FSA Provides Best Practices For Institutions to Prevent FAFSA Fraud
By Hugh T. Ferguson, NASFAA Managing Editor
The Department of Education (ED) issued an electronic announcement on Friday with several best practices institutions should consider to prevent fraud in federal student assistance programs.
The announcement follows the department’s recent real-time fraud detection for the FAFSA and offers operational steps that institutions can use to identify potential fraud earlier in the financial aid lifecycle, prevent improper disbursements, and coordinate action across offices.
“These practices are not exhaustive and do not replace existing statutory or regulatory requirements,” Friday’s electronic announcement reads. “Rather, they reflect concrete, operational steps institutions are using to identify potential fraud earlier in the financial aid lifecycle, prevent improper disbursements, and coordinate action across offices.”
Under each scenario, Federal Student Aid (FSA) offers several examples for institutions to reference.
Use account holds aggressively when risk indicators appear: FSA suggests placing immediate holds on accounts when suspicious activity is identified. Schools should also consider written protocols and automatic triggers through their technology systems.
Require layered identity verification for higher-risk cases: the department identifies examples of institutions relying on multiple forms of identity verification and suggests implementing “tiers of review” for lower-risk and high-risk cases. According to FSA’s examples, this process works best when account holds are kept in place until a review is complete.
Treat conflicting information as a campuswide responsibility: FSA suggests creating a simple escalation ladder for the following campus offices to ensure that any conflicting information is captured before any federal aid is disbursed – admissions, the registrar, bursar/student accounts, academic affairs, conduct, information security, and campus police.
Check attendance and academic engagement before refunds go out: Particularly for online and short-term programs, institutions should implement practices that track activity for real attendance or academic engagement.
Use unusual enrollment history and transfer patterns as risk indicators: FSA urges institutions to focus on any enrollment patterns suggesting an applicant may be attempting to obtain a credit balance refund rather than pursue academic credit and flag such patterns for additional scrutiny.
Strengthen process for reviewing subsequent Institutional Student Information Records (ISIRs) and post-disbursement discrepancies: The guidance reminds institutions that they must reconcile any conflicting information discovered after disbursement and cites later-arriving ISIRs, NSLDS changes, address changes, unusual account activity, and reports from other offices. FSA writes that those discrepancies should be routed into a review queue that can stop additional aid or refunds.
Build a formal red-flags program and train staff: The guidance encourages institutions to create their own “Red Flag” or identity theft prevention programs or create written documentation to identify common red flags.
Protect refund processes and account-change requests: FSA reminds institutions to review refund workflows to ensure that refund checks are not released until the student’s identity is confirmed and that student accounts cannot easily be redirected.
Refer credible fraud information to the Department’s OIG and document the basis: The department reminds institutions that they do not need to prove fraud or other criminal misconduct before referring it to OIG, but must report suspicions and provide any evidence they have gathered.
"Consistently applying proven best practices and adapting to the ever-changing world of fraud will help institutions of higher education prevent fraud, protect students, and safeguard federal student aid funds. FSA stands ready to continue to work with institutions on this important initiative,” the electronic announcement reads. “These materials are provided solely as illustrative examples of practices that institutions may consider when developing and implementing fraud prevention efforts."
Publication Date: 6/1/2026
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