AI Bots in California Steal Over $10 Million in Federal Financial Aid

If you’re a community college student in California, there’s a chance that at least one of your fellow students is actually an AI bot robbing taxpayers. Recent data from the California Community Colleges Chancellor’s Office suggest that these bots have stolen more than $10 million in federal financial aid and upward of $3 million in state aid between March 2023 and March 2024.

The scam is simple: Bots create AI-generated student profiles, apply for enrollment, and submit minimal online coursework—often AI-generated—to stay enrolled long enough to receive federal and state aid disbursements intended for low-income students. The scammers are known as “Pell runners,” who disappear after collecting the $7,400 federal grant. 

According to reporting by CalMatters, cases surged after restrictions around financial aid were loosened during the COVID-19 pandemic to make it easier for eligible students to access the one-time grants, which were provided to keep students enrolled. At the same time, coursework was moved online to comply with the state’s lockdowns, opening the door to virtual scammers. As early as 2021, the Chancellor’s Office estimated that 20 percent of applications were fraudulent. Now, increasingly sophisticated AI tools have made the problem worse, and recent data suggest that around 34 percent of California community college applicants are fake. Despite California allocating over $150 million since 2022 toward cybersecurity to help authenticate students and combat fraud at community colleges, scammers have successfully stolen more financial aid with each passing year. 

California isn’t the only state experiencing this problem. The FBI has investigated financial aid fraud cases across the country, including in Maryland, South Carolina, and Alabama. Nationwide, these crimes cost institutions over $100 million in 2023—a tenfold increase from the annual average before 2020.                                              

Making matters worse, each fake student enrolled in a class takes a spot away from a real student who needs credit to graduate, and instructors increasingly have to sniff out bots who weren’t filtered out during the admissions process. Bots often impersonate homeless, undocumented, or former foster care students who do not need to verify their identity to enroll in a California community college and blame technological challenges for their inability to communicate with teachers. Additionally, the increased amount of AI-generated submissions by real students makes it difficult for instructors to identify scammers. 

Alarmed by the number of stolen taxpayer dollars, congressional Republicans from the Golden State have called for an investigation into their state’s higher education system to “prevent further waste, fraud, and abuse” earlier this month. 

In a statement made to CalMatters, Chris Ferguson, a representative of the California Chancellor’s Office, said the office has so far “not been contacted by the U.S. Department of Education or the U.S. Attorney General about an investigation.” Ferguson also emphasized that a relatively low number of fraudulent students make it to the financial aid disbursement phase, making up only “about 0.21% in FY 2023-24.”

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