What Happens If You're Caught Lying on FAFSA?

Every student getting ready for college is hit with the reality of how expensive higher education can be. It might be tempting to lie on the FAFSA. However, lying on FAFSA can come with serious consequences. You could face criminal charges of fraud, and most of the time, you have to payback any financial aid you received under false pretenses. Find out more about this issue and how you can avoid these problems when you apply for financial aid.

What Is the FAFSA?

FAFSA stands for Free Application for Federal Student Aid. It’s a form that every student attending or planning to attend college can fill out for free to see if they qualify for federal financial aid. The types of financial aid you can receive include Pell grants or other funds you don’t have to payback as well as federally backed student loans.

Whether or not you qualify for aid via this process depends on a number of factors, including household income. This is one of the most common things people lie about on the FAFSA because lower income can mean increased financial aid options.

Even if you don’t qualify for financial aid via the FAFSA, there are other programs that can help your financial situation. These include private student loans, scholarships or other awards to help you pay for college. If you’re planning to leverage private loans, make sure you address other debts to position yourself for the best terms possible.

What Are the Penalties for Lying on the FAFSA?

The Higher Education Act of 1965 allows for penalties of up to five years in prison and a fine of $20,000 if someone is caught lying on the FAFSA. You will also have to payback any financial aid, so the monetary consequences are even greater. In many cases, the FAFSA is based on parental income 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 of college and the seemingly robotic nature of the online FAFSA 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 on the FAFSA, and many times the student actually lets the cat out of the bag — either on purpose or by accident. “When a school 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 FAFSA forms are selected for verification. When this occurs, the college 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 to financial 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 include income, taxes, education tax credits, child support, high school 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 Most Money?

The best way to fill out the FAFSA is 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 more money 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 to pay for college without financial aid. If your FAFSA is picked for verification, you may have to provide documentation proving the amounts you entered for bank accounts was accurate.

Does the FAFSA Affect My Tax Return?

Your FAFSA form does not directly impact your tax return. Your tax return — including whether you filed it and paid your taxes — does impact your ability to complete the FAFSA and receive financial aid.

However, certain types of financial aid may be deemed taxable income. This can include some work-study payments and grants or scholarships that are used to cover living expenses. If your awards are considered taxable income, you must report them on your next tax return form, and they could change the amount of refund you receive.

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

If you don’t receive enough federal student aid to fund college tuition and can’t foot the bill without a loan, there are private options. Make sure your credit situation is in order before you apply for them.

Consider starting with Credit.com’s services to order your annual credit reports. And once you have student loans, make sure to pay them on a consistent and timely basis to keep them from negatively impacting your credit in the future.