AI Bots Steal $13M in College Aid

Higher education will need to rework its financial aid system to stop scammers from using artificial intelligence bots to steal millions of taxpayer dollars each year, an AI expert told The College Fix.

Alliance for Secure AI spokesperson Peyton Hornberger made this comment in response to recent reports that scammers used AI-generated bots to steal more than $13 million in federal and state financial aid from California Community Colleges over the course of one year.

In 2024 alone, scammers stole about $8.4 million in federal financial aid and more than $2.7 million in aid from the state, according to The Los Angeles Times.

These scam bots, generated by AI and known formally as “Pell runners,” fraudulently enroll in community colleges as students. They submit the required assignments, which are typically AI-generated, apply for the federal Pell Grant, collect up to $7,400 at a time, and then leave without a trace, CalMatters reported.

“Within California’s system of 116 community colleges, 31% of applications last year – or 1.2 million – were found to be likely fraudulent, according to data from the office of the chancellor for the college system,” Just The News reported.

Hornberger told The Fix AI bots make this kind of fraud easier and more effective than ever before. “Any new technology exposes the gaps in our social fabric, and AI is no different,” Hornberger said.

She also said the public’s understanding of AI is very superficial, with little knowledge of its profound societal impact.

Not enough people are aware of the issue, “and the system itself needs to be reworked to accommodate for malicious actors who are using AI negatively,” she said.

“The AI revolution makes the current higher education model incompatible with rapidly advancing AI,” she said. “Our institutions are just not prepared.”

When asked about potential policy solutions, Hornberger said “banning deepfakes, certain technologies, and certain uses of AI is the tip of the iceberg.”

Transparency regarding this technology and its development labs is essential, she said, adding that “safety standards and testing reports should be mandatory public information.”

Moreover, the issue is escalating with the rise of online education and public AI language models like ChatGPT, CalMatters reported.

In 2021, a CalMatters investigation found that at least ten California districts or community colleges had “increases in fake applications, registrations, financial aid filings, or some combination of the three.”

The outlet also found that around 20 percent of community college applications in California were AI-generated in 2021. By January 2024, that amount went up to 25 percent. In April 2025, the number increased again to approximately 34 percent.

However, these scams are not isolated to California.

Reports from Illinois, Louisiana, Maryland, Missouri, and Nevada reveal that community college customer-relationship management administrators detect an AI-generated bot every seven minutes on average, the Chronicle of Higher Education reported.

Additionally, a recent investigation by the U.S. Department of Education “uncovered nearly $90 million disbursed to ineligible recipients, including thousands of deceased individuals receiving some form of payment,” according to a May news release.

In response to this finding, the department announced a new initiative to implement advanced identity validation processes nationwide for the upcoming fall semester, according to a June news release.

“When rampant fraud is taking aid away from eligible students, disrupting the operations of colleges, and ripping off taxpayers, we have a responsibility to act,” Education Secretary Linda McMahon said.