The University of Montana (UM) faced a significant financial setback due to a fraudulent enrollment scheme that siphoned off $673,745 in federal funds from Missoula College in 2025, as revealed by a recent report from the Legislative Audit Division. This widespread scam, which has impacted numerous educational institutions nationwide, highlights the vulnerabilities in current systems and the evolving tactics of fraudsters.
In response to the fraud, UM managed to return the total amount to the federal government by the 2026 fiscal year. However, the university still experienced a net cash loss of $377,937. Dave Kuntz, UM Vice President of Communications, stated that the university has filed an insurance claim to recuperate the financial losses incurred due to the theft.
James Bergeron, Deputy Undersecretary at the U.S. Department of Education, indicated that the overall financial impact of this elaborate scheme is yet to be fully quantified but is expected to reach tens of millions of dollars. The modus operandi involves AI bots using stolen identities to apply to multiple colleges simultaneously, obtaining federal aid, and disappearing before any real interaction with the institutions, earning them the moniker “ghost students.”
Efforts are underway by the Department of Education to recover the stolen funds and prosecute the fraudsters. Bergeron noted that a new verification system introduced in April has already prevented approximately $400 million from being misappropriated by these schemes. “We calculated we saved about $400 million from falling into the hands of fraudsters in just those four months since the new technology went into effect,” Bergeron said.
To counteract these fraudulent activities, the University of Montana has implemented enhanced security measures. These include improved monitoring, thorough reviews of suspicious activities, and expanded identity verification processes. Despite these efforts, a lack of resources has hindered UM from fully uncovering the extent of fraudulent enrollments, as noted in the audit report. Kuntz mentioned ongoing challenges, stating, “A lack of staffing resources continues to prevent us from doing a comprehensive, retroactive look backwards.”
Montana Legislative Auditor Angus Maciver stressed the importance of staying vigilant against increasingly sophisticated online scams. The upcoming discussions by the Legislative Audit Committee aim to delve deeper into these risks and the universities’ strategies to combat them. “We expect the Audit Committee discussion to provide additional context about these risks, how they are affecting universities, and what institutions are doing specifically to respond,” Maciver said.
UM identified 70 instances of identity theft that led to improper federal disbursements during the 2024 to 2026 fiscal years. The university initially became aware of the issue when an individual reported identity theft used for online course enrollment. Subsequent investigations revealed 94 fraudulent enrollments in summer 2025, with 63 receiving federal aid. Despite having controls in place, UM found that the sophistication of these fraud schemes outpaced the effectiveness of standard measures at the time.
To mitigate future risks, UM has introduced several safeguards. These include identity verification checks for select populations before admission, particularly targeting students applying for distance-only programs, and additional verification for students switching from in-person to distance modalities. New distance-only students seeking federal aid are now flagged for closer scrutiny by the Department of Education before aid is granted.
Bergeron highlighted that international investigations have uncovered crime rings in regions such as Africa and Eastern Europe, which are involved in stealing American identities. To combat this, the Department of Education has adopted a private sector tool used by major financial institutions to ensure federal resources are allocated correctly. Bergeron emphasized that while colleges can bypass the federal system, the Department of Education audits these decisions to safeguard against fraud. “It’s intended to serve students, not fraudsters,” Bergeron stated.
