Spartanburg Methodist College financial aid director Kyle Wade talks about the FAFSA, one-on-one sessions available for high school seniors offered by the school. Here, a students looks over his FAFSA information online.
Sacramento, California – California’s community colleges are grappling with an alarming rise in financial aid fraud, with roughly 34% of applicants now suspected to be fake — a sharp increase from 20% in 2021, according to the state Chancellor’s Office. As scammers grow more sophisticated, often using artificial intelligence to impersonate students, faculty and administrators say they’re struggling to keep up.
Between September 2021 and December 2023, fake students stole over $5 million in federal aid and $1.5 million in state funds, according to CalMatters. In just the first months of 2025, more than $3 million in federal and $700,000 in state dollars have already been distributed to fraudulent applicants.
College officials fear the situation could worsen following deep staffing cuts at the U.S. Department of Education — including in the Office of Inspector General, which has lost more than 20% of its personnel since October 2024. With fewer federal investigators on the ground, colleges say they’re receiving less support identifying and stopping these scams.
“We are committed to fighting student aid fraud wherever we find it,” said Catherine Grant, a spokesperson for the Inspector General’s office. “But we are limited with what we can do based on our limited resources.”
The scam operations are increasingly advanced, often exploiting vulnerable systems and emergency relief efforts. In January, as wildfires swept Los Angeles County, enrollment at East Los Angeles College abruptly doubled — likely due to scammers targeting student relief funds, said Nicole Albo-Lopez, deputy chancellor of the Los Angeles Community College District.
Faculty members are left to act as gatekeepers. At Berkeley City College, librarian Heather Dodge said she removed several suspicious students from her class who submitted generic, AI-generated responses instead of video introductions. “Are these students who are having technological challenges? Or are they scammers? It’s hard to tell,” she said.
Colleges have poured resources into fighting the fraud. Since 2022, California has invested $150 million in cybersecurity, partnering with ID.Me, LexisNexis, and others. But scammers continue to find workarounds. At the San Diego Community College District, officials said some fake students even passed identity checks through ID.Me.
Investigations into large-scale fraud rings are ongoing. In one case, scammers used the identities of at least 57 people to steal over $1.1 million from two Los Angeles colleges. Another fraud ring at Los Angeles City College may have used 70 fake identities to obtain financial aid.
Despite reporting fraud to federal agencies, many colleges say they rarely hear back. “When you direct less resources to combating fraud… you’re going to get more fraud,” said John Hetts, executive vice chancellor of the California Community Colleges Chancellor’s Office.
