Stealing government benefits through electronic payment systems is on the rise. Large-scale theft from programs was more difficult when bureaucracies relied on paper applications and in-person approvals. Today, criminals are flooding programs with payment requests over the internet, and government computers are paying out millions of dollars before scams are discovered.
Governments have always been incompetent, and handout programs have always attracted crooks. But the ease and efficiency of benefit and subsidy theft today is a stroke against the expanding welfare state.
The Los Angeles Times reports on rising electronic theft of student aid in California. So far, the dollar losses are not huge, but the scale of attempted scamming is remarkable.
Of those who applied to state community colleges from January through December 2024, 31% were determined to be likely fraudulent. That’s more than 1.2 million applications, according to data from the office of the chancellor for the college system.
Anyone who applies to a California community college is admitted. This accessibility, coupled with the increase in remote and hybrid formats for classes since the COVID-19 pandemic, creates vulnerabilities that scammers exploit to cash in on both state and federal financial aid.
Fraudsters, with the help of stolen identities, bots and artificial intelligence, act as dozens or even hundreds of students. They join classes and remain enrolled until they receive their financial aid checks. The fake students often take up limited spots in classes actual students need to take, creating headaches for both students and staff.
Although any financial aid goes toward tuition first, low-income community college students pay little or no tuition in California, meaning they receive funds directly to use for books, housing, food, or other needs while they’re in school.
Some fraudsters have spent that cash on plastic surgery, elaborate vacations, and designer bags, federal officials say. The state’s community colleges have seen a steady increase in fraudulent applications and enrollment in recent years.