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FIRST ON FOX: Department of Education stopped more than $1 billion in student benefit fraud during President Donald Trump's first year in office, including preventing suspected 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 crack down on scammers trying to obtain financial aid loans from colleges.
College officials and cybersecurity experts have pointed to a new scam trend in recent years: “ghost students” are falsified or stolen identities created solely for enrollment purposes, triggering financial aid payments and then disappearing. Ghost students are believed to be powered by or controlled by artificial intelligence bots criminal networks using the personal information of real Americans.
Other scams involved using the personal information of deceased people to fraudulently obtain loans.
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To combat fraud, the Department of Education has tightened its identity verification process for first-time federal student aid applicants. In June, the department said the Biden administration had “removed audit safeguards and redirected resources from fraud prevention to efforts to forgive illicit loans” amid the COVID-19 pandemic, which has worsened fraud patterns.
The Education Department said it has siphoned off more than $1 billion from alleged student loan scammers. (Alejandra Villa Loarca/Newsday RM via Getty Images)
“American citizens must show identification to buy a ticket to travel or rent a car—it is right that they must show identification to access tens of thousands of taxpayer dollars to fund their education,” U.S. Secretary of Education Linda McMahon said in an interview with Fox Digital on Thursday.
“From day one, the Trump administration has been committed to rooting out waste, fraud and abuse throughout the federal government,” she added. “As a result, $1 billion of taxpayer funds will now go toward supporting students pursuing the American Dream, rather than ending up in the hands of criminals. Merry Christmas, taxpayers!
The new verification process requires first-time applicants to “provide, in person or via videoconference, a valid government-issued photo identification to an authorized person, and the institution must retain a copy of this documentation.”
This screening measure prevented more than $1 billion from being passed on to suspected scammers, which the Department of Education said included “coordinated international networks of fraud and AI bots pretending to be students.”
The increased review process follows the Trump administration's discovery of nearly $90 million that was paid to suspected fraudsters in 2024, including $30 million in loans to dead people and more than $40 million paid to companies using bots disguised as fake students.
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Latest California Community Data College The system, for example, found that 34% of community college applications in 2024 resulted in millions of dollars in federal and state aid being misdirected.
Local media This spring, it was reported that both Democrats and Republicans were working to address the state's credit fraud problem and strengthen security measures, including a Democratic Assembly member calling for a state audit to identify fraud patterns.
A “ghost student” AI scam has infiltrated the college loan application process, Department of Education officials say. (Stock/Getty Images)
In 2024, the Foothill De Anza Community College District received about 26,000 applications, of which 10,000 were suspended due to possible fraud before the start of the semester, according to media reports. In Nevada, the College of Southern Nevada wrote off $7.4 million for the fall 2024 semester due to a “ghost student” scheme, media reports show.
Another “ghost student” scheme in Minnesota left Riverland Community College after filing an average of more than 100 potentially fraudulent claims per year.
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During the first week of the new review process in June, officials say they flagged nearly 150,000 suspicious individuals in ongoing Free Application for Federal Student Aid (FAFSA) filings and “immediately alerted” colleges and universities to suspicious activity.
During President Donald Trump's first year in office, the Education Department stopped more than $1 billion in student aid fraud. (Anna Moneymaker/Getty Images)
“Colleges and universities across the country say they are under siege by highly sophisticated fraud rings and have asked the Trump administration for help,” the Department of Education said in a news release Thursday.
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As well as implementing enhanced security measures, the department has also published material online warning families that “fake college websites are defrauding students with AI-generated content and false promises that appear to be real” and is now hiring “a new FSA fraud detection team that will be responsible for tackling fraud and abuse.”
