Red Flags to Prevent Student Aid Fraud on Your Campus

The first step in preventing abuse of student financial aid programs is awareness, according to an American Association of Community Colleges (AACC) white paper that highlights some best practices and recommendations to prevent fraud .

“While instances of abuse cannot be quantified, it is clear that it is an extremely small percentage of all students receiving aid at community colleges,” according to the AACC report. “However, the American Association of Community Colleges (AACC) and community colleges across the country recognize that no abuse can be tolerated.”

Because of a lack of a private national student unit record data system, AACC recommends the Department of Education (ED) deploy its National Student Loan Data System (NSLDS) to provide more real-time information to institutions about prior attendance patterns and loan debt. AACC also recommends ED provide more clarification on the circumstances that warrant reporting fraud on students’ records.

AACC also created a list of red flags that financial aid offices can look out for when reviewing student aid applications. These include:

  • Students with large financial aid refunds or disbursements
  • Students who have attended several other colleges
  • Students who have large student loan balances but who have not completed a degree

According to AACC, data features that may indicate an instance of fraud or abuse may include the following:

  • Multiple registrations from similar out-of-state locations
  • Multiple uses of the same physical address, PO box, or IP address
  • Multiple uses of the same bank account (required by the ED)
  • Multiple uses of the same computer (required by the ED)
  • Repeated use of one individual as an emergency contact 
  • Rapid increase in the number of students enrolled in certain courses
  • Frequent interactions, in terms of email correspondence or telephone calls, from similar locations or persons, especially if those interactions are expressed with anger and little patience for institutional safeguards (required by the ED) 

The appendix of the report includes a number of institutional best practices that NASFAA helped collect from colleges currently implementing fraud prevention strategies.