Understanding FAFSA + Risks to Keep in Mind

What FAFSA is and why it is so important to remain truthful when providing personal information.

To apply for federal student aid in the United States, students are required to fill out the FAFSA (Free Application for Federal Student Aid). It’s completely free to fill out the FAFSA, and you get the largest source of financial aid to help you with your tuition. 

Basic criteria for being able to fill out a FAFSA includes:

  • Demonstrating some sort of financial need. 
  • You must be a U.S. citizen or an eligible noncitizen. 
  • You must have a valid Social Security number (with the exception of students from the Republic of the Marshall Islands, Federated States of Micronesia, or the Republic of Palau). 
  • You must be enrolled or accepted for enrollment as a regular student in an eligible degree or certificate program. 
  • You must be enrolled at least half-time to be eligible for Direct Loan Program funds.
  • You must maintain a satisfactory academic process in college or career school. 
  • You must sign the certification statement on the Free Application for Federal Student Aid (FAFSA) form stating that you’re not in default on a federal student loan, you do not owe money on a federal student grant, and you’ll only use federal student aid for educational purposes. 
  • Overall, you must show that you’re qualified to obtain a college or career school education.

Different Types of Financial Aid

When exploring different options to make your college/career school experience a bit more affordable, understand that you are able to receive financial aid in a couple different ways. These include work studies, loans, and scholarships. 

Grants

A grant is a type of financial aid that you are not required to pay back. Some common federal grants include:

  • Federal Pell Grants: Awarded by U.S. Department of Education. 
  • Special LEAP Grants: The Leveraging Educational Assistance Partnership Program makes grants to states to assist them in providing need-based state grants to eligible students attending institutions of higher education.
  • Federal Supplemental Educational Opportunity Grants (FSEOG)
  • Teacher Education Assistance for College and Higher Education (TEACH) Grants, and
  • Iraq and Afghanistan Service Grants.

Scholarships 

Many types of private and non profit organizations offer scholarship money to help students pay for their education. Similar to grants, scholarships are also money that students will not be required to pay back. Scholarships are most commonly based on academic merit in a particular study, and can make a huge difference in your overall academic expenses. 

Most popular scholarships for college students in 2022 include:

  • The Coca-Cola Scholars Scholarship Program. $20,000 maximum award. 
  • Burger King Scholars Program. $25,000 maximum award. 
  • AXA Achievement Scholarships. $25,000 maximum award.
  • Gates Millennium Scholars Program. $20,000 maximum award.

Work-Study Jobs

Another way to help you earn money to pay for your education is through federal work study programs. You can work part time and earn at least the current minimum wage federally. Work study awards vary, and some factors that come into play when deciding appropriate options are your level of financial need and the school’s funding level. 

Loans 

Loans are another option where you borrow money, however it is not free. There are a lot of risks that come with loans, and the longer you take to pay them off the higher the interest will be. 

What are the main types of federal student loans?:

  • Direct subsidized loans: loans that are made to eligible undergraduate students who demonstrate some sort of financial need to help cover the costs of higher education at a college or career school.
  • Direct unsubsidized loans: loans made to eligible undergraduate, graduate, and professional students, but eligibility is not based on financial need.
  • Direct PLUS loans: loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid. Eligibility is not based on financial need, but a credit check is required. Borrowers who have an extensive credit history must meet additional requirements to qualify.
  • Direct consolidation loans: these loans allow you to combine all of your eligible federal student loans into a single loan with a loan servicer. 

Understand how to be a responsible borrower:

  • Keep track of how much you’re borrowing. Don’t borrow anymore than you need!
  • Know how much the starting salaries are in your related field. How much could you be earning after you graduate? How much will you be able to pay back each month towards loans?
  • Know the terms of the loan you signed. Keep any related documents with you. 
  • Make payments on time and keep in contact with your loan servicer. 

Filling Out the FAFSA

In order to complete the FAFSA form, you will need your social security number, alien registration number, as well as federal income tax returns. You might also have the option of filling out your form using the online IRS data retrieval tool. You can expect to find bank statements and records of investments, records of untaxed income, and an account username and password (FSA ID) so you can electronically sign the FAFSA form.   

Providing False Information on the FAFSA

Approximately one out of three students face verification issues during the FAFSA process. The U.S. Department of Education requires schools to verify at least 30% of all applications, but some schools will review every single one. So it’s better safe than sorry to stay truthful!

Unfortunately, it isn’t all that uncommon for people to get caught lying about information on their FAFSA. The most frequent types of fraud include underreporting income, overstating the number of family members in college, and even providing false copies of income tax returns. 

These are the most common warning signs of fraud on a financial aid application:

  • Interest and Dividend income are both at zero, or very low when compared with the family’s wages. Compare these figures with any figures reported for capital gains or losses.
  • No alimony income reported.
  • No business or farm income reported when the parents’ occupation might suggest that they are self-employed. If the return reports one-half of self-employment tax or self-employed health insurance deduction but no business or farm income, this should be a suspicious red flag.
  • Check the return for the immediate signs that it is a photocopy of a photocopy. If it appears to be a photocopy of an original, be suspicious.
  • Round numbers like $0, $500 and $1,000 for income.

Financial Aid Delayed 

Did you know that one in three colleges are flagged for issues with verification related to the FAFSA form? Understand that if a FAFSA form is flagged for verification, due to a mistake or lie, you will not receive any sort of financial aid while the audit is being processed. Mistakes happen, but it’s important to understand that if you lie in any way on the FAFSA form, you will have a very high chance of being reviewed and questioned. 

Felony Charge

Believe it or not, lying on a FAFSA form IS a felony charge. Like any other federal document, you can expect to pay up to a $20,000 fine along with five years in prison if you are caught lying. If your parents were involved in any way, this will also hurt them as well. A felony charge of any kind will really limit your chances of getting the education you may want and potential job opportunities later down the road. 

Loss of Money

If you are caught lying on your FAFSA, you will be forced to return the amount of financial aid in which you received. Even if the money was already used, you still must find a way to pay the money back. If you don’t pay back the money, you risk having to pay back even more along with prison time. 

School Expulsion 

Because the majority of colleges and universities have a very strict policy when it comes to cheating, you might as well expect to immediately be expelled from your university if you are caught lying on the FAFSA. 

If you know of someone who lied on their FAFSA, take these next steps to report the matter:

  • Call the Office of the Inspector General (OIG) at the U.S. Department of Education at 1-800-MIS-USED (1-800-647-8733).
  • You can also file a complaint online here.

Penalization by the IRS 

Understand that you will also face punishment from the IRS if you are caught lying at all on your FAFSA. If you happen to cash out any assets or move money around before filling out the form, the IRS has the ability to audit your taxes and you can be charged for failing to pay the appropriate taxes on the assets. Even though it might not be technically “lying” to move around your money, it can be treated as such by federal law.

Tell the Truth!

It might seem like a sneaky bright idea at the moment, but lying on a federal document such as the FAFSA is a serious crime and treated like such. Mistakes are okay, but make sure you are reviewing all the information before you submit the form. This will ensure you have no added issues during the review process. Good luck!

Matt Lyons
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