As the academic year begins, student challenges like enrolment fraud come to the forefront. Brian Suponcic of BMTX discusses combating fraud and supporting students' financial journeys.
In recent years, higher education institutions have faced a troubling and costly challenge: enrolment fraud. The cost of acquiring a new student is increasing every year, with an increase of up to 32% from 2020 to 2022 alone, placing additional financial strain on colleges and universities. Adding to this burden is the rise of ‘ghost students’—individuals using stolen identities to enrol fraudulently, often to access financial aid or other resources.
This issue is not only a financial burden for colleges and universities but also disrupts the integrity of academic environments. Institutions that unknowingly distribute financial aid to these fraudulent students experience direct losses, which divert funds from legitimate students who rely on them for their education. Inflated enrolment numbers can cause resources to be misallocated, leading to significant challenges for students. Some may find it difficult to enrol in the courses they need to graduate, while others may not be able to enrol in classes that align with their interests. This mismanagement disrupts students' academic progress and places additional strain on colleges and universities, lowering the overall quality of education.
The phenomenon of ghost students has become particularly prevalent in community colleges, where lower barriers to entry may create more opportunities for bad actors. For example, about 20% of community college applications in California were identified as fraudulent. The California State Chancellor's Office, which oversees 116 campuses, reported more than 460,000 suspicious applications out of 2.3 million. This issue is not isolated to just California, however; institutions across the United States have reported similar concerns as they face increasing challenges in distinguishing legitimate students from those with fraudulent intentions.
Enrolment fraud can have far-reaching financial consequences. Universities that unknowingly disburse financial aid to fraudulent applicants often cannot recover these funds, leaving them with significant economic losses. These disbursements, intended to support genuine students, are absorbed by fraudulent accounts instead, depriving legitimate students of the resources they need to succeed. Also, inflated enrolment numbers caused by ghost students can skew institutional planning, leading to unnecessary expansion and contraction of courses, facilities, and staffing based on false data.
This growing problem highlights the need for higher education institutions to implement more robust measures to safeguard the enrolment process. Traditionally, higher education institutions have relied on manual verification methods, which have proven insufficient in today's digital age. As fraudsters become increasingly sophisticated in their attempts to exploit vulnerabilities, colleges and universities must adopt modern identity verification tools to protect their students and resources.
In response to the increasing threat of ghost students, universities are exploring more advanced methods to verify student identities during enrolment. By leveraging emerging technologies such as artificial intelligence and machine learning, these institutions can identify patterns of fraudulent activity that might otherwise go undetected. These tools can assist in identifying inconsistencies in enrolment data and preventing fraudulent activity.
Furthermore, implementing a streamlined and secure enrolment verification process can significantly reduce the administrative burden on college staff. During peak enrolment periods, manual verification efforts often consume substantial time and resources, placing unnecessary pressure on admissions teams. By adopting sophisticated digital solutions, universities can reduce the hours spent on manual reviews, allowing staff to focus on other critical tasks that support student success. Additionally, colleges can save an average of 15-20 hours a week of manual, peak-season work.
While preventing and reducing enrolment fraud is crucial, it is also essential to consider the broader financial journey students embark upon once enrolled. Many students open their first bank account during college, viewing it as a tool for managing student loan disbursements and living expenses. Without secure identity verification (IDV) at enrolment, fraudulent actors could access financial aid meant for genuine students, disrupting their financial path from the start. By protecting the integrity of student identities from day one, universities ensure that legitimate students receive the financial resources they need. This allows them to begin on a solid foundation as they navigate their finances throughout college and after they graduate.
Providing students with the right tools to manage their finances responsibly can have a lasting impact on their future. Universities and fintech providers that offer financial literacy resources can help students make informed decisions about their money. As students transition from college to the workforce, they encounter new economic challenges, such as paying off loans, managing their income, and planning for the future. By providing tools that will allow students to begin on a solid foundation, universities and fintech providers can help them build a secure financial future, easing their transition into adulthood and fostering long-term financial health far beyond the classroom.
Comprehensive student identity verification solutions are necessary as higher education institutions grapple with rising enrolment fraud and the challenges of supporting students in their financial journeys. Combating fraud at the enrolment stage is just the beginning.
As the landscape of higher education continues to evolve, the challenges of enrolment fraud and student monetary management must be addressed collaboratively. By leveraging advanced student identity verification technologies and promoting financial literacy, higher education institutions and fintech providers can protect students and uphold the integrity of educational environments.
The path to student success starts with a commitment to safeguarding the enrolment process while empowering students to navigate their financial futures. By protecting against enrolment fraud and promoting long-term financial literacy, we can foster a more resilient and equitable higher education system that prepares students for life and benefits students and their communities. Higher education institutions, fintechs, and financial service providers play a vital role in shaping the futures of students and the broader communities they serve.
About Brian Suponcic
In his current role, Brian oversees solutions such as BMTX Identity Verification™ (IDV), which protects students and higher education institutions from enrolment fraud, and BankMobile Disbursements, which helps colleges and universities across the U.S. deliver financial aid credit balances to students securely, efficiently, and in compliance with federal regulations.
About BM Technologies (BMTX)
BM Technologies, Inc. (NYSE American: BMTX) - formerly known as BankMobile - is among the largest digital banking platforms and Banking-as-a-Service (BaaS) providers in the country, providing access to checking and savings accounts and financial wellness. It is focused on technology, innovation, easy-to-use products, and education with the mission to financially empower millions of Americans by providing a more affordable, transparent, and consumer-friendly banking experience. More information can be found at www.bmtx.com.
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