Education Department rolls out heightened screening for financial aid applications

Dive Brief: 

• The U.S. Department of Education announced Friday that it will require colleges to verify the identities of roughly 125,000 first-time applicants for federal financial aid who are enrolled in the summer term. 
• The requirement is temporary while the Education Department develops a new permanent screening process to detect fraudulent applications for federal student aid. The agency expects to roll out that process for the fall 2025 term. 
• Students selected for verification will have to present government-issued IDs to their colleges either in person or during a video call. Colleges will have to keep a copy of the IDs, the Education Department said. 

Dive Insight: 

 The Education Department is ramping up fraud prevention efforts amid widespread reports of scammers using fake financial aid applications to steal millions of dollars from both the federal government and state aid programs. 

These “ghost students” almost exclusively hit community colleges, as they accept 100% of those who apply, according to a Voice of San Diego report. In the scheme, fraudsters enroll in online community college classes and often use AI tools to complete class assignments and stay enrolled until they receive aid disbursements. 

“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,” U.S. Secretary of Education Linda McMahon said in a Friday statement.

The California Community Colleges system recently noted that about one-third of its college applicants are fake, CalMatters reported in April. Over the past year, the system’s colleges reported distributing about $13 million in federal and state aid to fake students. 

In April, congressional lawmakers representing California urged McMahon and U.S. Attorney General Pam Bondi to investigate the issue and immediately take action to prevent further fraud. However, CalMatters also reported that college leaders are worried that recent cuts to the Education Department — which have been temporarily blocked by federal court — will hinder efforts to reduce fraud. 

California isn’t alone. On Friday, the Education Department also referenced reports about fake student aid applications hitting community colleges in Minnesota and Nevada. 

The department’s announcement comes after it said in late May that it would heighten screening measures. The agency also restarted measures to identify students who had already received their lifetime limit of Pell Grants, and it said it had resumed flagging applicants suspected of using someone else’s identity to apply for aid back in March. 

Already in the past week, the Education Department said on Friday, it had identified nearly 150,000 “suspect identities” who have filled out Free Application for Federal Student Aid forms. Before aid can be disbursed, colleges will be required to verify these applicants’ identities.