The U.S. Education Department (ED) on Friday released a best-practices document to help colleges prevent federal student aid fraud.
The practices “reflect concrete, operational steps institutions are using to identify potential fraud earlier in the financial aid lifecycle, prevent improper disbursements, and coordinate action across offices,” ED said in its announcement. The document is part of ED’s effort to help colleges curb the number of unscrupulous individuals accessing federal financial assistance after a spike in fraud over the past few years, particularly among California community colleges.
Among the practices cited (which include examples from colleges, including community colleges):
Use account holds aggressively when risk indicators appear. For example, Macomb Community College (Michigan) uses an “identity verification hold” to prevent both registration and financial aid disbursement, while a case is being reviewed.
Require layered identity verification for higher-risk cases. Institutions that appear most prepared to combat fraud are not relying on a single document, ED said. Macomb lists a layered set of possible documentation, including tax returns, bank statements, prior transcripts, high school records, proof of residency, passport, birth certificate and Social Security card.
Treat conflicting information as a campuswide responsibility. Staff beyond the financial aid office should know how and what to escalate, ED said. While Delgado Community College’s (Louisiana) policy specifically directs admissions and other departments to notify the student aid office immediately when fraudulent documents are submitted, Harper College (Illinois) has a process in which the student conduct office, registrar and campus police compile potential fraud cases and help determine whether they are fraudulent. Elgin Community College (Illinois) has a formal red flag/identity theft committee that include multiple offices, such as admissions, registrar, bursar, financial aid, information technology, internal audit, student affairs and legal or finance leadership.
Check attendance and academic engagement before refunds go out. One of the clearest operational controls is linking disbursement and refund activity to real attendance or academic engagement, ED said.
Other practices include:
- Use unusual enrollment history and transfer patterns as risk indicators.
- Strengthen the process for reviewing subsequent Institutional Student Information Records (ISIRs) and post-disbursement discrepancies.
- Build a formal red-flags program and train staff.
- Protect refund processes and account-change requests.
- Refer credible fraud information to the Department’s Office of Inspector General and document the basis.
