US Dept. of Education launches crackdown on student aid fraud with new ID verification rules

In a sweeping response to an escalating wave of identity theft and fraud within federal student aid programs, the U.S. Department of Education (DOE) announced a nationwide initiative that is set to begin this fall aimed at eliminating fraudulent activity and safeguarding taxpayer dollars. The new effort will require significantly stricter identity verification for applicants to the Free Application for Federal Student Aid (FAFSA) program, especially those applying for the first time.

The move comes amid growing evidence that technologically sophisticated fraud rings are exploiting weaknesses in the student aid application process, jeopardizing both institutional operations and taxpayer funds.

Citing growing evidence of abuse within federal financial aid programs, Secretary of Education Linda McMahon said the effort is urgent and necessary. “When rampant fraud is taking aid away from eligible students, disrupting the operations of colleges, and ripping off taxpayers, we have a responsibility to act,” McMahon said in a statement.

These “actions will implement temporary changes to the current verification process to prevent identity theft fraud,” McMahon said, noting that, “We will continue to build longer-term solutions that reduce the administrative burden on institutions and protect American taxpayers who underwrite federal student aid programs.”

The announcement marks the most aggressive anti-fraud policy shift at the Department of Education in over a decade and comes in the wake of a growing crisis. According to data compiled by Federal Student Aid (FSA), the rate of fraud through stolen identities has reached a level that imperils the integrity of Title IV of the Higher Education Act, the legislation governing federal financial aid. Recent figures released by FSA show nearly 150,000 FAFSA applicants have already been flagged for potential identity fraud in the current aid cycle alone.

This interim verification surge, beginning this summer, applies to an estimated 125,000 students. DOE has directed colleges and universities to require these first-time applicants to present unexpired, valid, government-issued photo identification, either in person or via live video conference, to an authorized institutional representative. Schools must retain copies of this documentation.

DOE said “FSA expects the number of students requiring identify validation during the summer to be relatively low. This fall, the department plans to implement a permanent screening process for each FAFSA applicant to enhance FSA’s ability to immediately stop identity fraud on behalf of colleges and universities. These steps build upon anti-fraud efforts announced in May.”

The new requirements signal a marked departure from the previous system, which under the Biden administration had relaxed verification rules, diverting resources from fraud prevention as part of an ill-fated push for broad student loan forgiveness. The fallout from that policy shift has been severe.

A May 2025 review revealed nearly $90 million in disbursements made to ineligible recipients, including more than $30 million to deceased individuals and millions more to persons whose immigration status rendered them ineligible for federal aid. The department now says it has restored automated cross-checks with the Social Security Administration and the Department of Homeland Security to prevent such lapses going forward.

What makes this surge in fraud particularly difficult to detect is its technological sophistication. Officials say many of the applications are generated by organized fraud rings employing digital automation tools and stolen data. Several institutions have reported overwhelming spikes in fake applications. The Foothill-De Anza Community College District in California, for instance, received more than 26,000 applications in 2024, of which 10,000 were flagged for possible fraud before classes even began.

In Minnesota, Riverland Community College and Century College both report over 100 suspected fraudulent applications per year. The scale of deception has had financial consequences. The College of Southern Nevada was forced to write off $7.4 million in fraudulent aid in fall 2024 alone. Meanwhile, cybersecurity threats tied to such fake applications have placed additional strain on already under-resourced financial aid offices nationwide.

DOE’s newly announced measures are intended to address these vulnerabilities immediately while laying the foundation for a more secure aid verification system in the future. A key component of the initiative is a revamped identity confirmation framework that introduces flexible yet stringent alternatives for institutions conducting V4 or V5 verification—the two most intensive forms of federal aid identity checks.

Effective immediately, students selected for V4 or V5 verification are no longer required to submit a “Statement of Educational Purpose,” a document previously used to affirm eligibility but often cumbersome to process. Instead, institutions can verify identity through a live video conference, during which the student must present a valid photo ID to an authorized representative.

A screenshot or scanned copy of the ID, including the date of the video call and verifier’s name, must be retained. Additionally, verification conducted by an entity compliant with National Institute of Standards and Technology (NIST) Identity Assurance Level 2 (IAL2) standards will now be accepted. Incarcerated applicants may also be verified through an official at the facility where they are confined.

According to DOE, it “will consider a student’s identity to be verified if the student’s identity was verified by an entity that is compliant with NIST IAL2). In this instance, an institution must retain documentation of the date that the student’s identity was verified and the entity that performed the verification. More information on these requirements will be provided in the future.”

The new guidelines not only extend to future applicants but also retroactively apply to students already selected for verification prior to the announcement of the new standards. DOE said it hopes these changes will help reduce reliance on outdated notary systems while modernizing and digitizing fraud detection.

But the battle is not merely logistical, it is also legal. Institutions are now required to report suspected fraud directly to the Department’s Office of Inspector General. Schools must also maintain systems to detect discrepancies in student eligibility and halt aid disbursements immediately upon discovery of fraudulent behavior.

Any disbursements made to ineligible recipients must be treated as overpayments and handled in accordance with federal guidelines. Furthermore, DOE has warned that any individual or institution found to have knowingly submitted fraudulent claims will be subject to civil and criminal penalties under the False Claims Act and other federal statutes. This includes exposure to qui tam lawsuits initiated by private whistleblowers.

The latest crackdown also revives post-screening of student eligibility through the National Student Loan Data System. Resumed in May, the process flags individuals who have already reached their lifetime Pell Grant limits or who are otherwise ineligible. It had been previously suspended during the COVID-19 pandemic, contributing to an estimated $10 million in erroneous loan disbursements before its reinstatement.

DOE is particularly focused on bolstering safeguards around the Pell Grant program, which has been especially vulnerable to fraud. With growing budgetary constraints and mounting evidence of exploitation, FSA is accelerating efforts to integrate machine learning models that can detect inconsistencies and red flags in submitted FAFSA data. The agency began flagging suspicious FAFSA submissions again in March, a move that is reputed to have prevented an additional $40 million in misallocated direct loans and $6 million in Pell Grants.

The scope of this effort suggests a philosophical pivot within DOE that is focused on enforcement, oversight, and the integrity of taxpayer funds. McMahon has framed the changes as part of a broader rehabilitation effort for the nation’s student aid infrastructure, stating that trust in the system must be restored before long-term reforms can take hold.

Critics of the Biden administration argue that its emphasis on debt cancellation weakened the fraud-prevention apparatus at a moment when digital fraud was rapidly evolving. The failure to maintain rigorous identity verification during a time of rising online learning and surging FAFSA submissions allowed bad actors to exploit a vulnerable system, they assert.

Now, with schools reporting rising administrative burdens and growing anxiety over aid compliance, DOE is not only rebuilding trust but imposing accountability. By requiring institutions to be proactive partners in fraud detection, the department aims to create a system in which taxpayer dollars are channeled only to those genuinely eligible to receive them.

Article Topics

digital identity  |  document verification  |  fraud prevention  |  identity theft  |  identity verification  |  schools  |  U.S. Government  |  United States