Inside California community colleges’ persistent struggle to stamp out financial aid fraud

The Los Angeles Community College District, which includes Los Angeles City College and eight other campuses, is among many districts in the state that have been inundated with scammers attempting to steal financial aid.

Michael Burke/EdSource

Years since first being targeted by Covid-era financial aid scammers, California’s community colleges still can’t fully shake the fraud. 

It’s not for lack of trying. Colleges have made progress by using machine learning tools to sniff out many fake students created by fraudsters via artificial intelligence. Most colleges now use AI software to screen applicants.

The problem, however, is that the most sophisticated scammers keep exploiting new loopholes or vulnerabilities to steal financial aid, perpetuating a seemingly never-ending cat-and-mouse chase for the state’s community colleges.

Some pretend to be homeless or underage to shirk verification requirements. Others steal the identities of former students. And there are those who pretend to be real students for an entire semester, taking and completing courses to appear legitimate before stealing aid in the following term. 

In the first quarter of this year, the system of 116 colleges dispersed about $1.9 million in financial aid to students who turned out to be illegitimate, according to data obtained by EdSource through a California Public Records Act request. That included just under $700,000 lost to fraud in March, the most recent month with available data. 

Those amounts could increase. In some cases, it takes colleges several months to identify and report financial aid fraud. The names of individual colleges were redacted in the data, so the amount of fraud at each local college is unknown.

The system has lost more than $30 million to fraud since 2024, but the latest losses are down from the highest levels experienced in early 2025. Between January and May 2025, many scammers used AI to inundate the system with bot students and to steal more than $13 million.

Since last summer, when many colleges began using AI to detect fraud, the losses have been reduced to about $500,000 per month. 

“Is there still some level of fraud and fraudulent access to financial aid? Yes. Is the problem lessening? Yes,” said Chris Ferguson, executive vice chancellor of finance and strategic initiatives for the community college system.

Leveraging AI 

Community colleges have always been susceptible to fraud because they are open access and generally admit any student who applies. The problem was exacerbated by the Covid-19 pandemic, when many classes shifted online.

That gave scammers more opportunities to enroll without ever having to appear in person. The colleges have been targeted by criminals who are often part of organized crime rings — sometimes operating overseas in places such as Russia, Africa and Asia. 

The fraud is not unique to California. Community colleges in other states — including Michigan, Oregon and New Jersey — have also lost money to the scams. But California’s vast community college system, by far the largest in the country, is the ripest target. 

The issue worsened even further with the proliferation of artificial intelligence. At many colleges, more than 30% of applications were fake last year. 

“It became a lot easier for them to commit the fraud at a larger scale,” said Victor DeVore, dean of student services at the San Diego Community College District. 

The colleges have since fought back against those bot students with their own AI tools. Rather than relying only on human staff to flag suspicious accounts, colleges now use machine learning to identify potential scammers by looking for red flags, such as IP addresses from another country or a phone number that matches an applicant at another campus.

A majority of the system’s colleges use an AI platform called Lightleap. Other campuses have contracted with different vendors. College of the Canyons in Santa Clarita uses Voyatek. California’s largest community college district, the nine-campus Los Angeles district, uses Socure. 

Beginning this summer, the state chancellor’s office also plans to add the Lightleap software to the systemwide application portal, CCC Apply, to screen all applicants when they initially apply for admission. 

“That will help us even better catch fraud across our institutions,” said Jory Hadsell, an executive at the state chancellor’s office. 

One step ahead 

As much as the AI detection software has helped, officials acknowledge that it can’t catch the smartest of scammers who have mastered how to appear as real students.

One way they achieve their deception is by stealing the identities of real people, using their names, Social Security numbers and other stolen personal information.

At College of the Canyons, staff have started hearing from a handful of victims who realized their identities had been stolen after being contacted by collection agencies over past due tuition balances. 

“They’re telling us, ‘I never attended College of the Canyons. That wasn’t me,’” said Clinton Slaughter, the college’s interim vice president of student services. “And so now we’re having to go back and look at individual cases and try to assess exactly what happened and whether any aid was paid out.”

In some cases, fraudsters will identify accounts belonging to former students who either dropped out or graduated. They then try to access those accounts — sometimes by calling the college’s help desk and claiming to be the former student — and use their credentials to enroll. 

Some fraudsters play the long game. When they initially enroll, they take one or two classes in the first semester and complete those courses, appearing to be a real student. The following semester, they register for a full course load, making them eligible for more financial aid.

Then, once the financial aid check clears, “they disappear,” Ferguson said. 

“They’re hard to stop because that was a real person,” he added. 

Scammers are constantly looking for loopholes to exploit. 

Sometimes they pose as students younger than 18. That allows them to skip some verification steps, since the community college system’s main identity verification platform, ID.me, requires users to be at least 18 years old to create an account.

At one point last school year, the Los Angeles Community College District decided to be more lenient in its verification checks of homeless students, allowing them to apply without submitting an address since many of them don’t have one.

Suddenly, the district was receiving applications from thousands of students claiming to be homeless, said Nicole Albo-Lopez, the district’s deputy chancellor. 

“And I was like, OK, we have a problem,” Albo-Lopez said. “So we learned we can’t leave the back door open. Because they’ll find a way in.”

When applicants get flagged as suspicious, they are typically required to verify their identity either by coming to campus in person or joining a Zoom meeting. 

Some scammers have attempted to pass that verification check by using deepfake technology that superimposes a different person’s face over their own during a Zoom call, Hadsell said. Many of them get caught, but officials believe some likely pass the verification check that way, highlighting the difficulty of catching scammers who are constantly evolving and finding new ways to penetrate the college system. 

“We are always going to strive to get to zero, but the issue will be that you do have some advanced individuals who might be excellent at stealing identities or appearing real,” Ferguson said. “So I think you’re still going to see some of that.”