Tip of the Week

Fraudsters are becoming more sophisticated, particularly when it comes to federal student aid fraud.

According to the Financial Crimes Enforcement Network (FinCEN), colleges are seeing an increase in “ghost students,” stolen identities, synthetic identities, AI-generated documents, and other methods used to fraudulently enroll in colleges to obtain federal financial aid refunds. Open admission and on-line programs are primary targets.

On July 24, FinCEN, a bureau of the U.S. Department of the Treasury, published a comprehensive alert for financial institutions, which includes some valuable information for colleges, servicers, and other organizations across the postsecondary finance system.

The alert provided some “red flag” indicators that should be monitored, including multiple refunds to the same account, multiple unrelated students using the same account for the deposit of student aid refunds, rapid movement of student aid refunds, and newly opened accounts with no financial activity except for student aid refunds.

The Department of Education launched a nationwide effort to prevent fraud in federal student aid programs and, in late 2025, announced it had prevented $1 billion in student aid fraud during 2025.

While colleges can’t eliminate federal student aid fraud, FinCEN reminds institutions of the need for their due diligence by monitoring the identity of students, watching for “red flags” and reporting suspicious transactions and cases of fraud to the ED-OIG Hotline.

– By Marlene Seeklander