Trick or Treat? How Unvetted Ghost Students Steal Millions in Financial Aid
Is it spooky in here or is it just us? It’s not your imagination. Many higher education institutions are discovering that ghost students have quietly infiltrated their online classrooms.
Halloween is a great time to talk about the ghosts haunting higher ed, so let’s talk about a growing problem for institutions of all sizes. That’s right. We’re going to talk about “ghost students”.
Ghost students are not real students, but they do apply for admission, sign up for financial aid, register for classes, and do just enough to get access to their financial aid funds before fading into the night.
These fraudulent identities are created by scammers who take advantage of weak identity verification processes so they can enroll in school for the sole purpose of collecting financial aid. This kind of identity fraud diverts millions of dollars away from legitimate students and leaves colleges and universities to take the hit.
The Ghost Student Playbook: Siphoning off Financial Aid
Sounds terrible, but it’s true. There’s never been a better time to be an identity scammer. No need for fancy disguises or mysterious accents. In fact, you don’t even have to show up in person.
Today, all you need is an internet connection and some time, and you can be anyone you want to be. Peter Steiner said it best way back in 1993, "For all they know, you could be a dog".
Admissions fraud isn’t new, but as schools enroll more and more online students, the scale of the problem continues to worsen, along with the negative impacts. The scam itself is deceptively simple and follows a predictable pattern.
First, the fraudster uses a stolen or synthetic identity (a mix of fake and real data) to create a fake applicant that seems plausible. This is our ghost student.
Next, they use this fake identity to apply to institutions, often focusing on online programs or community colleges with policies that allow for quick enrollment with minimal paperwork.
Once enrolled, the ghost student learns what is required to receive a disbursement of financial aid funds and then does the absolute bare minimum required to trigger this payment, such as logging into the learning management system (LMS) or submitting a blank document.
Once they do enough to trigger the financial aid office to disburse funds, the ghost student vanishes without a trace.
How Schools Can Prevent Identity Fraud
Reacting to this problem after the money is gone isn’t acceptable. We need to stop ghost students at the front door, before they can do harm, and this requires modern identity security with two main elements.
Robust Identity Vetting
To prevent ghost students from getting access to your systems, you must be able to answer the question: "Is this applicant a real person who is exactly who they claim to be?"
Identity vetting, or identity proofing, is a rigorous verification process used to establish and confirm an individual's identity with a high degree of confidence before they are officially granted access to your systems. At a minimum, strong identity verification uses two main mechanisms, document verification, and technology-supported biometrics and liveness checks:
- Document verification prompts the applicant to upload a photo of their government-issued ID (such as a driver's license or passport). Specialized software then analyzes the provided document for cryptographic security features, signs of tampering, and data consistency (e.g., matching the uploaded information to the document) to verify authenticity.
- Biometric & liveness checks can be used during the interview process to further verify an incoming student’s identity. Liveness detection technology analyzes factors like eye movement, head turns, or mouth movement to distinguish a live person from a static photo or recording, while biometric matching confirms that the face captured matches the photo on the uploaded government ID.
Modern Identity & Access Management (IAM)
Once a student is vetted, your Identity & Access Management (IAM) platform ensures that this legitimate identity is used only by its verified user by deploying MFA, SSO, and risk-based authentication.
- Multi-Factor Authentication (MFA) is a non-negotiable for safeguarding your systems from fraudulent users, requiring a second factor for authentication, like facial recognition or a push notification to a mobile device.
- Single Sign-On (SSO) ensures that one, vetted, and trusted identity is the single key to every critical system, from the student portal and LMS to the financial aid office.
- Risk-based authentication intelligently flags suspicious activity. If a student exhibits unusual behavior, the system can automatically trigger additional login challenges to re-verify their identity.
Practical Steps You Can Take Today
While a well-integrated IAM program is the resilient solution you need to prevent this problem in the future, you can begin to mitigate this problem today by strengthening your internal processes.
- Audit Your Application Process: Train your admissions team to spot the signs of potential identity fraud. Are multiple admissions applications coming from a single IP address? Do the applicant’s essay answers seem generic? Are applicants using disposable email domains?
- Cross-Reference Data: Actively cross-reference data between federal student aid applications like the FAFSA (Free Application for Federal Student Aid) and the information provided on the student’s application for admission. Look for mismatches between dates of birth, addresses, and other personal information provided by the applicant.
- Implement Checkpoints to Ensure Proof of Engagement: Require that all students engage in meaningful action before you make any disbursements, such as submitting an assignment or completing orientation.
Unmask Ghost Students with Strong Identity Verification
If you see something strange in your classroom, who are YOU gonna call? Contact KeyData Cyber today to learn about our robust identity vetting and access management solutions.
