WHITE BEAR LAKE — A two-year school in the Twin Cities suburbs, Century College educates about 8,700 students. And its employees spend roughly 60 hours a week fending off financial aid fraud attempts by criminals.
Those hours are largely spent scouting out so-called “ghost students,” criminals who enroll in classes using stolen or fake identities just long enough to receive financial aid — and then disappear.
History professor Joe Haker first noticed the problem three years ago, when he wondered why one student in his gender studies class had submitted the same assignment as a student in his history course.
“I thought, ‘Well, that’s weird. That probably could only happen if they were the same person,’” Haker said.
Nine students turned out to be the same person. This summer, Haker suspects as many as a third of his 90 online students could have been fake.
“It’s so maddening,” he said. “You can’t help but feel very, very strange when you realize that this student that you’re devoting even some time to is just scamming.”
The Minnesota State system of 26 colleges and seven universities is preparing to pilot a new automated identity verification system that it says will help combat the ever-evolving problem of ghost students. The Legislature this spring allocated $3 million toward the effort, which Craig Munson, who oversees information security for the system, said should provide guardrails for a couple of years.
While faculty and financial aid officers applaud the move, some question whether the new technology will do enough, quickly enough, to curb a problem that largely has been left to individual schools and their staffs to confront.
“This is not a Century College problem,” said Pam Engebretson, Century’s financial aid director. “It’s a system office problem, and we need a system office solution to be able to support all of the work that we do.”
Century uses its own software to help filter out fake students from real ones and devotes at least 1.5 full-time staff to the problem, Engebretson said.
While those steps have reduced fraud, Engebretson believes a handful of fake students obtained financial aid this summer — and even more enrolled in classes before faculty or other staff noticed.
“We’re doing everything we can to correct it,” Engebretson said. “We’re as much of a victim as anyone else.”
In California, a potential bellwether for Minnesota in its approach to fighting ghost students, lawmakers have spent at least $150 million since 2022 on technology to help verify the 2.2 million students within its community college system.
This spring, the system reported losing $1.5 million in federal aid to fraudulent students. However, that’s a decrease from $5.6 million in spring 2025 and a fraction of all financial aid paid out, according to the news outlet CalMatters.
One problem in Minnesota, critics note, is that the true scope of financial aid fraud isn’t clear.
The Minnesota State system, which serves over 290,000 students each year, says it flagged 2,696 financial aid applications as fraudulent or potentially fraudulent in the 2025-26 school year, down from 7,715 the year before.
However, citing security concerns, system officials declined to disclose how much federal or state aid has been lost to ghost students, even after questions from state lawmakers this spring.
U.S. Education Secretary Linda McMahon claimed in a 2025 letter to Gov. Tim Walz that 1,834 fake students in Minnesota had received $12.5 million in taxpayer-funded grants and loans. But McMahon provided no additional details, and the agency did not respond to clarifying questions from MinnPost.
In an interview, Munson said he had no idea where the $12.5 million figure came from. Nearly 100 higher education institutions in the state participate in federal financial aid programs. Munson said the system’s 33 schools “certainly are probably a portion of that. I would suspect a small portion.”
“If they do have information about where it came from, we’d love to see it,” he added, “because we want to do our due diligence and make sure that we’re finding what we should be finding and stopping what we should be stopping.”
At Century College alone, some $500,000 was paid out to suspected fraudulent actors within one academic year, according to several people who requested anonymity to avoid Century getting singled out for a far more widespread situation.
In a statement, the college declined to confirm or deny that figure, referring questions to the system office.
Haker said it’s important to know the full extent of the problem so Minnesota State can develop a comprehensive response.
“Because you don’t have anything coming from the system, it’s all based on your own experience,” he said. “And if I’m going off of my own personal experience this summer, it’s an enormous problem still.”
A patchwork of responses
Ghost student fraud is big and getting bigger all across the country.
It usually works like this: Thieves use stolen or fake IDs, or pay kickbacks to “straw students” to use their personal information, to apply for federal financial aid via the FAFSA form. Then they enroll in classes. The U.S. Department of Education distributes financial aid to individual colleges, which take what’s needed to cover tuition and fees and distribute the rest directly to the “students.”
The Department of Education estimates it has lost nearly $90 million to ghost students. In just two examples of recent cases, a Detroit man pleaded guilty to submitting fraudulent FAFSA claims for nearly 1,300 people in a scheme involving 100 schools in 24 states; over $10 million was disbursed. And a North Carolina woman was sentenced to five years in prison for stealing over $3.5 million in aid.
Community colleges are most at risk because of open admissions policies that aim to welcome all and reduce the complexity of the application process. The expansion of online classes during COVID-19 made it even easier to game the system.
The scope of the problem in California — where the state system of 116 public community colleges paid over $17.5 million in federal aid to fake students between 2022 and 2025 — drew national attention to the issue. But no state is immune. In Utah, a June audit estimated seven public institutions had devoted over 15,000 staff hours and lost over $830,000 to fake students in just one year, despite existing fraud detection systems.
At the national level, the Department of Education earlier this year launched a verification system that flags suspicious FAFSA applicants. Anyone deemed high-risk must confirm who they are by presenting a government-issued identification and going on camera for a photograph.
But the federal government has also made clear that schools are expected to have their security, and they are on the hook to repay money distributed to fraudulent students.
Minnesota’s largest system of two-year colleges, Minnesota State, has spent years relying on its individual schools to contend with ghost students while looking for systemwide solutions.
In 2023, the system created a work group on enrollment fraud, which the Legislature formalized two years later. The group issued a report in January, recommending the new systemwide verification system, along with more training for staff and students and annual reporting about enrollment fraud trends and mitigation.
The work group also published a user guide with protocols to deter enrollment fraud and for how to respond. The system tracks and logs fraud attempts, Munson said, and staff are expected to manually verify students’ IDs as needed.
“It’s a lot of labor,” he said. “We want to rightsize that and then get the automation where we can, and that’s where we asked for the help from the Legislature.”
Without that help, Munson said, Minnesota State eventually would have been able to invest in software, but it would have been “more homegrown, a little bit later, and we didn’t want to get past the tipping point where it became out of control.”
It’s difficult to grasp what prevention efforts look like internally across the system’s community colleges. MinnPost contacted all 26 with questions about protocols. Most did not answer, and several deferred to the system office while citing concerns about revealing information that could be useful to crime rings.
Mark Grant, a communication studies professor at Dakota County Technical College and representative for the Minnesota State College Faculty union, said the response varies from place to place.
“We have campuses that are doing an enormous amount because they have the resources,” he said. “We have campuses that are less equipped because they have less resources.”
Minneapolis College hired an outside company to review student IDs, said Dean of Enrollment Management Heidi Aldes, but scrapped it after determining their internal process was more effective.
“It takes significant human resource time,” Aldes said. “I would say the benefit is, as the attempts become more sophisticated, we sort of have a real-time understanding of what those changes are.”
Normandale Community College purchased software to aid its fraud team, which spans admissions, student services, records and registrar staff, among others. Since 2023, the school of about 11,000 students has flagged 29,000 applications for review, a college spokesperson told MinnPost.
The college estimates 31% of all incoming applications since 2025 have required additional review for any number of reasons — including because they are potentially fraudulent.
“Even if it’s just a few minutes, it’s wasted time,” said Susan Ant, director of financial aid and scholarships at Normandale. “We’re taking time that is meant for real students to get an education, graduate, do all those things, and there’s somebody who’s kind of working against that.”
Munson said the system is still deciding whether ID verification should be required of all students or just those whose applications are flagged. That’s part of a broader concern the system is dealing with, to ensure new security measures don’t prevent its diverse range of students from enrolling.
Technology to prevent stolen financial aid is a now-booming business.
Among the companies responding is AMSimpkins & Associates, which has grown its client base from six schools in 2023 to over 500 this year, according to founder Maurice Simpkins. Another 12 to 15 schools contact the company each week, he said.
Simpkins said colleges and universities are almost guaranteed to have some internal mechanisms in place to fight ghost students. And dealing with the issue poses recurring budget costs for schools, he said, given how quickly perpetrators adapt their tactics to security upgrades.
“Fraud trends change weekly, sometimes daily, sometimes hourly,” he said, meaning it doesn't take long for a security system to become antiquated and “for the fraudsters to either find a way around it or to just circumvent it as a whole.”
‘Testing our system’
Among the piles of papers on Engebretson’s desk at Century College are emails from victims of identity fraud. They often contact her after applying for a student loan or a mortgage, only to learn their information has been stolen and used to apply for financial aid.
It’s one of the many ways she deals with attempts to steal public money in her day-to-day job. Although that’s always been an issue during her 15-year tenure at Century, she said it worsened significantly beginning around 2021 or 2022 with the boom in online classes during the pandemic.
“We believe that they were testing our system to see how easy it was to be able to get financial aid,” Engebretson said. “And the answer was, it was easy.”
Since then, she’s done everything in her power to make it anything but easy.
The goal is to freeze fake students’ accounts before money goes out the door at the beginning of each semester. But that requires finding them.
The software Century uses looks for indicators of financial aid fraud in student accounts. If an account raises red flags, the student is asked to take a selfie, which the software cross-references with an ID.
While Engebretson instructs faculty to alert her if they notice suspicious student behavior, there’s no systemwide guidance for faculty.
Grant, the union faculty representative, told lawmakers in February that faculty struggle knowing what to do when ghost students “slip through” and enroll in classes. If faculty are expected to go beyond just flagging potential ghost students, he said, “somebody needs to tell us that.”
“Absent that direction, we have faculty who are still employing a number of strategies to combat this,” he said in a February committee hearing, like meeting with dozens of students at the beginning of a semester just to make sure they are real.
As of August, nothing has changed, he said in an interview.
In his own online classes, Grant sometimes asks students to turn on their cameras and wave at the screen so he knows they are real.
Haker has other strategies — like compiling IP addresses on a spreadsheet to spot when the same address is attached to more than one student.
“Have we ever been told, here are some techniques to identify those students? Not really, and certainly not at the system level,” Haker said. “Anything that we have gotten has been from Century College specifically.”
Sen. Heather Gustafson, DFL-Vandais Heights, represents Century College and sponsored the legislation to create the work group that oversees enrollment fraud.
Advocating to create that group, Gustafson told lawmakers during a committee meeting the issue “places a significant strain on institutions,” and despite colleges’ efforts to respond, “many lack the resources for dedicated fraud prevention.”
Gustafson draws a connection between the ghost student issue and other attempts to steal public dollars. This session, lawmakers devoted $90 million to replace antiquated technology that has been linked with fraud in the state’s social services programs.
But she said it’s important that the ghost student problem, a national issue, not be turned into “another Minnesota fraud story.” Minnesota was able to take action earlier than other states because of “some really vigilant employees at our community colleges,” she said.
“Even if we don’t get it perfect, the more we do the more it sends the signal that we are not open for fraud business here,” Gustafson said in an interview. “We are not an easy target anymore, and people should know that.”
Munson, of Minnesota State, has repeatedly said the system will never be able to stop every attempt to steal financial aid. He notes the $3 million in legislative funding is less than the amount of money lost to fraud and to staff time spent fighting it.
Nevertheless, he said, the system has a “high success rate” in preventing criminals from slipping through.
“That doesn't mean we stop everyone,” he said. “But we aren't satisfied until we get that as close to zero as humanly possible.”
Minnesota State has selected a vendor for its new software, he said, and will pilot it with a few schools before rolling the technology out systemwide.
Among those waiting for that launch is Aldes, who said she doesn’t know exactly what’s coming, but, “Boy am I anxious to know.”
“We’re doing everything we can on a local level, and any systemic changes that maybe alleviate some of the manual work that we’re doing would be awesome,” Aldes said. “In the meantime, we’re going to protect our students, we’re going to protect our institution, we’re going to try and mitigate the harm as much as possible.”
Cleo Krejci is an investigative reporter covering community colleges as part of a collaboration between MinnPost and Open Campus. If you think you’ve been a victim of identity theft related to financial aid fraud – or are a college employee dealing with this issue – we want to hear from you. Reach out at ckrejci@minnpost.com.
This article first appeared on MinnPost and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.
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