"Ghost Students" Created by AI: The Reality of Financial Aid Fraud Exploiting Online Classes and a Warning for Japan

"Ghost Students" Created by AI: The Reality of Financial Aid Fraud Exploiting Online Classes and a Warning to Japan

Table of Contents

1. Introduction

2. Fraud Techniques: "Ghost Students" Created by AI

3. Scale of the Damage: The Severity Told by Numbers

4. Victims' Testimonies: The Sudden Burden of "Invisible Student Loans"

5. New Rules and Challenges from the Federal Department of Education

6. Evolving Fraud Groups and the Latest Crackdown Cases

7. Measures Universities and Educational Institutions Should Take

8. Implications for Japan and Concrete Action Plans

9. Conclusion

1. Introduction

The penetration of online classes and the rapid spread of generative AI have expanded the possibilities of higher education while also creating new threats. In the United States, large-scale financial aid fraud utilizing AI has become a social issue. This article details the mechanisms and expansion factors of the crime, based on the latest research reports and victim testimonies, and discusses preventive measures that Japanese universities should take.

2. Fraud Techniques: "Ghost Students" Created by AI

Criminal groups combine generative AI and RPA (automation tools) to automatically execute a process where ① stolen personal information is used for applications, ② chatbots log into course sites and submit "assignments," and ③ they immediately withdraw once scholarships or grants are confirmed. Community colleges with open enrollment and low tuition fees, where the tuition difference is refunded in cash, are prime targets.  

3. Scale of the Damage: The Severity Told by Numbers

• 1.2 million: The number of suspicious applications reported by California public colleges in 2024

• 223,000: The number of fake student registrations identified in the same year

• 11.1 million dollars: The total amount of scholarships and grants that could not be recovered

• 125,000 people: The number of new federal aid applicants subject to identity verification in the summer semester of 2025

  These figures are statistics from only one state, and nationwide, the damage could swell to several billion yen.

4. Victim Testimonies: The Sudden Onset of "Invisible Student Loans"

Heather Brady, a resident of San Francisco, first learned about a $9,000 loan in her name paid to someone else when visited by the police. Brittany Nelson from Louisiana took two years to discover a fraudulent $5,000 loan after her credit score dropped by 27 points. During this time, she had to navigate complex procedures such as filing police reports and applying for loan deferments on her own, incurring significant mental and time costs. 

5. New Rules and Challenges from the Federal Department of Education

In June 2025, the U.S. Department of Education announced a provisional rule requiring the presentation of government-issued IDs, but it was limited to first-time applicants, and a permanent identity verification system was postponed until after the fall semester. Additionally, the Federal Student Aid (FSA) office saw a reduction of over 300 staff members, raising concerns about a weakened audit system.

6. Evolving Fraud Groups and Recent Busts

• Texas: Leader Indicted for Embezzling $1.5 Million

• Misuse of Prisoner Names: $650,000 in Fraudulent Applications at Universities in the South to Southwest

• New York: Guilty Verdict in a $450,000 Fraud Spanning 10 Years

  Criminal groups are acquiring large amounts of personal information through phishing sites and the dark web, and using AI to generate responses that mimic "student-like" behavior, making detection more difficult.

7. Measures Universities and Educational Institutions Should Take

1. Implementation of Multi-Factor Authentication (MFA) and Biometric Authentication

2. Credential Verification at the Time of Application(Government ID Matching and Credit Check)

3. Detection of Chatbot Behavior Using Behavioral Analysis AI in LMS (Learning Management System)

4. Setting Assignments Combining Small Group and Face-to-Face Elements

5. Enhancing Information Literacy Education for Studentsand Strengthening the System for Reporting Suspicious Emails

8. Implications for Japan and Specific Action Plans

As Japanese universities progress in online processes from entrance exams to course registration and scholarship applications, the risk of similar "ghost students" is quite conceivable. Private universities and distance learning institutions are particularly vulnerable.

• Central Database and Face/ID Integration by the Ministry of Education and JASSO

• Elimination of Fake Accounts through Real-Time Inquiry with Banks and Credit Institutions

• Sharing Blacklists and Collaboration Agreements Among Universities

• Introduction of Cyber Insurance and Development of Incident Response Guidelines

9. Conclusion

While AI expands the possibilities of education, it also becomes a powerful tool for criminals. The "ghost student" fraud occurring in the United States is a "future standard risk" that higher education institutions worldwide, including Japan, face. Based on the cases and countermeasures presented in this article, it is essential for universities, governments, and financial institutions to collaborate across sectors to strengthen identity verification and cyber defenses.

Reference Articles

• Associated Press (June 9, 2025) "Scammers are using AI to enroll fake students in online classes, then steal college financial aid" [link]

• myMotherLode.com (June 9, 2025) "Scammers are using AI to enroll fake students in online classes, then steal college financial aid" [link]

• Slashdot (April 17, 2025) "Bot Students Siphon Millions in Financial Aid from US Community Colleges" [link]