“Ghost Students” and Financial Aid Fraud: The Growing Crisis in Higher Education and How Colleges are Responding.

In recent years, higher education institutions, particularly community colleges, have been plagued by so-called “ghost students”—fraudulent applicants who exploit financial aid systems. Also known as “Pell runners,” these scammers apply for federal and state financial aid and pocket funds and vanish without ever attending classes. This practice, exacerbated during the pandemic with the shift to online education, has cost educational institutions millions and has prevented legitimate students from accessing courses. In response, colleges are employing a host of security measures to counteract these scams.

How it Works

There are nuances inside the various scams, but essentially these ‘ghost students’ are created by scammers utilizing fake names, social security numbers, and fabricated academic records to generate fictitious student profiles and apply for enrollment. They will often use stolen identities or slightly altered personal information to create multiple accounts that avoid immediate detection.

Scammers employ bots or automated systems to submit multiple applications quickly, often targeting community colleges and online programs where admissions barriers are lower. These bots can fill out applications en masse, using similar or slightly modified information across multiple submissions to avoid triggering fraud detection systems​.

Upon acceptance “students” apply for aid through FAFSA and stay in a class until the census date, doing the bare minimum to remain registered, using AI to generate essays, for example, to avoid being dropped from a class for non-participation. Once financial aid is disbursed (usually by direct deposit or check), “students” withdraw the funds and vanish. Pell Grants, which don’t require repayment, are a common target because they’re ideal for immediate financial gain.​

Financial and Operational Impact

“Ghost students” cost millions. In California alone, community colleges reported approximately 460,000 fraudulent applications in a single year—nearly 20% of all applications submitted. This fraud impacts both finances and enrollment processes. For example, Fullerton College identified $1 million in financial aid payments that would have been lost to fraud, had officials not halted them in time.

Fraudulent enrollment not only wastes public funds but also clogs classroom rosters. Institutions report discovering ghost students who enroll and then disappear; in some cases, fraudulent students make up nearly half the class, blocking real students from enrolling. California’s Pierce College enrollment dropped by 36%—from 7,658 students to 4,937—after purging ghost students from the rolls.

Additionally, fraudulent applications require extensive manual labor for detection and investigation. At Foothill College, staff reported spending hundreds of hours addressing fraudulent applications, time that could otherwise support legitimate students.

Law Enforcement Efforts and Prosecutions

Law enforcement has been active in prosecuting financial aid fraud cases, with several notable cases reaching federal courts. In New York, executives from a for-profit college were convicted of defrauding financial aid programs by fabricating student records and collecting over $7 million in fraudulent aid. Similarly, in Louisiana, a woman was found guilty of using false identities to access over $280,000 in financial aid funds. In these cases, defendants faced penalties that included prison sentences, fines, and restitution to the Department of Education. Federal agencies including the Department of Justice and Homeland Security are actively investigating and prosecuting these financial aid crimes. But the “ghost” nature of these crimes often makes it difficult to track. That means institutions strengthen security and improve detection systems to combat perpetrators.

Solutions and Countermeasures

In response to the ghost student problem, colleges are developing multi-layered strategies that leverage both technology and staff vigilance to detect and prevent these fraudulent activities:

1. Enhanced Identity Verification: Schools now require additional identity verification steps for new applicants, including biometric checks or third-party authentication, to confirm the identities of students receiving aid.
2. Data Analytics and Monitoring: Sophisticated analytics tools help identify unusual patterns in applications or financial aid withdrawals, alerting administrators to potentially fraudulent cases.
3. Partnerships with Federal and State Agencies: Schools increasingly coordinate with the Department of Education’s Office of Inspector General, as well as with state fraud prevention units, to share information on detected fraudulent activities.
4. Education and Training: Training programs for financial aid officers and admissions staff help them identify red flags, such as applications with repetitive data or inconsistencies in reported income.
5. Technology to Spot Inaccuracies: LMS integrity tools can help confirm learner identity and identify plagiarism or non-original work. Additional technologies can integrate multiple fraud detection features.

 Balancing Access with Security

One of the biggest hurdles in combating fraud is maintaining accessibility for legitimate students, especially those needing financial aid. Colleges are tasked with ensuring equitable access to financial aid while implementing robust security measures. Striking this balance requires ongoing investments in technology, cybersecurity, and staff training.

As educational institutions evolve their responses, collaboration remains key. By sharing data and leveraging advanced analytics, colleges can better protect taxpayer dollars and ensure that financial aid reaches those who genuinely need it. The fight against ghost students is an ongoing battle, but institutions are making progress with strategies that prioritize both security and student access.

 How IntelliBoard Can Help

IntelliBoard is an institutional ally working to help prevent and potentially identify this kind of fraud. We work with institutions to detect ghost students in a number of ways. Students with no substantive activity in a course before the “Pell Recalculation” or “Census Date,” can easily be identified. In some cases, IP addresses can be tracked to provide a link back to where the enrollment originated. IntelliBoard currently supports the ability to monitor and track additional types of engagement (i.e. discussion forum participation, placement quizzes, web conference attendance) that take more effort in which to fake participation. We are actively working to support more in the future.

Read how IntelliBoard is helping the North Carolina Community College System, one of the largest in the U.S.