DOJ charges five in 'ghost students' AI student loan fraud crackdown

The case marks the first broad federal crackdown on “ghost students,” according to the DOJ, and officials say the scam has been running since at least 2021, growing more sophisticated as AI opens new avenues for loan theft. The scheme targets a specific gap: people who never attended college, meaning the Department of Education has no prior enrollment records to cross-check against.

Officials described a pipeline that starts with purchased personal data and ends with money mules opening bank accounts to receive leftover aid. The DOJ says data analysis helped flag suspicious patterns, leading to the seizure of more than $750,000 in cryptocurrency and what officials described as more than $32 million in actual loss tied to the charged subjects. They added that they believe the actual total is substantially higher.

The crackdown relies heavily on automated identity verification, which officials say is similar to systems used by banks. But advocates warn that false flags could delay aid for low-income students who may lack a driver’s license, and a June 29 to July 6 glitch already blocked fraud evaluation results for some FAFSA forms before being reprocessed.