Financial aid professionals and others on the campus can look to the proven practices of other institutions to help prevent FAFSA fraud and protect federal student aid funds.
In a May 29 Electronic Announcement, the Department of Education provided a comprehensive list of best practices that institutions may want to consider as they work to prevent fraud in the federal student aid programs. While the practices do not replace existing statutory or regulatory requirements, they provide concrete operational guidance that some institutions are using to identify possible fraud earlier, prevent improper disbursement of funds, and coordinate actions across offices.
The Department has already implemented real-time identity fraud detection within the Free Application for Federal Student Aid (FAFSA) and has previously stated that institutions also have an important role in conducting identity verification.
In the announcement, the Department states that “Institutions should embrace the principle that fraud prevention is not only a federal financial aid function but a core component of an institution’s responsibilities under Title IV of the Higher Education Act of 1965.”
The best practices outlined in the announcement, including examples of what various institutions are doing, include:
- Use account holds aggressively when risk indicators appear
- Require layered identity verification for higher-risk cases
- Treat conflicting information as a campuswide responsibility
- Check attendance and academic engagement before refunds go out
- Use unusual enrollment history and transfer patterns as risk indicators
- Strengthen process for reviewing subsequent Institutional Student Information Records (ISIRs) and post-disbursement discrepancies
- Build a formal red-flags program and train staff
- Protect refund processes and account-change requests
- Refer credible fraud information to the Department’s OIG and document the basis
