Ghost Students: An FSA Fraud Threat You May Already Have
- Rachel Lane
- Jan 27
- 3 min read
Institutions across the U.S. are experiencing a sharp rise in sophisticated Federal Student Aid (FSA) fraud. Organized rings are exploiting online programs, weak identity verification, and high‑volume BOTs that can create a fake ID that is good enough to bypass enrollment systems in six minutes. The Department of Education’s mandate is to use ID verification at the enrollment or registration level.
However, many of our clients surveyed want to immediately stop FSA to ghosts ("ghost" is a student profile/identity created with fake or stolen IDs) who have made it into their LMS. Our Solution blocks the refunds due to ineligible students and this is called the “Clean House Offense”. In this blog we will share real data about how these ghost identities infiltrate LMS platforms, how their ringleaders complete coursework to appear legitimate, and how they repeatedly reapply for aid—often for years.
Case Examples Illustrating the Scale
Texas (2024) – A Richmond resident was indicted for allegedly filing nearly $600,000 in fraudulent financial aid claims across eight Texas colleges, using the identities of more than 30 students. The scheme involved submitting falsified applications and routing aid disbursements through centralized contact points they controlled.
National Patterns
• 24 states (2015–2024): 1,200 ghost students across 100+ schools, with ringleaders completing coursework to extend aid eligibility.
• Michigan (2024): 80 ghost students enrolled in similar online programs, with coursework completed on their behalf to keep FSA active.
• Louisiana (2022): 180 ghost students using fabricated or stolen identities to repeatedly apply for aid.
• California (2021–2022/current): 60,000 bot‑generated ghost IDs bypassing safeguards and receiving millions in FSA funds.
How to Start a “Clean House Offense" to find and stop Ghosts in your LMS
Identify and compile a list of students eligible for FSA refund/balance disbursements.
Pause all refund disbursements for the students on this list.
BSI notifies these students by email that identity verification through BioProof‑ID is required before funds can be released.
Each student is provided with a unique verification link.
BioProof‑ID initiates a multi-phase authentication process:
Phase 1 – Biometric Password Creation: Students create a written biometric password, which bots cannot complete—immediately stopping ghost bot rings.
Phase 2 – Document and Identity Check: Students submit front and back images of their driver’s license or passport along with a selfie. BioProof‑ID analyzes the documents and confirms authenticity through a state DMV records check.
Results from a recent client’s 3 month fall session stats:
Thousands of legitimate students successfully completed verification and received their refund balances.
81% of “eligible” students never created a BioSig‑ID password, despite an average refund balance of $3,398. These students were identified as ghost accounts already active in the LMS—many likely continuing to submit FSA applications and contributing to potential institutional liability for defaulted loans and grants.
19% failed BioProof‑ID verification, including cases involving fake IDs, altered documentation, or mismatched selfies.
Total savings to the Department of Education for the fall semester: $604,000.
Bottom Line
BSI has a proven approach for cutting off refund and balance disbursements to the large number of ghost students already embedded in your LMS waiting to collect federal aid. FSA fraud is no longer isolated or opportunistic—it is organized, scalable, and increasingly automated. Institutions relying on traditional enrollment safeguards are now deeply exposed. Use a multi‑tiered defense that combines a biometric bot‑stopper with document verification and selfie‑to‑ID comparison. This step gives you the first, essential layer of protection to remove ghost students from your LMS and disrupt FSA fraud and then proceed to intervene at the enrollment and application levels.
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