The U.S. Education Department (ED) this week detailed its timeline and implementation of real-time identity screening procedures for applicants completing the Free Application for Federal Student Aid (FAFSA).
The changes aim to address the rise in fraudulent applicants – called “ghost students” – who use stolen identities to apply for and steal federal financial aid. Community colleges have long called for additional support to identify fraudulent applicants prior to transmitting Institutional Student Information Records (ISIRs) and disbursing Title IV funds.
In fall 2025, ED partnered with a vendor to identify students for V4/V5 identity verification based on a high degree of confidence of fraudulent activity. Since the rollout of that enhanced verification partnership, only 0.4% of students flagged for V4/V5 verification were legitimate students who took additional steps to verify their identity for Title IV disbursement.
Starting April 26, when a student submits a FAFSA, the department will deploy the algorithm to determine the likelihood of fraudulent activity in real time.
Students flagged as “moderate risk” will have their ISIR sent to the college as accepted, but with a corresponding comment code. The school is not required to conduct additional verification on these students before disbursement, but it may choose to implement its own identity verification procedures prior to registration or other key enrollment steps.
A student flagged as “high risk” will have to provide additional forms of identification through an automated system on the FAFSA portal. For applicants flagged as “high risk” doesn’t produce legitimate documents as part of the automated process, ED will transmit their ISIR to the college as rejected due to suspected fraud. Applicants assessed as “highest risk,” will not be asked to participate in the automated FAFSA verification process and their ISIR will be rejected.
Colleges are not obligated to take any further action for rejected ISIRs with fraud-related reject codes. If a student believes his or her ISIR was incorrectly rejected, the college can perform a V4/V5 identity verification and, if it’s successful, can disburse aid. Colleges can begin curing rejected ISIRs on May 3. Department officials continue to emphasize that very few legitimate students are likely to be flagged by the system and that they do not expect these “fraud override” procedures to be widely used or burdensome.
The new real-time identity verification process will roll out on April 26, with a corresponding mid-cycle ISIR layout update. Schools must update their student information systems to accept the new ISIR layouts by April 26, or they will not be able to load ISIRs and package aid. Prior to April 26, the department will conduct one final sweep of all transmitted ISIRs using the fraud-detection algorithm. As a result, colleges may see additional students flagged for V5 verification within this cohort.
This new process should largely shift the responsibility for identity verification from colleges to the agency. However, institutions remain ultimately responsible for Title IV stewardship, meaning that they will remain obligated to report to the department any red-flag patterns that may escape the agency’s new screening system. They will also remain responsible for combating ghost students who are not applying for federal student aid but are instead applying for state aid, institutional aid or registering to gain access to institutional resources.
