In a developing case that ties federal aid integrity to state oversight, Minnesota is at the center of allegations that nearly two thousand students enrolled fraudulently, enabling more than $12.5 million in federal student aid to be disbursed improperly, The Federalist reports. Education Secretary Linda McMahon characterized the situation in a formal letter to Minnesota Governor Tim Walz, framing it as a systemic failure that drew international fraud rings and AI-enabled schemes into American postsecondary aid programs. The core claim centers on “ghost students” — applicants who were not properly ID-verified, did not reside in the United States, or did not exist — yet nonetheless received loans and grants intended for eligible students.
“[Y]our careless lack of oversight and abuse of the welfare system has attracted fraudsters from around the world, especially from Somalia, to establish a beachhead of criminality in our country,” McMahon wrote in her letter to Walz. “As President Trump put it, you have turned Minnesota into a ‘fraudulent hub of money laundering activity.'”
The letter follows reporting about fraud investigations tied to Minnesota welfare programs, with several cases connected to Somali communities. These developments have fed into broader debates over immigration policy, temporary protected status, and how to ensure rigorous oversight of public funds.
Department officials say a recent shift toward stricter identity verification and documentation requirements aims to prevent future losses. As part of those safeguards, institutions were instructed to require first-time aid applicants to present government-issued photo IDs in person or via live video verification, with copies preserved by the school. Department spokespeople have argued that these measures are essential to protect taxpayer funds and ensure aid reaches those genuinely entitled to receive it.