Fighting Financial Aid Fraud in Higher Education
February 24, 2025
Financial aid fraud has surged over the last five years. The same sophisticated tools used by the financial services industry can help colleges and universities fight back.
Over the past five years, financial aid fraud in higher education has surged dramatically, costing institutions across the United States upward of $100 million per year as of 2023—compared to less than $10 million annually reported before 2020.Footnote1
The FBI has investigated numerous cases of financial aid fraud including in Maryland, South Carolina, Alabama, and California—all of which have resulted in significant financial losses. Though widespread statistics are difficult to come by, California’s community colleges alone disbursed more than $7.6 million in aid to fraudulent identities over the first three quarters of 2024—up from $4.4 million for the entirety of 2023 and $2.1 million the year before (statewide reporting began in September 2021). It’s now suspected that as many as one in four applicants to California’s community colleges is fraudulent.Footnote2
These numbers mirror the striking nationwide increase in identity fraud over a similar period. While identity fraud among American consumers leveled off in 2023, specific categories such as synthetic identity fraud have reached record levels, growing by 38 percent between 2022 and 2023 in certain sectors.
