The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced on Friday that it issued an alert to financial institutions about fraudsters creating schemes to target Federal Student Aid programs.
FinCEN said fraud rings will use stolen and fraudulent identities to create “ghost students,” as well as other tactics, to enroll in colleges and universities and steal student aid funds. The agency said the schemes result in losses to the federal student aid programs and can even disenfranchise real students by making it harder for them to enroll in classes because of the fraudulently enrolled fake students.
“Every dollar stolen from Federal student aid is a dollar taken from taxpayers and deserving students,” Secretary of the Treasury Scott Bessent said in a statement. “The Trump Administration will not tolerate criminals who exploit government programs for personal gain. Treasury is working with financial institutions and law enforcement to identify these fraud schemes, recover stolen funds, and hold those responsible accountable.”
FinCEN laid out several ways in which fraudsters steal federal student aid funds. One way they do so is by illegally obtaining Personally Identifiable Information (PII) and posing as a legitimate student. These fraudsters may also use AI and other tools to skirt identity verification and create fake documents with the stolen PII. Victims of these crimes are unaware and are sometimes minors, the agency said.
The agency said fraud rings will also leverage complicit “straw students,” or individuals who, for a fee, give their PII to fraudsters who then enroll in colleges or universities and collect financial aid refunds in their name.
Some fraud rings create networks of these “straw students” to obtain student aid, and sometimes they are assisted by corrupt staff who work for the institutions and can recruit more straw students and manipulate educational records, the agency said.
FinCEN encouraged banks to help identify this fraud by looking at deposits made by the educational institutions or by contracted intermediaries.
“According to Bank Secrecy Act data, payments made by an intermediary typically occur via Automated Clearing House transfers and the associated transaction references may include the term ‘refund’ and the educational institution’s name or abbreviation,” the agency said in its press release. “In some cases, the stated recipient may also be listed in the transaction reference. After illicitly obtaining student aid refunds, fraudsters may launder student aid funds, including through money mules, shell companies, and fraudulent accounts.”
The Treasury Department said the alert is part of its effort to uphold President Donald Trump’s executive order pledging to tackle waste, fraud, and abuse in the federal government.
Katherine Hamilton is a political reporter for Breitbart News. You can follow her on X @thekat_hamilton.
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