Stories like Zhu’s are becoming increasingly common as the ranks of Chinese students going abroad for college continue to swell. Because many Chinese students have only basic knowledge of foreign universities and have trouble making sense of complicated applications, a huge industry of education agents has arisen in the country to help guide them — and, in some cases, to do whatever it takes to get them accepted. This has created a thorny ethical dilemma in the U.S. While many American schools are elated by the influx of Chinese students as they’ve scrimped and saved to make ends meet in the economic downturn, some educators worry that the reliance of Chinese students on agents has led to some unintended — and troubling — consequences.

This fall, David Zhu will join an exodus of Chinese students boarding planes for the leafy, beer-soaked campuses of American colleges and universities. Zhu, currently a university student in Shanghai, will be enrolling at Oregon State University to pursue a bachelor’s degree in business — a dream his parents have had since they started saving a $157,000 nest egg for his education. But like many Chinese students who don’t speak English fluently, Zhu might not have been accepted without a little help. The 21-year-old hired an education agent in China to clean up and “elaborate” on the essay he submitted as part of his application. “Actually, the agency helped my application to some extent,” he says.

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Although Chinese students have been going to America to study for decades, their numbers have spiked dramatically in the past few years. In the 2010–11 school year, more than 157,000 Chinese students were enrolled at institutions of higher learning in the U.S. — a 22% increase over the previous year and tops among all countries. (Second-place India had just 104,000.) The largest increase has been among undergrads: China sent nearly 57,000 to the U.S. in 2010–11, up from 10,000 five years earlier. For the wealthy, an overseas education is becoming almost standard. A survey conducted by China’s Hurun Report found that 85% of rich Chinese parents planned to send their kids abroad to study. The U.S. is their preferred destination, followed by the U.K. and Canada.

While there are a host of reasons for this explosion, money and prestige appear to be the most important factors. Not only can more Chinese families now afford to pay the tuition at a foreign university, they also view it as a better investment in their children’s future. Universities in the West are revered in China, and homegrown schools — even the best ones — fail to measure up. “I think the college education in China is not very practical,” says Vincent Sun, another Fudan student who will be enrolling at MIT this fall to pursue a master’s degree in finance. “When I will be searching for a job, I think a degree from a very famous [foreign] university is a huge thing I think that will put me into a very good place.” Ironically, a foreign university can also be a fallback for Chinese students who don’t do well enough on the national exam, the gaokao, to get into a Chinese school — there’s always an American college willing to take their tuition dollars.

But many of these students would probably never make it to America without a middleman to pave the way. According to a 2010 report by Zinch China, a consultancy that advises U.S. colleges and universities on China, 8 out of every 10 Chinese undergraduate students use an agent to file their applications. And with such intense competition among agents — not to mention ambitious students and their overzealous parents — cheating is rampant, the group says. It estimates that 90% of recommendation letters from Chinese students are fake, 70% of college application essays are not written by the students, and half of all high school transcripts are falsified. “The world of higher education is becoming extremely competitive, much more so than it was even 10 years ago, and I think the kids are looking for an edge,” says Tom Melcher, chairman of Zinch China. “Everyone is looking around and saying, ‘Well, everyone else is cheating, why shouldn’t I?’”

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Another issue that concerns some admissions officers in the U.S. is where the money is coming from. Not only are agents paid by families in China — up to $10,000 before bonuses, according to Zinch — some American schools also have contracts with agents that guarantee them a commission for each student they enroll. This practice constitutes a potential conflict of interest, says Philip Ballinger, head of a commission launched by the Washington-based National Association for College Admission Counseling (NACAC) to study the issue of foreign recruiting. “If money is first, then perhaps the interest of student or the person that’s involved is not first,” he says.

What’s desperately needed is greater oversight in China and the U.S. — something both sides are now trying to address. The Chinese government realizes that doctored transcripts are a problem: earlier this year, it launched a new service to verify students’ high school grades for foreign universities. But because there are literally thousands of agents operating in China, cheating will persist. “The Chinese kids, when I talk to them, they sort of think it’s the schools’ fault. The schools will say you have to have a recommendation letter from a guidance counselor, and Chinese kids don’t have guidance counselors,” Melcher says. Zhu, the student enrolling at Oregon State, says his agent didn’t falsify documents beyond the “elaborated” essay, but he believes doing so is sometimes a necessary evil. “Some schools in China test students by very hard questions beyond their abilities, so the scores students get are very low. So the students who want to go to the USA, they had to change their scores,” he says. “But the students are still very good students because they’re in the best schools in Shanghai.”

In the U.S., there are hopes that the NACAC committee investigating overseas recruiting practices will bring much needed clarity to a situation that has been a relative free-for-all in recent years. While federal law prohibits colleges and universities from paying commissions to recruit students in the U.S., there is no statute against doing it internationally. NACAC has a policy against it, but enforcement has been put on hold while its investigation is continuing. The group’s second meeting is set for this fall; recommendations are expected to come in 2013.

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Although it acknowledges that fraud is a major concern, NACAC is focusing initially on the question of whether universities should be permitted to pay overseas recruiters commissions. Mitch Leventhal, vice chancellor for global affairs at the State University of New York (SUNY) and an outspoken pro-recruiter advocate, argues that agents can provide a legitimate and useful service for foreign students, provided they operate in a professional and transparent way. He says it’s ridiculous to suggest that universities should stop using agents. “That’s sticking your head in a hole. They’re not going to go away because market demand is there, so the best way to address it is to engage them and identify the good ones.”

Leventhal believes he’s found a way to do that. He’s founder of an organization called the American International Recruitment Council, which has developed a rigorous process for certifying international agents. Agents must volunteer and pay a fee for the service, which involves a third-party investigation of their business, an external review by two members of U.S. universities and a confidential complaint system. So far, the group has certified about 45 agents, who benefit, Leventhal says, from having increased access to U.S. schools. And after agents are thoroughly vetted, he sees nothing wrong with paying them commissions, so long as the schools are also transparent about it. At SUNY, the fee is 10% of the student’s first-year tuition. “No one likes to pay a commission to a real estate broker when we buy a house because it’s another expense,” he says. “But we don’t deny the fact that a real estate broker works on commission and deserves to earn something for their effort.”

This sentiment isn’t shared by everyone. Mark Sklarow, head of the Washington-based Independent Educational Consultants Association (IECA), says students in China are better served by so-called educational consultants, who are paid solely by families (not by U.S. universities) to find the best educational match for students. Dozens of consultants in China have applied to become IECA members, but the organization must first ensure they’ve never accepted money from a college or university and they’ve never engaged in fraudulent practices. He believes that as Chinese students become more familiar with the U.S. application process, they’ll increasingly turn to consultants like these to help them make decisions about colleges rather than put all their trust in agents.

Sklarow says the U.S. is at a turning point too. For the past five years, colleges and universities were “balancing their budgets on Chinese students,” but he thinks the pressure is now on them to find a way to regulate the system. “I think until American colleges stand up and say we need a way to guarantee that the students we accept, that the records we’re looking at are whole, complete and legitimate, the problem continues to grow.”

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* Correction: An earlier version of this story misidentified David Zhu’s school. He attends the Shanghai University of Electric Power, not Fudan University.