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A hidden scheme draining millions from the federal student aid system and infiltrating college campuses has emerged as a key target of the Trump administration’s fraud crackdown, with officials faulting Biden-era identity verification policies for opening the door to it.
One fraud expert is now highlighting the red flags students and parents must look out for as the fall semester begins, warning fraudsters are fabricating identities to enroll at colleges and collect aid that is meant for legitimate students.
“People, scammers specifically, look for vulnerable places like student loans and unemployment fraud to take advantage of those channels because historically they have been lax in their controls,” Mallory Wortman, senior fraud investigator at financial crime prevention firm Abrigo, told Fox News Digital.
In June, the Education Department also said it saved taxpayers nearly $200 million after requiring high-risk applicants to present government-issued identification when applying for federal student aid, Fox News Digital previously reported. The identity verification system was integrated into the online FAFSA application, with department officials estimating it will save taxpayers more than $1 billion this cycle.
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The department took aim at weak fraud safeguards under former President Joe Biden, accusing his administration of requiring less than 1% of students to verify their identity following their FAFSA submission during the COVID-19 pandemic era.
The administration has also paired those safeguards with new enforcement efforts. Vice President JD Vance recently announced that more than 870,000 borrowers tied to alleged COVID-era fraud would be suspended from future federal loan programs, saying they could ultimately face federal prosecution.
But the crackdown reflects a simple reality, according to Wortman, who said fraudsters are quick to take advantage of any opportunity where government money is flowing.
“Anytime there’s an opportunity where funds are flowing, like financial aid fraud, or another example would be when there’s unemployment fraud during COVID, they’re gonna use that as a method to get those funds,” Wortman said.
Wortman said fraudsters frequently use so-called “ghost students” to exploit the programs. A “ghost student” is a stolen or fake identity, sometimes created with artificial intelligence (AI), used to enroll in college and collect federal student aid funds, loans or grants.
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She compared the trick to her own time in community college, where she said she watched students enroll, walk away with a financial aid “refund,” then suddenly drop out of classes.
“That’s kind of what we’ve seen, straw student schemes turning into today,” she said, adding today’s fraudsters’ main objective is “attaining the aid rather than pursuing an education.”
As students return to campus, Wortman said there are many signs to look out for.
“They’re going to have multiple applications,” she said. “They’re going to have common information. There’s gonna be some unusual enrollment patterns and then suspicious changes to their account before those funds are disbursed.”
Similar “connections and patterns” can also be spotted in banking records, where Wortman described how fraudsters use elaborate data breaches and phishing messages to trick victims into providing personal information.
“You’re going to have shared information, that unusual movement of funds and then multiple apparently unrelated customers with common either connection activity, IP addresses, and then funds flowing through the account that just don’t make sense,” she said.
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According to Wortman, the best defense against these fraudsters starts with keeping a close eye on your personal financial information.
“Just be aware and keep tabs on your personal financial information,” she said.
Despite the heightened focus on the fraud, Wortman said the scam is nothing new and that she is “glad” it is finally being recognized and prevented.
The size of the scam became clear last year when the Education Department revealed it blocked more than $1 billion in fraudulent student aid and identified nearly $90 million that had already been fraudulently disbursed. More than $30 million went to deceased individuals, while more than $40 million went to companies using bots disguised as fake students.
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“This has been going on, and I’m glad that they’re finally doing something about it,” she said.
Fox News Digital’s Ashley J. DiMella and Joshua Q. Nelson contributed to this report.
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