It may be tempting to misrepresent one’s income and assets on the Free Application for Federal Student Aid (FAFSA) to qualify for more need-based financial aid. Don’t do it.
There’s a difference between using insights into the financial aid formula to avoid making mistakes that hurt the student’s financial aid eligibility and lying about one’s income and assets.
People who lie on financial aid application forms are often caught.
About one-third of FAFSAs are selected for verification, where the applicant has to provide copies of independent third-party documentation of the data reported on the FAFSA. In contrast, the IRS audits only about one percent of federal income tax returns.
The U.S. Department of Education has switched to using a risk-based model for determining which FAFSAs will be selected for verification.
Financial aid administrators have more experience detecting fraud on financial aid forms than families have in perpetrating fraud.
Inconsistencies between information reported on the FAFSA and federal income tax returns often reveal unreported income and assets. Colleges are precluded from disbursing federal student aid until conflicting information is resolved.
The IRS and the U.S. Department of Education continue to share data to improve accuracy and detect fraud on the FAFSA. (The IRS does not, however, currently use FAFSA data to detect fraud on federal income tax returns.)
Families must now either use the IRS Data Retrieval Tool to complete or update the FAFSA, or ask the IRS to send a tax transcript directly to the school. It is no longer sufficient for the family to provide a photocopy of the federal income tax return.
Intentionally providing false and misleading information on the FAFSA is fraud. The penalties for lying on the FAFSA include, but are not limited to, fines of up to $20,000 and up to five years of jail time, in addition to repaying the financial aid received by the student. Some colleges and universities may suspend or expel a student for providing false information on financial aid application forms.
People with information about financial aid fraud may contact the Office of the Inspector General at the U.S. Department of Education by calling 1-800-MIS-USED (1-800-647-8733).