FSA Tightens Identity Verification to Combat Student Aid Fraud: What Schools Need to Know for 2025
In response to a rising wave of identity theft in federal student aid programs—especially the Pell Grant—the U.S. Department of Education is launching new measures designed to better protect taxpayer-funded aid from fraud. These actions, announced in a recent Electronic Announcement (APP-25-16), reflect a broad strategy to combat sophisticated fraud rings and reinforce the integrity of Title IV aid programs.
Here’s what institutions and financial aid professionals need to know:
Why These Changes Are Happening
Recent data from Federal Student Aid (FSA) and state and institutional partners show a troubling increase in identity-based fraud. The risk is especially high for programs like the Pell Grant, which is already under financial strain. In response, the Department is introducing stronger identity verification processes starting in Summer 2025, with a full rollout expected by the Fall 2025 semester.
What's Changing This Summer (2025)
1. Increased V4 Verification for New Applicants
Until the Department’s new fraud screening process is fully operational, schools will see more students selected for V4 verification—especially first-time aid applicants. This summer alone, about 125,000 students are expected to go through identity validation.
2. V1 and V5 Verifications Remain Stable (Mostly)
No significant changes are expected for V1 verification. However, there may be a slight increase in V5 verification for students who were already flagged for V1.
New Identity Verification Procedures
To ease the burden on schools and students while tightening fraud controls, the Department has updated several key verification rules:
Statement of Educational Purpose No Longer Required:
Students selected for V4 or V5 verification are no longer required to submit this form.Video Call Verification Is Now Allowed:
If a student cannot appear in person with a valid, unexpired government-issued ID, schools can now verify identity via a live video call. A screenshot of the ID during the call, with date and reviewer’s name, must be saved.NIST-Verified Entities Accepted:
If a student’s identity was confirmed by a NIST IAL2-compliant organization, the institution can accept that verification, with proper documentation of the verifying party and date.Verification for Incarcerated Students:
Schools may rely on identity verification conducted by officials at the student’s correctional facility. Proper documentation must be retained.
These new options apply retroactively to students selected for verification before this announcement.
Fraud Detection and Reporting Obligations
Institutions are reminded that under federal regulations (34 CFR 668.16(f)), they are required to detect and resolve conflicting information before disbursing aid. If fraud is suspected:
Report it to the Office of Inspector General (OIG)
Use the encrypted portal at https://oighotlineportal.ed.govDo not disburse aid
If an applicant is confirmed to have used a false identity, any disbursed aid must be treated as an overpayment, following guidance in Volume 4, Chapter 3 of the FSA Handbook.Legal Consequences Apply
Submitting false claims may result in civil or criminal penalties, including actions under the False Claims Act.
What’s Next?
The Department plans to introduce a more advanced fraud detection model in the fall that will eventually reduce the need for V4 verification altogether. More detailed guidance on that process will be issued in the coming weeks.
Bottom Line for Institutions:
Stay alert. Update your verification practices. And ensure your staff is trained on the new identity confirmation options. While these changes may bring short-term adjustments, they represent a major step toward securing the future of Title IV aid—and protecting both students and taxpayers from fraud.
