adding that in the other state reports they analyzed, the percentages were similar.

What's more, in the several cases profiled by the AP, the real students had only found out about the identity theft by chance.

One former student said he started receiving emails for a class at a local community college he had attended nearly a decade earlier. Apparently, the 'chatbot stand-in' was even submitting homework assignments in the student's name to avoid detection.

In another case, a young mother discovered that thousands of dollars in financial aid were disbursed in her name. The woman randomly noticed her credit score had dropped over 27 points due to non-payment on the loan.

And yet another college attendee living in Arizona found out a federal student loan was taken out using her name – at a school in California she had never attended. She was lucky enough to be notified by local police.

In fact, there have been so many cases reported that Federal Student Aid (FSA) officials announced just last week “Significant Actions” for the upcoming 2025-26 school year to help eliminate identity theft and fraud in an effort to protect students, taxpayers, and the colleges and universities, which also suffer.

Starting this fall, FSA will begin a new “Identity Confirmation Process” entailing additional screening for each federal student loan applicant.

Referred to as “FAFSA” (Free Application for Federal Student Aid), the agency said it would be making changes to "the acceptable documentation for identity verification that must be maintained by schools."

Combatting financial aid fraud

The US Department of Education (DOE) says cybercriminals are known to prey on college students to steal their “personal information, money, or both.”

“The impact of their scams can be severe—your identity stolen, credit cards and loans taken out in your name, or your bank account zeroed out,” the Department of Ed said in a recent cyber bulletin warning of the scam.

The DOE suggests to prevent becoming a victim of financial aid fraud and identity theft, students should:

• Never share their Federal Student Aid or school login credentials.
• Always set up multi-factor authentication on their accounts.
• Always use strong, unique passwords for each account.
• Never store passwords where others can see them.
• Be wary of phishing scams trying to get your personal information or school ID.

The DOE also reminds students that if they receive any unsolicited emails, texts, or calls referring to a student loan, they should alert their school’s financial aid office right away.

Additionally, if a student suspects they have been targeted or fallen victim to a student aid scheme, they should immediately contact the student loan servicer involved, freeze their credit reports, and report the crime to the DOE Office of Inspector General’s hotline.