Bribery and corruption damage universities and schools across the world, according to a report for the UN's education wing, Unesco.
Fake degrees on the internet are a growing problem
The study says education is plagued by rigged tendering processes, academic fraud and bribes over places and posts.
Academic fraud, such as fake degrees, is more common in the United States than in developing countries, it says.
The study of more than 60 countries says that in some, illegal use of funds meant for schools can be very high.
This loss between ministries and schools - or "leakage" as it is called - can be as much as 80% of the non-salary cash for schools.
Recent surveys have shown that ghost teachers on school payrolls represent 5% of the payroll in Honduras and 15% in Papua New Guinea, according to the survey.
In higher education, the problems centre mostly on bogus universities, degrees which can be bought rather than earned and fake accreditation or licensing of institutions.
The study says the number of fake universities on the internet offering bogus degrees rose from 200 to 800 between 2000 and 2004.
Officials in Ukraine had admitted that in 2005 most licensing or accreditation applications for the country's 175 private universities required some form of bribery for success.
Authors Jacques Hallak and Muriel Poisson paint a bleak picture of world education.
Their report says: "In most societies - rich and poor - the education sector is facing severe difficulties and crisis; financial constraints, weak management, low efficiency, wastage of resources, low quality of service delivery and lack of relevance as illustrated by high unemployment of graduates, among others".
The authors say the lack of integrity in education systems leads donors to question the worth of aid programmes.
The answer, they say, lies in strengthening regulatory systems and management as well as educating future generations about ethics to try to stamp out corruption.
They say there are good examples of countries which have overcome corruption problems, such as Azerbaijan, where fraud in university entrance exams was cut through the use of computer technology which stopped people altering marks.
In Uganda, they say "leakages" of funds in the transfer of money from the education ministry to schools was cut from 87% to 15%. This was achieved by giving more information to local communities and by publicising penalties taken against corrupt officials.
The director-general of Unesco, Koichiro Matsuura, said the report was a call to action.
"Such widespread corruption not only costs societies billions of dollars, it also seriously undermines the vital effort to provide education for all.
"It prevents poorer parents from sending their children to school, robs schools and pupils of equipment, lowers teaching standards and thus education standards generally, and compromises the future of our youth. We cannot let it go unchecked."