To keep money flowing, criminals use AI to fill out applications, complete courses, and even make it look like a student is attending virtual sessions.
“It appears that the ghost student is actually completing the class,” McDonald said at the news conference. “Some even create the appearance of a fake student in an online classroom to fool schools into believing a real person is present. The goal is to keep the ghost student in school as long as possible, semester after semester after semester.”
Unaware Americans keep the bills
So far, the DOE has “identified more than 830,000 potentially fraudulent federal student aid accounts created using this PII of U.S. citizens,” officials said at the news conference. If all of those accounts are ghost students, the total losses are close to $130 million, the Justice Department said.
For Americans whose data is stolen, there is little chance of discovering the scheme until the government collects on the loans years later. Meanwhile, victims’ credit may be damaged. Once they detect the scheme, they are caught fending off demands to pay off inflated student loans, which McDonald admitted are complicated.
“The Department of Education does a great job helping solve that mess, but it’s a mess that no one should have to endure,” he said.
In connection with the arrests, officials said they “identified more than $32 million in actual losses related to these specific subjects” and “we believe the actual total is substantially higher,” with “millions more suspected.”
The DOE Office of Inspector General first detected the fraud patterns that brought the alleged scheme to light. The FBI then helped identify how many accounts were affected, tracing the money to US and foreign bank accounts and crypto wallets. In one case, a defendant “used multiple bank accounts at multiple financial institutions to receive more than 700 fraudulently obtained federal student aid refund deposits, totaling approximately $1,439,548,” the DOJ said. In another, “an individual received more than $1 million in deposits that were linked to more than 300 fraudulent student accounts,” Inside Higher Ed reported.
