Just How Risky Is It to Lie on Your FAFSA Application?

What Is the FAFSA?

The Free Application for Federal Student Aid (FAFSA) is a simple form all new and returning college students should fill out to receive financial aid. The Department of Education (DOE), states, and colleges and universities use the information on the FAFSA to determine how much money they can offer you in the form of grants, need-based scholarships, and student loans.

As the cost of a college education rises, it is more important than ever for students like you to fill out the FAFSA. Since the form is online, you can easily submit your financial information and make corrections if something is filled out incorrectly. Schools, states, and the federal government all want to help you get the best possible education.

However, you might be tempted to falsify some of the information on your FAFSA, provide inaccurate financial information for yourself or your family, or otherwise mislead the government about your financial status. Lying on your FAFSA is illegal and will hurt your ability to pay for college and get a higher education. 

Problems Caused by Lying on Your FAFSA Application

Some schools audit financial aid applications, especially if they have numerous incoming students in need of money to attend college. This increases your risk of getting busted for putting wrong information on your FAFSA.

You might accidentally put the wrong information on your FAFSA, receive wrong information from your family, or your family might fill out information incorrectly on the FAFSA if you are a dependent student. Accidents happen, and you have time to correct your FAFSA information.

However, if you are caught lying on your FAFSA, your future is in jeopardy. Here’s what will happen: 

• Financial aid will be delayed. If your FAFSA is flagged for verification because of a mistake or a lie, you can lose weeks or months to the audit process. During this time, you will not have financial aid.
  
  One in three FAFSA applications is flagged for verification, and the DOE and colleges want this process to go as quickly and smoothly as possible. They understand that mistakes happen, and your good faith attempts to work with them and correct problems will help you. Lying on your FAFSA, though, is very likely to be caught during the verification process.
• You may be charged with a felony. Lying on a federal document like the FAFSA is a felony. You, or your parents, face up to five years in prison and/or a $20,000 fine. This felony charge will follow you or your parents for the rest of your lives, hurting your future chances of an education and a job.
• You lose the money. If you received student financial aid because of lying on the FAFSA, you must return it. If you already spent it, you have to find another way to pay it back. The Inspector General at the Department of Education will be alerted to your fraud after a school audits your FAFSA.
• You get kicked out of school. Most colleges and universities have a zero-tolerance policy for all forms of cheating, so you will get kicked out. College financial aid offices are usually the first to find out about lying on FAFSA forms, so losing your acceptance to the school of your dreams might be the first consequence you face.
• The Internal Revenue Service (IRS) will also penalize you. If you cash out assets or move money around your bank accounts to adjust your FAFSA information right before filling out the form, the IRS can also audit your taxes and charge you for failing to pay appropriate taxes on your assets.

What Is Considered Lying on the FAFSA?

Some articles about college might recommend that you cash out your assets or move money around to different bank accounts to get more financial aid. Fudging your numbers is risky. Even though it is not technically lying, it might be treated as such by the DOE and your college.

Ways that you can lie about numbers or try to deceive the government on your FAFSA include: 

• Lying about income. These days, many people have several jobs, gigs, or side hustles, so it might be easy to forget about some of your income accidentally. Gather your tax information and keep track of your pay stubs, whether they are electronic or paper. If you do not get this information from a job or contract, ask for it.
  
  Intentional deception about income on your FAFSA is illegal. Because the DOE and the colleges you apply to check your income with the IRS, your chances of getting caught lying on your FAFSA are high.
• Putting money into grandparents’ accounts. If you are a dependent student, money in your name directly affects your student aid, while money and assets in your parents’ name impact your results less directly. Money in your grandparents’ names or extended family members’ names will not affect your FAFSA results in any way. However, the FAFSA can require a few years of tax information to notice these discrepancies, so you are not saving your assets by suddenly moving them one year.
• Hiding assets. Too many families try this method of lying on the FAFSA. Because part of a dependent child’s FAFSA number is calculated with the expected family contribution (EFC), parents or guardians may feel like they need to move savings and other assets into different bank accounts under different names. Some may fail to report these at all.
  
  The EFC accounts for your family’s taxed and untaxed income, assets, and benefits like Social Security benefits. However, retirement accounts are not considered among your parents’ assets. Any other dependent children are considered, especially if they are also attending college. Moving assets around will leave a paper trail that the IRS might notice.
• Buying annuities or life insurance. Spending money to reduce assets is another method of “hiding” this money. While it is not as noticeable as blatantly hiding assets in other accounts, you may spend too much money on insurance coverage you do not need. This money could instead support you or your child through college.

Working to Fix Mistakes Improves Your Financial Aid Chances

In past years, the U.S. Department of Education has asked schools to verify a random 30% of their FAFSA applications. Some choose to verify 100%, while others stick to the 30% range. Regardless, your chances of being audited are good enough that you will likely get caught lying on your FAFSA. You would then face felony charges for deception on a federal document.

Accidents happen, however, and the DOE understands that. If you make a mistake on your FAFSA and do not catch it, work with them to adjust the information as soon as possible. Alert the school that sent you a financial aid award letter, change the information on your online FAFSA, and take other necessary steps to show good faith. If you work to repair misinformation as soon as you discover it, you are less likely to face criminal charges.

If you filled out your FAFSA information correctly and you do not receive enough financial aid, including federal student loans, to help you through school, you have more options than you might think. You do not have to give up your place at the college you want to attend.

Instead, you can appeal the decision with your student financial aid office, ask about merit-based scholarships or research these online, and check out private student loans. There are several sources of financial aid available to all kinds of college students. Check these out instead of fibbing on your FAFSA.