Colleges are fighting ghost students on three fronts. The federal government now screens every FAFSA for identity fraud in real time. State systems are funding shared verification tools. And individual campuses are combining screening software, ID checks, account holds, and attendance reviews. The results are real, but so are the costs in staff time and student access.

Fraud detection in higher education looks very different than it did two years ago. Here's what each level of the system is doing, what's working, and where current approaches still fall short. If you're new to the topic, start with our explainer on ghost students.

What Is the Federal Government Doing About Ghost Students?

Federal Student Aid moved first. In June 2025, it launched a nationwide identity verification effort that required certain first-time FAFSA applicants to confirm who they are. By December 2025, the Department of Education reported that its stronger controls had stopped more than $1 billion in attempted aid fraud since January of that year.

On April 26, 2026, FSA added real-time identity fraud screening inside the FAFSA itself. Every form is now assessed for risk as the applicant fills it out. Most students move through without interruption. A small share must take extra steps, such as presenting a government-issued ID and taking a live photo.

Federal screening doesn't take colleges off the hook. In May 2026, FSA published best practices for institutions and reminded them that federal rules require adequate internal controls against fraud, along with referrals of credible fraud to the Office of Inspector General. Colleges can also be required to repay aid that reaches fraudulent students.

The pressure extends beyond the Department. In July 2026, FinCEN issued an alert to financial institutions about schemes targeting federal student aid. In Congress, the No Aid for Ghost Students Act passed the House in June 2026, and a Senate version is still pending.

What Are States and College Systems Doing?

California has made the largest investment. Its community colleges have spent roughly $150 million since 2021 on fraud prevention and cybersecurity, according to CalMatters. The Chancellor's Office approved a new identity verification policy, and Jory Hadsell, a technology executive in that office, credited better application filtering and new fraud-detection software for recent progress. EdSource reported in May 2026 that most California community colleges now use AI software to screen applicants.

The numbers show the effect. Federal aid lost to fraud fell from more than $5.5 million between January and March 2025 to just under $1.5 million in spring 2026, according to college reports to the Chancellor's Office.

Minnesota is earlier in the process. The Minnesota State system formed an enrollment fraud work group in 2023, and the Legislature put $3 million toward a systemwide automated identity verification tool this year. The system has selected a vendor and plans to pilot the tool at a few colleges before a full rollout.

In Utah, a June 2026 state audit estimated that seven public institutions spent more than 15,000 staff hours and lost over $830,000 to fake students in a single year, even with fraud detection systems already in place.

How Are Individual Colleges Responding?

Even with federal and state help, most of the work still happens on campus. The approaches fall into five categories, and many colleges use several at once.

Screening Applications Early

Many colleges now run applications through fraud-detection software that looks for patterns no person could catch at volume, such as bursts of submissions or shared contact details. At Century College in Minnesota, an account that raises red flags must submit a selfie, which the software compares against a government ID.

Verifying Identity in Proportion to Risk

FSA's best practices highlight colleges that tier their reviews. George Washington University prefers in-person checks with a government photo ID and allows secure video calls for students who can't come to campus. The goal is to save the heaviest checks for the riskiest cases, so most real students never face them.

Placing Holds When Red Flags Appear

Some colleges place holds as soon as something looks off. Macomb Community College says an identity verification hold can stop both registration and aid disbursement while a case is under review. Harper College holds awarded aid until a student's identity is confirmed.

Checking Engagement Before Refunds

The refund is the payday for a ghost student, so colleges increasingly tie it to proof of real participation. College of Eastern Idaho confirms attendance in all courses during the first 10 days before releasing certain funds. Nevada State University runs queries to catch suspicious accounts before refunds go out. Faculty play a part too. Mark Grant, who teaches communication studies at Dakota County Technical College, sometimes asks online students to turn on their cameras and wave.

Building Cross-Office Fraud Teams

Fraud touches admissions, financial aid, the registrar, IT, and faculty, so some colleges formalize how cases move between them. Normandale Community College runs a fraud team that spans admissions, student services, records, and the registrar. Ohio University and Elgin Community College both describe red flag committees that bring several offices together.

Where Do Current Approaches Fall Short?

These efforts are working, but each comes with tradeoffs.

The Staff Time Adds Up

Every flagged record needs a person to review it. Century College employees spend roughly 60 hours a week fending off fraud attempts, and the college devotes at least 1.5 full-time staff to the problem. At Normandale, about 31% of incoming applications since 2025 have needed additional review, for fraud concerns and other reasons. That time comes out of work meant for real students.

Stronger Checks Can Slow Real Students Down

Verification protects aid, but it can also delay it. CalMatters reported in 2025 that students waiting on verification could face long delays before receiving aid, and that some might give up on financial aid altogether. Minnesota State is still deciding whether to verify every student or only flagged ones, partly to avoid creating new barriers for the students it serves.

Fraud Rings Adapt

Detection pushes fraudsters to change tactics. EdSource found that some scammers in California claim to be homeless or underage to sidestep verification requirements. Others steal the identities of former students, or complete a full semester of coursework to look legitimate before collecting aid the next term.

A Flag Is Only the Start

Detection tells staff where to look. Someone still has to gather evidence, contact the applicant, and document a decision, often across several offices. Many colleges are building that process on their own. Pam Engebretson, Century College's financial aid director, told MinnPost, "This is not a Century College problem," and called for a system-level solution. Faculty there say they've received little guidance on what to do when a ghost student turns up in their class.

What Does a Stronger Response Look Like?

FSA's best practices and the campus examples above point to a common pattern. Screen early. Verify in proportion to risk. Hold funds until open questions are resolved. Check engagement before refunds go out. Give one team clear ownership of each case. And document every decision, so a real student who gets flagged can be cleared quickly. Our guide, [LINK: The Enrollment Leader's Guide to Stopping Ghost Students], walks through that workflow step by step.

Where Element451 Fits

Element451's Bolt App Fraud Detector Agent already handles the screening step. It reviews each application for signals like submission timing, duplicate applications, email, IP address, location, and phone data, then assigns a low, medium, or high risk flag with its reasoning. Staff review the flag and make the call. At Galveston College in Texas, it flagged more than 1,100 of over 6,200 applications in just over a year, and nearly 90% held up as fraudulent on review.

Coming soon, Bolt Fraud Detection and Resolution will take on the follow-up work that tends to stall after a flag, with AI agents coordinating verification and keeping each case moving while staff keep the final call.

See What Comes Next

The strongest responses pair detection with clear follow-through. To see how AI agents will carry a flagged case through verification to a documented staff decision, read the full announcement of Bolt Fraud Detection and Resolution.