What Happens If You're Caught Lying on FAFSA? | Credit.com (2024)

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Blog Home > Loans > Student Loans > What Happens If You Lie on Your FAFSA?

PublishedAugust 7, 2019 | 4min. read

Gerri Detweiler

Gerri Detweiler focuses on helping people understand their credit... Read More

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Everystudent getting ready forcollege is hit with the reality of how expensivehigher education can be. It might be tempting to lie onthe FAFSA. However,lying on FAFSA can come with serious consequences. You could face criminal charges of fraud, and most of the time, you have topayback anyfinancial aid you received under false pretenses. Find out more about this issue and how you can avoid these problems when you apply forfinancial aid.

What Is the FAFSA?

FAFSA stands for Free Application forFederal Student Aid. It’s a form that everystudent attending or planning to attendcollege can fill out for free to see if theyqualify for federal financial aid. The types offinancial aid you can receive include Pell grants or other funds you don’t have topayback as well as federally backedstudent loans.

Whether or notyouqualify for aid via this process depends on a number of factors, including householdincome. This is one of the most common things people lie about onthe FAFSA because lowerincome can mean increasedfinancial aid options.

Even if you don’tqualify for financial aid viathe FAFSA, there are otherprograms that can help yourfinancial situation. These include privatestudent loans,scholarships or other awards to help youpay forcollege. If you’re planning to leverage private loans, make sure you address other debtsto position yourself for the best terms possible.

What Are the Penalties forLying on the FAFSA?

TheHigher Education Act of 1965 allows for penalties of up to five years in prison and a fine of $20,000 if someone is caughtlying on the FAFSA. You will also have topayback anyfinancial aid, so the monetary consequences are even greater. In many cases,the FAFSA is based on parentalincome and information. In this case, it would likely be the parent who ends up facing the consequences unless it’s proven that another party completed the form without that individual’s knowledge.

The cost ofcollege and the seemingly robotic nature of theonlineFAFSA form are two reasons people are tempted to try to cheat the system. But Mark Kantrowitz says no one should think FAFSA fraud is easy to get away with. “College financial aid administrators are more skilled and experienced at detecting lies than families are at perpetrating them,” he says.

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Kantrowitz says there are numerous ways of identifying discrepancies onthe FAFSA, and many times thestudent actually lets the cat out of the bag — either on purpose or by accident. “When aschool has credible information about fraud, they are required to investigate it,” he says.

What Happens if Your FAFSA Is Selected for Verification?

Around a third of all FAFSAforms are selected for verification. When this occurs, thecollege financial aid office requests additional documentation from you. You might also need to complete verification forms. Refusing to provide this information can mean giving up access tofinancial aid funds.

The verification process often singles out one or more data elements, not the entire form. Some types of information that might be verified includeincome, taxes,education tax credits, child support, highschool completion status or number of members in your household. You can reduce the chances of a verification by importing information from your FAFSA directly from the IRS’s data retrieval tool. Information from this tool that was not modified by you will never require verification.

How Do I Fill Out FAFSA to Get the MostMoney?

The best way to fill outthe FAFSAis honestly. The questions on the form don’t typically come with answers that could be one or the other, and trying to answer them in a way to get moremoney could mean you’re lying or fudging the numbers.

Does FAFSA Check Your Bank Accounts?

FAFSA doesn’t check anything, because it’s a form. However, the form does require you to complete some information about your assets, including checking and savings accounts. Whether or not you have a lot of assets can reflect on your ability topay forcollege withoutfinancial aid. If your FAFSA is picked for verification, you may have to provide documentation proving the amounts you entered for bank accounts was accurate.

Doesthe FAFSA Affect MyTax Return?

YourFAFSA form does not directly impact yourtax return. Yourtax return — including whether you filed it and paid your taxes — does impact your ability to completethe FAFSA and receivefinancial aid.

However, certain types offinancial aid may be deemed taxableincome. This can include some work-studypayments and grants orscholarships that are used to cover living expenses. If your awards are considered taxableincome, you must report them on your nexttax return form, and they could change the amount of refund you receive.

How Your Credit Plays a Role in FundingCollege (and Vice Versa)

If you don’t receive enoughfederal student aid to fundcollege tuition and can’t foot the bill without aloan, there are private options. Make sure your credit situation is in order before you apply for them.

Consider starting with Credit.com’s servicesto order your annual credit reports. And once you havestudent loans, make sure topay themon a consistent and timely basis to keep them from negatively impacting your creditin the future.