"As they're stealing identities, these loans are not being repaid. They're being assigned to people. They don't even know they have a debt with U.S. Department of Education. Or, you get some letter from the department or the servicer or the Internal Revenue Service that says you owe the Department of Education money for something you didn't even know about," Williams said.
Williams says community colleges that accept almost all applicants through their open enrollment are most vulnerable. Some colleges say that more than a third of their applicants in recent years have been fake.
"We see in some of these fraud schemes where people are enrolled in two or three different schools at the same time, receiving aid at all of them," Williams said.
Murat Mayor, a 58-year-old suburban Washington, D.C. man, and his teenage son discovered they were victims. They were applying for college financial aid, but someone had beat them to it, stealing their identities and signing them both up for classes at community colleges across the country.
"We noticed that there were a lot of activity. There are a lot applications, loan applications, grant applications," Mayor said.
"There are many ways people learn they are a victim of ID theft. Sometimes, they may check their credit report and notice an account they don't recognize. So, you can get a free credit report from annualcreditreport.com. If you don't recognize an account, that could be a sign you are a victim of ID theft," said Federal Trade Commission Midwest Region Director Jason Adler.
Whether you're a student or a senior, Adler says the best way to protect yourself is to freeze your credit online for free with the credit bureaus. However, if you're a minor, you may have to call all the credit bureaus, and if you're 16 or under, call with a parent, and ask them to "create a credit file."
"The way it works for minors is, the credit bureau will create a credit file for the first time and put the freeze in place," Adler said.
Eva Velasquez from the Identity Theft Resource Center says while freezing credit can help stop loans from being distributed, lenders and colleges also need to improve the verification process.
"They want to create access and make it easy for students to enroll. And I understand that. And that is an important piece of it, but you also want a little bit of friction, because you want to make sure that person is who they say they are," Velasquez said.
But the federal government says scammers often use artificial intelligence to expand their reach and circumvent fraud detection controls.
"These bad actors take core identity credentials that can belong to someone like, you know, Social Security number, a driver's license number, name, date of birth, that type of information. And then they mix it with fake information, like maybe a bank account, where they want the funds to be deposited," Velasquez said.
The Identity Theft Resource Center and the FTC can help you fight identity theft for free:
According to the Department of Education's Inspector General, the federal government has lost more than $350 million to ghost student scams with more than 200 active investigations nationwide.
For more of ABC's investigation into ghost students and the nationwide rise of financial aid scams, tune in to Good Morning America on Wednesday morning and check out ABC News platforms throughout the day.