Ghost Students and AI Scams: How Identity Theft is Gutting Financial Aid

What happens when hundreds of thousands of college applications are submitted—not by hopeful students, but by bots using stolen identities? In this episode, we dive deep into the alarming rise of financial aid fraud in U.S. higher education, driven by "ghost students" and increasingly sophisticated scams powered by AI. From fraud rings applying for Pell Grants using inmate names to bots flooding online colleges for quick cash refunds, we examine how these schemes operate, who’s behind them, and how they’re hurting real borrowers and legitimate students.We also spotlight internal institutional fraud—from bribed grade changes to fake vendors draining college budgets—and discuss the critical red flags institutions often miss. You'll learn how weaknesses in verification systems, outdated IT controls, and lax internal oversight are enabling widespread fraud.Finally, we explore how colleges, the Department of Education, and victims are responding—from new ID verification rules to AI-powered fraud detection systems—and where these defenses still fall short. If you're a college administrator, student aid officer, policy maker, or just someone who wants to understand how organized scams are hijacking federal aid, this episode is essential listening.

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