The Free Application for Federal Student Aid (FAFSA) application goes live on October 1, but with student aid season underway, there is an onslaught of new and convincing scams within the education system.
Many fraudsters are able to use stolen or AI-generated identities to create “ghost students” who subsequently enroll in college just long enough to collect financial aid before disappearing entirely.
Newsweek spoke to student aid and scam experts about what to know as the financial aid season begins.
Why It Matters
Ghost student scams have become prevalent across the country. In California alone, colleges reported over $13 million in aid lost to fake students in the last year. That includes more than $10 million in federal dollars and $3 million in state funds.
What To Know
Ghost student scams are increasing as AI technology becomes more pervasive. In the first few months of 2025, California colleges reported another $3 million in federal aid stolen, plus $700,000 in state dollars.
Many victims don’t become aware that their identities have been used until they’re denied real aid or contacted by loan servicers.
“Ghost students are synthetic enrollments. Criminals using stolen identities to create fake students who never set foot on campus but collect very real financial aid checks,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek. “We're talking about organized networks leveraging AI to manufacture these phantom enrollments at scale.”
The stolen identities can apply to both living and dead victims, with millions lost due to stolen identities of deceased individuals every year, Ryan said.
“If grandma's Social Security number is out there, criminals are testing it against FAFSA systems,” Ryan said. “The real victim isn't always the government. Sometimes it's a real person who suddenly has phantom student debt they never incurred.”
All potential students are urged to sign up for credit report software so they can be notified if a scammer ever uses their information illegally. Immediate action through reporting can be the difference in both the individual and the university losing thousands of dollars, experts say.
Last week, the Department of Education (DOE) released the "earliest and most streamlined FAFSA form in history," according to a department spokesperson. It also introduced a series of updates designed to streamline the application process and strengthen system performance, and more than 125,000 students already started their application as of Friday afternoon.
In June, the DOE also announced it would launch a nationwide effort to eliminate identity theft and fraud in the federal student aid programs. As of today, the department is requiring institutions of higher education to validate the identity of certain first-time applicants.
What People Are Saying
Ryan told Newsweek: “When ghost students enroll in courses, they take up space in classes with limited capacity, forcing real students onto waitlists or delaying required coursework. Now we're talking about stolen opportunity, not just money. Every ghost in the system is a seat denied to a legitimate student trying to build a future.”
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “Scams involving ‘ghost students’ have become more prevalent in recent years, as those perpetuating the fraud have developed more intricate plans for stealing identity information and using it to gain acceptance into college - and the financial aid that goes with it. We've seen renewed efforts from colleges and federal and private student aid providers to offer more security in their application processes, but they're still not foolproof.”
What Happens Next
Ryan urged Americans to act now before the FAFSA season gets underway by freezing their credit with all three bureaus to stop any potential scammer from doing long-term damage.
“It's the financial equivalent of locking their front door,” Ryan said.
Update 09/30/25, 5:35 p.m.: This article was updated with further information.
