College is expensive, and it's especially shocking to some parents and students when they start the financing process to learn that one form — the FAFSA — may largely determine their financial fate when it comes to federal student aid. It may be tempting to fudge the numbers on the FAFSA to get more money to help pay for your child's education, but getting caught could spell big trouble. Unfortunately, federal student loan fraud is a growing trend:
- One commenter in the College Confidential forums said her parents were planning to claim to be separated in order to try to maximize their chances of financial aid: "I was definitely NOT on board with this but they refuse to listen to anything I'm saying," the student wrote.
- In 2014, the Boston Globe reported that a father of a former Harvard student pleaded guilty to charges of falsifying income information to get more than $160,000 in financial aid. (He apparently filed false tax returns, which likely carries additional penalties.)
- A college professor and counselor was charged with fraud after he allegedly falsified applications for students he said he was just trying to help.
- A mother and daughter pleaded guilty in 2014 to making false statements to federal agents in connection with an investigation of student aid fraud. The mother reported no income for a time period during which she reportedly received over $521,000 in income.
If you're thinking of falsifying your FAFSA, just don't. Under the Higher Education Act of 1965, penalties include a fine of up to $20,000 and/or up to five years in prison. Plus, you'd have to return any aid you had received.
And don't think you can't get caught. "College financial aid administrators are more skilled and experienced at detecting lies than families are at perpetrating them," warns Mark Kantrowitz senior vice president and publisher of Edvisors.com which publishes a variety of FAFSA tip sheets.
In fact, about one-third of all FAFSA applications are selected for verification by the Department of Education. If yours (or your child's) is chosen, additional documentation will be required. An example of a red flag: the tax return shows dividends and interest on investments but little or no assets are reported on the application.
What about the commenter whose parents want to pretend to be separated? It's not an uncommon scenario says Kantrowitz, but "if it's a informal separation, it's only acceptable if the parents don't live together," he says. "They may ask for evidence that the parents don't live at the same address." And there are ways to find out they aren't telling the truth. The college could "call the home of the custodial parent and ask for the other parent. If that parent picks up the phone then it's very likely they live together," he says, by way of example.
A more common scenario, he says, is when parents are separated or divorced and lie about which parent has custody in order to maximize the chances of getting aid. But there are ways of finding that out, too. For example, the school can match up the custodial parent's address with the address of the high school from which the student graduated. If they don't match? It may be fraud.
"You would be surprised how often the student blabs," says Kantrowitz. "When a school has credible information about fraud, they are required to investigate it."
A college education is expensive and parents and students who want to avoid student loan debt may be tempted to fudge facts. But it's not worth it. Here's a guide to paying for college without a mountain of debt — and without lying on your financial aid applications.
If federal student loans aren't enough to cover your total student loan bill, you have other options. Private student loans are available for students and parents, but private loans (unlike federal student loans) will most likely require a credit check to determine your interest rate, and a co-signer if the borrower has a limited or non-existent credit history. You can get a free credit report summary every month on Credit.com to see where you stand. If you have great credit, private student loans may even get you a better interest rate than Parent PLUS loans, so doing your research, improving your credit and monitoring your progress are key.
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