How emerging tech makes it easier to defraud schools out of millions

Scammers are collecting millions of dollars by posing as community college students and requesting financial aid. These “ghost students,” now running rampant in California and infiltrating other states, are deploying new deepfake technology to trick their institutional victims.

More than one-third of California community college applicants were likely fake, and ghost students have made off with more than $13 million in federal and state dollars, Cal Matters reports.

On Friday, the U.S. Department of Education announced its plans to implement identity verification measures for fall 2025 to eliminate identity theft and fraud in federal student aid programs. Members of Congress sent a letter in April to Secretary Linda McMahon to investigate.

Institutions have tried to get smart by enforcing new encrypted security measures. However, scammers are getting ahead of the curve by integrating AI, VPNs and other emerging technologies.

That’s according to Ofer Friedman, chief development officer at AU10TIX, an identity verification service. In this Q&A with University Business, Friedman demonstrates how ghost students can attend virtual interviews while using a stolen identity.

Note: This conversation has been edited for brevity and clarity. 

Alcino Donadel: What makes community colleges such prime targets for ghost students?

Ofer Friedman: Most of the fraud, at the end of the day, is based on ease, not on the potential. I can steal a million dollars from one bank or steal a little from a thousand mom-and-pop shops. They would rather earn less money than take a risk and be caught or denied.

So, presumably, attackers think that community colleges are relatively easier prey than other types of institutions or companies.

Donadel: Can you provide some examples of how these scammers attempt to gain access to an institution’s system?

Friedman: There are a couple of ways to do that, but in principle, you need to be identified and go through a process. Your options would be to show up, which obviously would be more difficult and dangerous.

The other would be to do it remotely. One way is to submit everything online. The other would be through an interview, which is the most dangerous because one of the things beginning to develop is using the latest technologies to commit the perfect impersonation.

There are free tools that can create face swaps. The latest features illuminate your face during the session, look completely normal and you can talk in real-time. It’s a video conversation, but the level of deepfake face swaps is becoming so good that the new ones can render a full body.

Donadel: So you’re telling me that these students can pose as someone else and look completely real?

Friedman: You can have this conversation with the university, with your bank, with your boss, with whoever you want, and this is the most convincing way to converse with someone when you’re not there.

Student loans and financial aid are a big market. That’s a lot of money and it’s increasing. Enough people are interested in the money and think they can get away with it because they have the technology, some of which you don’t have to pay a penny for.

It’s a perfect crime because now you can get off the grid using a VPN. And all the tools are available at a level that they never were before.

Donadel: I imagine that AI probably allows people with less powerful computers to weaponize deepfake technology.

Friedman: If you wanted to do this impersonation two years ago, you would have to know how to do deepfakes with various engines, do the voice separately from the image itself, optimize the picture and then transmit it. You don’t need to anymore.

Fraud has become hyper-easy because of AI, but also the quick development of fraud-as-a-service tools that don’t necessitate you to be an expert in production.

Donadel: How can institutions protect themselves?

Friedman: Because of the rapid sophistication of fraud, you need to check as many hurdles as possible, such as examining the data and device and staying on top of solutions that appear in the market.

But what are the chances that you have the time, the skill and the tools to do that? You don’t.

Usually, it will be something that you have to buy from someone else. On the same token, you can try to build a car, but I think you’d rather go to the showroom and pay because it’s the easiest way.

Donadel: Purchasing services can be very challenging for some institutions that might be cash-strapped. Have you heard of any state initiatives to help higher ed?

Friedman: The market is in the process of migrating to reusable, encrypted credentials that sit on your mobile devices. These can be shared with a certain institution, based on your permission and what you are allowing it to do.

The biggest innovation in the U.S. is Real IDs. There’s already a good list of states that have started offering digital IDs on mobile devices. It’s safer because to steal from your device, it requires a level of computing that few people, if any, have.

So there will be a cat-and-mouse game here with newer technology putting up a barrier and other intelligent professional forces finding a way around it.