It was a lesson in fraud she hadn’t planned on teaching.
Lisa Carroll, CFE, an associate professor of accounting at a community college in California, suspected that a few of her students were committing student loan fraud during the spring and fall 2025 semesters.
She tells Fraud Magazine how one of her online students didn’t seem interested in completing his coursework. Carroll could see online that he hadn’t accessed any of the course modules or purchased the online reading materials required to pass the class. She emailed the student to see if he needed help.
At first, Carroll got a chilly reception from the student. Carroll recounts how detached his email responses seemed, but the student later claimed that he was glad for her help. Yet despite Carroll’s outreach, the student still hadn’t accessed the course materials. He also participated minimally during online class discussions and would restate other students’ comments. When he still hadn’t completed his work, Carroll emailed him again to warn him that he’d missed the deadline for being able to withdraw from the class and wouldn’t be able to pass. The student then asked Carroll to give him extra assignments to do outside of the course syllabus so he wouldn’t lose his financial aid. Carroll thought his behavior suggested he was only staying in the class for the financial aid money.
Another student in one of Carroll’s in-person classes emailed her multiple times about his financial aid, but he often left class early and didn’t complete his assignments. He also made Carroll and the other students uncomfortable by yelling during class and making racially offensive comments.
“He said to me, in front of the other students, ‘I need you to give my attendance to the financial aid department so that it’ll prove that I’ve been here in the class,’” Carroll recounts to Fraud Magazine. His demands became loud and upsetting for her and the other students. Concerned for her safety, she and her department dean had campus police escort her to her classes.
Carroll tried to explain to the student that submitting attendance wasn’t her responsibility, since attendance wasn’t mandatory for introductory courses and his financial aid didn’t depend on it. The student eventually withdrew from the class, but then later demanded to be let back in, which Carroll was reluctant to do.
“He got very mad and was sending me emails, asking if he could do a couple assignments to make it look as if he was doing work in the class to keep his financial aid,” says Carroll.
The department’s dean supported Carroll’s decision not to let the student back in the class, but the student kept harassing Carroll. She stopped acknowledging his emails and let the dean handle any further discussions.
Carroll, who’s also president of fraud examination and bookkeeping firm Number Crunching, Inc., tells Fraud Magazine that she’s learned and read about many cases of alleged financial aid fraud in universities, especially as online enrollment increased during the COVID-19 pandemic.
“In an online course it can be really hard to determine if somebody is just a really bad student and not doing their work, or if they enrolled to commit financial aid fraud,” says Carroll.
Her experiences are among many instances of alleged student loan fraud occurring across campuses globally. In March 2025, The Sunday Times reported its findings from an investigation revealing that thousands of foreign students are fraudulently claiming hundreds of millions of pounds from the U.K. student loan system. The education secretary, Bridget Phillipson, enlisted the expertise of the U.K.’s Public Sector Fraud Authority to investigate.
Student loan fraud can be perpetrated in various ways. In some cases, students enroll in classes with no intention of doing any work and drop the class as soon as they get their financial aid. In others, foreign actors and scammers use stolen identities to pose as students so they can collect financial aid money.
“Federal Student Aid (FSA) data indicates that the rate of fraud through stolen identities, particularly involving technologically advanced fraud rings, has reached a level that imperils the federal student assistance programs under Title IV of the Higher Education Act,” the U.S. Department of Education announced in an effort to implement new identity validation processes.
With some federal aid funds going directly to students’ bank accounts, fraudsters recognize an opportunity to take money that’s difficult to recover once distributed.
“If it’s a bad actor or foreign actor we can’t find, then that money is gone,” explains Carroll. “If it’s a student, [universities] may have more recourse to get it back.”
According to a U.S. Department of Education press release from May 2025, approximately $90 million in federal student aid has gone to ineligible recipients, including more than $30 million disbursed to thousands of deceased individuals over the last three years.
Carroll has a son who receives financial aid, and she knows there are students who try hard in their classes and can’t afford textbooks. “It’s aggravating to know these people are stealing funds from people who actually need it,” says Carroll.
Phillipson wrote in The Sunday Times that the “revelations of major misuse of public money and potential fraud by students in franchised universities deal a hammer blow to the integrity of higher education in this country. They point to one of the biggest financial scandals in the history of our universities sector.”
With high-profile cases of organized crime exploiting funds meant for students, Fraud Magazine examines global student loan fraud, its schemes, and strategies for prevention and detection.
Not all students enrolled in universities are actual students. In one type of scheme, “ghost students,” or fake students, enroll in schools to fraudulently obtain financial aid money. These “ghosts” apply to colleges and enroll in classes with personally identifiable information (PII) they’ve stolen through data breaches and phishing scams.
Criminals also impersonate students using deepfakes they create with artificial intelligence (AI). Ofer Friedman, chief development officer of identity verification company AU10TIX, told University Business about free tools that enable users to create face swaps — superimposing a person’s face over another face in a video. An imposter can then talk on a video call during identification checks and video chats with professors using someone else’s face, allowing them to enroll in multiple classes with fake identities, complete the minimal coursework required to qualify for student loans, then vanish.
Jordan Burris, vice president of identity-verification firm Socure and former chief of staff in the White House’s Office of the Federal Chief Information Officer, told Fortune that at some U.S. schools more than half the registered students were found to be illegitimate. According to the Associated Press, California colleges reported 1.2 million fraudulent applications in 2024, resulting in 223,000 suspected fake enrollments.
Community colleges, which provide a more affordable alternative to higher education institutions and offer workforce training classes, are particularly vulnerable to fraud schemes because they operate with minimal barriers to admission, often not charging admission fees. A woman in North Carolina faces 20 years in prison for a years-long scheme that defrauded $5 million from the U.S. Department of Education. According to USA Today, from 2016 to 2023, the woman applied to multiple schools in North Carolina, including community colleges, on behalf of 70 recruited “student participants” and impersonated them to make it appear as though they were attending classes. She applied for financial aid and took the funds remaining after she was reimbursed for tuition.
In two other “straw student” schemes, where recruited individuals in on the scheme pose as students, defendants in Michigan were charged with fraud related to Federal Student Aid (FSA). One man submitted fraudulent FSA claims for more than 1,200 individuals across more than 100 schools in 24 states.
Those who pay taxes for grants and those who depend on financial aid are most affected by student loan fraud schemes. More than 40 million in the U.S. have student loans, with the total outstanding debt exceeding $1.6 trillion.
Many student loan borrowers in the U.S. who depend on loan forgiveness plans and programs designed to help them repay their loans face uncertainty with changing federal aid programs. In December 2025, the U.S. Department of Education announced a proposed joint settlement agreement with the State of Missouri to end the ‘Saving on a Valuable Education’ (SAVE) Plan enacted by former President Joseph Biden. The SAVE Plan was meant to offer borrowers affordable monthly payments and student loan forgiveness; however, several U.S. states argued that it shifts the burden of student loan debt onto taxpayers. This caused delays in aid to students enrolled in the program, who may now owe additional taxes, since the law shielding student loan forgiveness from taxations expired at the end of 2025. Some fear that with the end of the SAVE Plan, and with student loan debt collections resuming, fraudsters will see an opportunity to take advantage of those burdened with more tax liability and debt.
And, as Carroll’s example shows, educators bear the strain of fraud in financial aid as well. In addition to planning courses and preparing lessons, professors must be vigilant about verifying student identities.
“I appreciate the volume of work that’s going on from the teachers’ perspective,” Carroll tells Fraud Magazine. “But then there’s the added stress of having a fraudster, having several fraudsters in the class, and the emotional impact of having a student who’s committing fraud.” She says looking for suspected fake students and dealing with the behavior of those in her classes trying to commit fraud is time-consuming and could potentially take an emotional toll over time.
Not all schemes designed to take advantage of student loan borrowers involve advanced technology. Some criminals employ age-old deceit through social engineering tactics. Cybersecurity experts warn students to watch for criminals who call students on the phone and impersonate Free Application for Federal Student Aid (FAFSA) representatives to get students to tell them personal information like login passwords and government identification numbers.
The FTC also permanently banned two men from the debt-relief industry after uncovering a brazen student loan forgiveness scheme, run through Nevada-based Superior Servicing and other related companies. The scheme targeted borrowers seeking relief after the federal student loan payment pause ended in the U.S. The operators posed as affiliates of the Department of Education, convincing borrowers to pay hefty up-front fees — sometimes hundreds of dollars — under the false promise that these payments would reduce their loan balances. Instead, the money lined the fraudsters’ pockets, with little or no actual relief provided.
The Sunday Times report on fraud in the U.K.’s student loan program revealed how thousands of students, many of whom are suspected members of a criminal network based in Romania, enrolled in universities to take out loans with no intention of studying or paying them back. Most enrolled in franchised universities, or smaller colleges contracted to offer degrees with low grade requirements. These franchised colleges began operating in 2011 when universities in the higher education sector attempted to profit by increasing enrollment.
According to The Sunday Times, the intent behind franchised universities was to increase educational opportunities for more students, especially those from low-income backgrounds. But the concern is that these smaller colleges have been flourishing without proper regulation, and that payments are going to students who should’ve been withdrawn from the universities rather than to students who want to use the funds for their intended purpose.
The Student Loans Company (SLC), a U.K. government-owned body that issues loans and grants, identified 3,563 suspicious loan applications for the 2022–23 school year, equal to about 60 million pounds. Six franchised colleges are under investigation for applications involving fake documents and address duplication, where fraudsters fill out multiple applications with the same address. One franchised college made 234 million pounds in 2024, increasing its profits by 1,266% in three years. About 15% of the Romanian nationals in the U.K. received a student loan in 2023, and as of May 2025 Romanian students made up more than half of the applicants at franchised colleges. Romanian TikTok and Facebook videos help propagate student loan fraud by coaching applicants on how to cheat the system.
Universities in the U.K. are regulated by the Office for Students (OfS) and are responsible for upholding academic standards, including attendance monitoring, for the franchised colleges they contract. Students enrolled in franchised courses can apply for funding from the SLC. Students can also apply for maintenance loans, which are paid directly to students. Students are required to pay the money back once they graduate and earn an annual salary of at least 25,000 pounds. Debts are canceled after 40 years. According to The Sunday Times, the franchised college keeps about half a student’s annual tuition fee and the university gets 25%, leaving any remaining amount to agents who help recruit students for these programs. Recruitment agents often advertise courses through social media and are paid a commission for each student they enroll.
The SLC investigated the misuse of student loans and set up a new fraud unit that found increasing numbers of students from Romania applying for loans. The OfS said it received allegations of cheating in franchised courses and claiming financial aid they weren’t entitled to.
Student loan debt in the U.K. reached 236 billion pounds in 2024.
Rasha Kassem, Ph.D., CFE, is a senior lecturer and leads the Fraud Research Group at Aston University in Birmingham, England. She talked to Fraud Magazine about the student loans scandal in the U.K.
“So-called ‘ghost students’ — individuals enrolled but not actively studying — have become a growing concern in U.K. higher education,” she tells Fraud Magazine. “While many are genuine cases of disengagement, the same gaps that allow real ghosts also enable fake enrollments exploited by organized fraud networks.”
Kassem explains that while universities must confirm students’ attendance and level of engagement before loans are distributed, there isn’t a consistent definition of “engagement.” Students must attend classes to receive their loans, but this isn’t properly regulated. Franchised colleges in particular show course completion rates of 60%.
“This policy ambiguity has created loopholes open to abuse,” says Kassem. “According to the U.K. National Audit Office (NAO), more than half of all detected student finance fraud by value occurs at franchised higher-education providers.”
The NAO suggests lack of oversight of franchised colleges by universities bears some responsibility, as well as use of unregulated recruitment agents. According to the NAO, universities have little incentive to report abuse of the loans system because they benefit from having more students. Over the last four years the number of students enrolled at franchised colleges almost tripled.
While individual fraudsters and criminal organizations alike are behind many student loan schemes, higher-education institutions may also look for a big payday by exploiting student loan funds. In 2024, two former executives alleged that the Los Angeles Film School in Hollywood received tens of millions of dollars from federal student aid programs due to fraud.
In a lawsuit filed against the school, the former vice principal of career development and vice principal of admissions accused the film school of misleading students into thinking they had prospects for employment and lying during a Department of Education audit. The Los Angeles Film School gets $85 million each year in federal assistance, $60 million of which comes from student loans, and another $19 million in military veterans’ education grants. The executives allege the school was trying to meet an accreditation benchmark that required roughly 70% of its graduates to find field-related jobs. The school loses its eligibility to receive federal student aid if it fails to meet accreditation requirements. According to the executives, however, only 20% of the graduates were able to find jobs.
The school allegedly arranged for thousands of fake job placements by paying Ivar Music Group approximately $1 million between 2010 and 2017 to hire its graduates for two-day jobs. School officials controlled who’d be hired, when they worked and their pay. They financed employment opportunities for their graduates to give a false impression to prospective students and federal regulators. Although the school’s attorneys deny the claims, the lawsuit alleges that executives lied to Department of Education auditors by denying the incentive compensation system existed and failing to disclose their link to Ivar Music Group.
Federal aid money disbursed to fraudsters is often gone for good. In 2024, at least $11.1 million in federal, state and local financial aid from California community colleges couldn’t be recovered.
“Ghost students” also take up spots in classes meant for real students. The Associated Press reports that in some cases none of the students in classes were real. Students who need to enroll in certain courses get pushed out by AI bots.
On top of hindering educational opportunities for legitimate students, cyber scams targeting student loans leave victims spending months working to erase debts from fraudulent loans accessed in their names.
According to the Associated Press, one victim who didn’t even attend college but owned a housecleaning business discovered loans in her name when she received a notification that her credit score had dropped 27 points. She’d previously signed up for identity theft protection and regularly monitored her credit scores, but it still took two years to remove the loans from her record.
In Canada, Alberta Student Aid programs recently received complaints from students who received debt notices for student loans they didn’t apply for. They were targets of a scheme where a con artist used fake passports, driver’s licenses and Social Insurance Numbers to obtain unlawful student loans. Loans to 15 of the con artist’s victims totaled more than $500,000.
The court prosecutor in the case said in a statement that many of the victims learned of the loans only after being pursued by debt collectors or when denied credit. According to an Associated Press story, a California woman learned of loans in her name only when police knocked on her door asking whether she’d applied to Arizona Western College. The woman then checked her student loan account and discovered that an additional $9,000 loan to a California school had been granted in her name. [See “What to do when fraud targets your student loans” at the end of this article.]
In June 2025, the U.S. Department of Education announced a nationwide effort to eliminate identity theft and fraud in federal student aid programs for the fall 2025 semester. Changes included new requirements for higher education institutions to validate the identities of some first-time applicants enrolling in the 2025–26 summer term. Additionally, applicants will now be required to present valid, government-issued photo identification in person or in a live video call. Institutions must also keep a copy of the documentation.
The Department of Education also announced changes to strengthen real-time data-sharing with the U.S. Social Security Administration to prevent the identity theft of deceased individuals. They’ll use data models to identify and flag suspicious or inconsistent information submitted on FAFSA forms.
The U.K. government ordered that any franchised college with 300 or more students enrolled must be registered with the OfS or it’ll lose access to student aid funds. The government has also proposed improving how eligible students are verified and recovering funds from the universities that ignore fraud.
According to Kassem, in the U.K., shifting from reactive detection methods to more proactive risk management should help prevent student loan fraud. “Measures such as biometric ID verification, standardized attendance tracking and tighter oversight of franchised providers could close many of the existing gaps,” she says. “Enhanced data-sharing between the SLC, law enforcement and regulators would also help flag suspicious activity early.”
Kassem also urges integrating fraud-risk awareness and integrity training across higher education to embed compliance and protection into the culture, rather than treating them as a minimal checklist.
Integrating advanced technology can be a powerful tool in preventing student loan fraud. Fortune reports that after bringing in an AI firm to help protect the college from fraud, Santiago Canyon College in California dropped more than 10,000 fake enrollments, and that by spring 2025, the number of “ghost student” enrollments dropped from 14,000 at the start of the term to fewer than 3,000.
With the right training, professors can take an active role in detecting fake students in their classes as well. Carroll tells Fraud Magazine that when she taught online during the fall 2025 semester, she scheduled a video interview with each of her students to make a personal connection so they’d feel comfortable communicating with her if they had questions. But she also used the opportunity to check for something else.
“I was looking for telltale signs in the background that might indicate I was talking to a deepfake,” she says.
Some of these signs include how objects in the background of a student’s video look and the way students behave during the call. In one video call, a female student looked like she was outside, but the clouds behind her weren’t moving and there was a plume of stationary smoke. Carroll also noticed something off about her interaction with the student. The girl kept pulling at her face, as if plucking at a hair, but there wasn’t anything there. Carroll considered these clear signs that the student was a deepfake.
In contrast, one of Carroll’s other students called from a bedroom full of clutter. Carroll could clearly see the ceiling fan turning, the shadow it cast and other objects moving outside the window — signs that she was talking to a real student.
Another sign Carroll looks for is notable landmarks in the background. One of her students was on a walk during the video call, and Carroll recognized buildings from campus behind him in the background, so this seemed to be an actual student. She explains that it’s harder for deepfakes to maintain an image and move at the same time, so a deepfake likely wouldn’t be walking during a call.
Carroll also tries to spot suspicious email addresses to detect student loan fraud. Emails that a fake student might use include emails that have “abc” and a period before the student’s name and other telltale signs of emails typically used in phishing scams. There may also be multiple email addresses that look similar, suggesting that the same person generated multiple addresses with close-matching details.
According to Carroll, increasing the training for those who work in admissions would help prevent fraud within universities. She says it’s important for those who work in higher education to be informed of current fraud tactics and the ways that many preventive measures that verify identities, including ID.me, can be faked by fraudsters and aren’t infallible.
With increased awareness and better preventive measures, fraud fighters can help individuals and universities better protect themselves against those who want to obtain funds fraudulently and ensure that educational aid will go to those who need it.
Carroll suggests that a perception change may also be necessary. She’s heard others say that some in the education sector may be afraid that reporting too much fraud will make them look bad. But Carroll emphasizes that hiding fraud is the same as committing fraud, and it perpetuates a culture where it’s allowed to flourish.
“I think psychologically we all like to keep certain things the same in our brains because it’s comfortable,” she says. “But that perception needs to change. If you’ve reported all this fraud, you look like you’re really catching it, like maybe you’re not the institution to mess with.”
Anna Brahce is an assistant editor of Fraud Magazine. Contact her at abrahce@ACFE.com.
Knowing the signs of student loan schemes can help you protect yourself — and your bank account — from fraud. Red flags that suggest a company claiming to offer student loan debt relief may be fraudulent include companies that request up-front fees in exchange for debt assistance (which is illegal), someone who asks directly for student loan FSA login information and any other unsolicited communication — whether through text, email or voicemail — about student loans.
To find out if a federal student loan has been accessed in your name in the U.S., you can use your FSA ID to log in to StudentAid.gov and search under “My Aid.”
To report a fraudulent student loan in the U.S., The College Investor lists these recommended steps:
In the U.K., here’s how to report fraud to the Student Loans Company.
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