Financial aid offices manage some of the most sensitive and valuable information on campus, including Social Security numbers, tax records, bank account details, and enrollment information. Consequently, student financial aid systems have become prime targets for cybercriminals.
From FAFSA scams to refund fraud and student account takeovers, attackers increasingly exploit both technology gaps and human error.
Protecting financial aid data is no longer just a compliance issue. It’s a matter of student trust, institutional credibility, and financial stability.
Real-World Examples of Financial Aid Fraud in Higher Education
Attacks targeting financial aid systems frequently take advantage of technological vulnerabilities and human factors to gain unauthorized access to accounts and reroute funds. Be aware of these common scams:
Student Aid Related Phishing Emails
Attackers will often impersonate official sources like the Department of Education or a university’s financial aid office and try to trick students into providing sensitive information in exchange for fake grants, scholarships, or loan forgiveness. They may ask the student to pay an upfront “processing fee” or “disbursement fee” to receive the aid/refund.
FAFSA Scams
Students receive emails or texts claiming there’s a problem with their FAFSA application and they must “verify” their information immediately. The links lead to realistic-looking fraudulent websites that steal logins, tax data, and Social Security numbers.
Refund Fraud
Attackers access student accounts and change direct deposit information just before financial aid refunds are processed. By the time the student checks their account, the money is already gone—often transferred overseas and difficult to recover.
Student Account Takeovers
Criminals gain access through stolen credentials from phishing emails or reused passwords. Once inside student portals, they can view financial aid details, change contact information, request transcripts, or launch additional scams from the compromised account.
Ghost Student Fraud
Another growing threat is “ghost student” fraud, where attackers create fake student records to receive financial aid funds. These fraudulent accounts can siphon money from grants, loans, or refund disbursements before anyone notices, often requiring careful auditing and verification to detect.
Administrative Targeting
Financial aid staff are also targeted through spear-phishing emails impersonating supervisors requesting urgent student data or wire transfers. One mistake can expose thousands of records.
Best Practices for Preventing Financial Aid Fraud
A proactive combination of technology, policy enforcement, and user awareness is the most effective way to reduce financial aid fraud risk. Here are some steps to combat financial aid fraud:
Enforce Strong Authentication
Use multi-factor authentication (MFA) on student portals, financial aid systems, and administrative platforms.
Lock Down Data Access
Apply least-privilege policies so staff access only the information necessary for their role.
Verify Before Acting
Require identity verification before processing enrollment changes, bank updates, or aid disbursements.
Improve Email Awareness
Train staff and students to identify phishing, spoofed email addresses, and suspicious links. Training should help students look for red flags, including emails sent from unofficial addresses that don’t end in .gov or .edu, messages claiming urgency/pressure, requests for upfront fees, or notifications about grants they didn’t apply for.
Monitor for Red Flags
Watch for unusual activity such as sudden changes to bank info, logins from new devices, or multiple access attempts.
Keep Systems Updated
Ensure financial aid platforms, databases, and third-party tools are patched and reviewed regularly.
Actionable Steps for Higher Ed Institutions
Clear roles and responsibilities across departments help create consistent protection for student financial aid data. Here are some steps to take across various teams:
For Financial Aid Offices
- Implement MFA and fraud alerts on student accounts.
- Use call-back or verification protocols for sensitive requests.
- Conduct annual fraud and privacy training specific to financial aid workflows.
- Provide secure document upload portals instead of email.
For IT and Security Teams
- Monitor for account anomalies and failed login attempts.
- Conduct simulated phishing tests for high-risk departments.
- Maintain incident response plans specific to financial aid breaches and test them regularly.
For Students
- Use unique, strong passwords and enable MFA.
- Never enter FAFSA credentials through links sent by email or text.
- Verify communications through official department channels.
- Report suspicious messages immediately.
Financial Aid Fraud Key Takeaways
Understanding how fraud happens is the first step toward preventing it. Consider these other important points:
- Financial aid offices are prime targets due to the data they manage.
- Most fraud incidents involve stolen credentials or deception, not system failures.
- Training staff and students is one of the strongest defenses against fraud.
- Fast detection and response minimize financial and reputational damage.
- Protecting financial aid data directly protects student success.
Final Thoughts
Financial aid is a lifeline for many students, and attackers know it. As fraud tactics become increasingly sophisticated, higher education institutions must move beyond reactive thinking and adopt a proactive approach to security awareness.
When staff and students are trained to recognize risks, verify requests, and report anomalies, campus communities become far more resilient. Protecting financial aid data isn’t just about avoiding fraud; it’s about safeguarding futures.
CampusGuard’s online training provides relevant courses to ensure your staff stays current on essential topics, including Information Security Awareness training, Phishing Awareness training, and compliance programs such as PCI DSS, GLBA, HIPAA, FERPA, and more. Request a free demo or contact us to learn more.
