---
title: Fraud Costs in Higher Education:  Losses, Labor & Reputational Harm
description: Understand the broader institutional impact of fraud—and build a stronger case for prevention with findings from official audits and federal guidance.
image: https://blog.mutarainc.com/hubfs/Frustrated%20Auditor.png
---

[![www.mutarainc.com](https://blog.mutarainc.com/hs-fs/hubfs/Mutara_H_Web.png?width=864&height=325&name=Mutara_H_Web.png "www.mutarainc.com")](http://mutarainc.com)

Open main menu Close main menu

[Higher Education](https://blog.mutarainc.com/tag/higher-education) [News](https://blog.mutarainc.com/tag/news) [Trends](https://blog.mutarainc.com/tag/trends)

# Fraud Costs in Higher Education:  Losses, Labor & Reputational Harm

[Larry Grey](https://blog.mutarainc.com/author/larry-grey)

[Share this blog post on Twitter](https://twitter.com/intent/tweet?text=I+found+this+interesting+blog+post&url=https://blog.mutarainc.com/fraud-costs-in-higher-education-losses-labor-reputational-harm) [Share this blog post on LinkedIn](http://www.linkedin.com/shareArticle?mini=true&url=https://blog.mutarainc.com/fraud-costs-in-higher-education-losses-labor-reputational-harm)

When institutions consider the cost of enrollment fraud, the first thing that comes to mind is usually stolen money.

That is a significant concern. But the costs extend beyond fraudulent refunds and financial aid.

Bad actors also use admissions and enrollment processes to obtain institutional credentials and access resources intended for students. When these activities are discovered, staff must investigate, correct records and address the consequences.

In this article, we will look at three areas where institutions pay a price:

- **Financial costs:** Fraudulent refunds, financial aid repayment obligations and misuse of paid resources.
- **Labor costs:** Reviewing suspicious applications, investigating activity and correcting accounts and records.
- **Reputational harm:** Using institutional accounts and credibility for fraud, affecting confidence in the institution.

## What Institutions Are Seeing

The Utah Legislative Auditor General’s June 2026 report, *[Enrollment Fraud in Higher Education: Balancing Access and Security 🔗](https://pf.utleg.gov/olag/reports/audits/2026/5e94a771-3d90-4cb2-87dc-6a1865f40092/2026-16_RPT.pdf)*, provides a useful example.

For 2025–2026, the audit reported:

- **Approximately $834,000 in confirmed and potential fraud losses**
- **More than 15,000 estimated staff hours spent mitigating enrollment fraud**

If we apply a loaded labor rate of $35 per hour, those hours represent more than **$525,000 in staff time**. Adding that to the reported financial exposure brings the combined amount to approximately **$1.36 million**.

The hourly rate is our assumption, not a figure from the audit. The total also includes potential losses, so it should not be presented as confirmed cash lost.

Other official sources describe similar challenges:

- [SUNY’s fraud briefing🔗](https://security.suny.edu/media/Security/APPLICATION_ENROLLMENT_FINANCIAL-AID_AND-SERVICE_DIGITAL_RESOURCE_FRAUD_9-22-25.pdf) identifies fraudulent enrollment, financial aid activity and misuse of email, software licenses and storage.
- A [Department of Justice case🔗](https://www.justice.gov/usao-ednc/pr/north-carolina-man-sentenced-misappropriating-identities-defraud-federal-student-aid) involved attempts to obtain more than **$400,000 in federal student aid**, resulting in a **$289,403 restitution order** to the Department of Education. These amounts relate to the overall scheme, rather than one institution’s loss.

## Financial Costs

### Payment and Refund Fraud

A bad actor uses stolen financial information to pay tuition, then drops classes or requests a refund. The goal is to receive the refund through a different payment method or an account they control.

If the institution issues the refund and the original payment is reversed, the institution may be unable to recover the money it paid out.

An [LSE/Western Union fraud guide🔗](https://info.lse.ac.uk/staff/divisions/Finance-Division/assets/documents/Fees-Income-and-Credit-Control/PDFs/Fraud-Guide-for-Students-LSE-Education-EN-UK-Oct-2021Final.pdf) describes criminals arranging tuition payments and directing students to request refunds.

Returning the money to its original source can help prevent this. However, institutions cannot assume their payment gateway provides that restriction. In our work with customers, we have encountered payment workflows that lacked the necessary controls.

A refund policy is only effective if the institution can enforce it through its systems or review processes.

### Financial Aid Repayment Responsibility

A bad actor may also use a stolen identity or false information to obtain financial aid.

The money comes from the federal government, but the institution can be responsible for paying it back.

[Federal Student Aid’s July 2026 guidance, Question 5.2🔗](https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2026-07-17/real-time-fafsa-fraud-detection-and-identity-confirmation-frequently-asked-questions-updated-sept-21-2026), states that improperly disbursed Title IV funds must be returned when a student is subsequently determined to have been ineligible. This includes fraud cases where the institution had no verification flag or prior indication of fraud.

The guidance states:

> “The financial responsibility for improper payments lies with the school.”

Recovering funds can reduce the eventual loss. When calculating costs, however, the stolen aid and the obligation to repay those same funds should be counted once.

### Misuse of Institutional Resources

Financial aid and refunds are not the only things worth stealing.

SUNY identifies software licenses and storage as resources that fraudulent accounts can consume. Depending on the institution’s contracts, these accounts may create additional charges or use capacity purchased for legitimate students.

## Labor Costs

Even when an institution stops a fraudulent payment, it has already spent time addressing the attempt.

That work can include:

- Reviewing applications and documents
- Requesting evidence and following up
- Investigating related accounts and transactions
- Coordinating holds and access restrictions
- Correcting records and supporting recovery

The work often involves several offices, including admissions, financial aid, the registrar, IT and finance.

Utah’s **15,000-plus hours** cover fraud mitigation overall. They do not provide separate totals for investigation and remediation. Our **$525,000 labor estimate** values that time; it does not mean institutions incurred that amount in additional payroll.

There are also consequences for the students those employees serve. The [Utah audit](https://pf.utleg.gov/olag/reports/audits/2026/5e94a771-3d90-4cb2-87dc-6a1865f40092/2026-16_RPT.pdf) describes fraudulent applicants occupying advising appointments at Weber State University and required classes at Utah Valley University. Real students experienced delays or were placed on waitlists.

## Reputational Harm

When an institution creates a student account for a fraudulent applicant, it can give a stolen or fabricated identity an appearance of legitimacy.

That account may then be used for phishing or other attacks. The institution’s name becomes associated with activity it never authorized.

Victims of identity theft may also discover enrollment or financial records at an institution they never attended. Although the identity theft may have occurred elsewhere, the institution must help explain and resolve what happened.

The [LSE/Western Union guide](https://info.lse.ac.uk/staff/divisions/Finance-Division/assets/documents/Fees-Income-and-Credit-Control/PDFs/Fraud-Guide-for-Students-LSE-Education-EN-UK-Oct-2021Final.pdf) specifically identifies institutional reputational harm as a potential consequence of tuition-payment and refund scams.

It is difficult to assign a dollar value to that harm. Institutions can track complaints, account misuse and the effort required to respond without making up a financial estimate for lost trust.

## Understanding the Full Cost

When evaluating fraud prevention, institutions should ask:

1. **How much money and what resources are at risk?**
2. **How much time do employees spend investigating and resolving fraud?**
3. **What is the impact on students and confidence in the institution?**

In earlier articles, I discussed [how admissions processes can create opportunities for bad actors🔗](https://blog.mutarainc.com/fraud-how-admissions-processes-can-make-it-easy-for-bad-actors) and [why identity verification alone is not enough🔗](https://blog.mutarainc.com/fraud-in-higher-ed-why-identity-verification-alone-isnt-enough).

Understanding the costs helps institutions decide where to act. It provides a basis for investing in verification and controls before bad actors gain access to accounts, resources and money.

[Get in touch](https://blog.mutarainc.com/fraud-costs-in-higher-education-losses-labor-reputational-harm#schudele-demo)

## Related Articles

[![](https://blog.mutarainc.com/hubfs/Yield%20dial%20-%201000x571.png)](https://blog.mutarainc.com/need-to-increase-enrollment-lets-talk-inbound-marketing-and-admissions)

[Best practices](https://blog.mutarainc.com/tag/best-practices) [Lead generation](https://blog.mutarainc.com/tag/lead-generation) [Institutional value](https://blog.mutarainc.com/tag/institutional-value)

### [The 4 letter word that's good for admissions](https://blog.mutarainc.com/need-to-increase-enrollment-lets-talk-inbound-marketing-and-admissions)

Lead.  Yield.  Call it what you will.  Attracting candidates is important to every university.  Most organizations are looking for ways to improve admissions results....

[Larry Grey](https://blog.mutarainc.com/author/larry-grey) 

[Read More](https://blog.mutarainc.com/need-to-increase-enrollment-lets-talk-inbound-marketing-and-admissions)

[![Image of students walking divergent paths.](https://blog.mutarainc.com/hubfs/20251112%20-%2003%20-%20Blog%20Article%20Image.png)](https://blog.mutarainc.com/enrollment-realignment-where-growth-is-really-happening-in-2025)

[Trends](https://blog.mutarainc.com/tag/trends) [In the news](https://blog.mutarainc.com/tag/in-the-news) [2025](https://blog.mutarainc.com/tag/2025)

### [What 2025 Fall Enrollment Trends Reveal About Access and Growth](https://blog.mutarainc.com/enrollment-realignment-where-growth-is-really-happening-in-2025)

On Tuesday, the National Student Clearinghouse released its [Preliminary Fall 2025 Enrollment Trends Report](https://nscresearchcenter.org/prelim-fall-enrollment-trends/), representing roughly half of all higher education...

[Larry Grey](https://blog.mutarainc.com/author/larry-grey) 

[Read More](https://blog.mutarainc.com/enrollment-realignment-where-growth-is-really-happening-in-2025)

### Schedule a Demo

#### Company

- [About Mutara](https://info.mutarainc.com/about-mutara)
- [Blog](https://blog.mutarainc.com)
- [Privacy Policy](https://info.mutarainc.com/privacy-terms)

#### Products

- [Admissions Candidate Application](https://info.mutarainc.com/product-application-for-admissions)
- [Non-Degree Registration and Enrollment](https://info.mutarainc.com/product-continuing-education)

[Follow us on LinkedIn](https://www.linkedin.com/company/mutarainc/) [Follow us on Twitter](https://twitter.com/mutarainc) [Follow us on Facebook](mailto:info@mutarainc.com)