Trump administration stops $1 billion in student aid fraud schemes
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FIRST ON FOX: The Education Department prevented more than $1 billion in student aid fraud during President Donald Trump’s first year in office, including stopping suspicious bots and “ghost students” from receiving taxpayer-funded loans, Fox News Digital has learned.
Officials say the savings come from new “enhanced fraud controls” the department implemented in June to combat scammers trying to get financial aid loans from colleges.
University officials and cybersecurity experts have noted a new scam trend in recent years, such as “ghost students,” which are made-up or stolen identities created just to enroll, trigger financial aid payments, and then disappear. Ghost students are believed to be powered by or managed by AI bots. criminal networks uses personal information of real Americans.
Other scams include using the identities of deceased people to fraudulently obtain loans.
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To guard against fraud, the Department of Education has expedited the identity verification process for first-time applicants trying to receive Federal Student Aid. The department said in June that amid the COVID-19 pandemic, which has further complicated fraud schemes, the Biden administration is “removing verification measures and diverting resources from preventing fraud to illegal loan forgiveness efforts.”
The Department of Education says it has blocked more than $1 billion in fraudsters who allegedly took advantage of student loans. (Alejandra Villa Loarca/Newsday RM via Getty Images)
“American citizens are required to present identification to purchase tickets to travel or rent a car; it is only right that they present identification to access tens of thousands of taxpayer dollars to fund their education,” U.S. Secretary of Education Linda McMahon told Fox Digital on Thursday.
“From day one, the Trump Administration has been committed to rooting out waste, fraud, and abuse across the federal government. As a result, $1 billion in taxpayer funds will now support students pursuing the American dream rather than falling into the hands of criminals. Merry Christmas, taxpayers!” he added.
The new verification process requires first-time applicants to “present, in person or in a live video conference, an unexpired, valid, government-issued photo ID to an institutionally authorized person, and the institution shall retain a copy of such documentation.”
The verification measure blocked the flow of more than $1 billion to suspected fraudsters, which the Department for Education said included “coordinated international fraud rings and artificial intelligence bots pretending to be students.”
The increased verification process followed the Trump administration’s discovery of nearly $90 million paid to suspected fraudsters in 2024; This included $30 million in loans to dead people and more than $40 million to companies using bots posing as fake students.
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Recent data from the California Community College System, for example, showed that 34% of community college applications in 2024 resulted in millions of dollars of federal and state aid being misdirected.
local media In the spring of this year, he reported that both Democrats and Republicans were working to address loan fraud in the state and increase security measures; This includes a Democratic assemblyman calling for a state audit to detect patterns of fraud.
“Ghost student” AI scams have also infiltrated the college loan application process, according to Department of Education officials. (Stock/Getty Images)
Foothill-De Anza Community College District received approximately 26,000 applications in 2024, according to media reports, 10,000 of which were put on hold due to possible fraud before the start of the semester. According to media reports, the College of Southern Nevada in Nevada lost $7.4 million in the fall 2024 semester due to the “ghost student” plan.
Another “ghost student” program in Minnesota resulted in Riverland Community College receiving an average of more than 100 potentially fraudulent applications per year.
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During the first week of the new verification process in June, officials said they flagged nearly 150,000 suspicious identities on existing Free Application for Federal Student Aid (FAFSA) applications and “immediately alerted” colleges and universities to suspicious activity.
President Donald Trump speaks in the Oval Office at the White House in Washington, DC on October 6, 2025 (Anna Moneymaker/Getty Images)
“Colleges and universities across the country report that they are under siege by highly sophisticated fraud rings and have requested assistance from the Trump Administration,” the Department of Education said in a press release Thursday. he said.
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As well as introducing increased security measures, the department has published online warning materials for parents against “fake university websites intended to deceive students with AI-generated content and false promises designed to appear real” and is in the process of recruiting “a new fraud detection team within the FSA that will be responsible for tackling fraud and abuse”.
