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nalimali -

As a Financial Aid Counselor in Colorado, my job includes performing "Verifications" of FAFSA information when requested. You've picked up on a huge weakness of the system - no audit of figures except by whatever process a college uses to select applications for verification. We have limited funds and limited manpower, and spend each in areas of greatest return, i.e., finding cheaters who get free money if not found out.

My school requires documentation of the numbers of all students who are eligible for a Pell grant. What we do is require copies of tax returns and, as necessary, bank/investment statements, divorce decrees with alimony/child support terms, etc. We're not the IRS Mafia, but if a student or parent showed $5,000 in savings/cash on the FAFSA but paid taxes on $1,500 of interest income, we ask for documentation showing where that interest came from. $2,500 at 2 or 3% takes a whole lot more than $5,000 in interest bearing accounts, and colleges are REQUIRED to resolve this conflict before disbursing aid. It is common that the requested documents never materialize and aid never pays. Perhaps they had the cash...

In other words, if you get a lot of good aid by lying on the FAFSA, you have a good chance of getting caught. If you lie and are still only eligible for loans, however, we don't begrudge people the "priviledge" of borrowing for college, so we verify very few FAFSAs that qualify students/parents to borrow and nothing more.

Perhaps most important, I've found the Financial Aid system focused on being fair. If a student/parent lies, the aid they get is not just fraud but a form of theft from someone more deserving, and that someone is sitting in my office trying to scrape together the money to stay in school. Conversely, if we get a call from a student and discover that their FAFSA was incorrectly filed and it hurt their aid, we often request documentation to support our making changes on their behalf so they get the aid they deserve.

Some days I feel like Robin Hood, I really do. If you're truly broke, I'll do whatever I can to make sure things are right. But don't mess with me if you have a business and hide stuff there.

Example: If your adjusted gross was $45,000, you say your business is worth $20,000 on the FAFSA, and you live in a house where the neighborhood appraisals average $500,000 (I use Zillow at, I'll sense one of those conflicts the fed requires me to reslove. I'll ask for your Schedule E and corporate returns, track down the accrued earnings in the Sub-S or LLC, figure out how much money is really available to whom based on family attribution rules, and capitalize the earnings that your stock generates at 10% or so. Keeping $70,000 of income in the business to keep it off the FAFSA makes me want to exercies my authority to change the value of investments - in this case, from $20,000 to $700,000 or so. That'll change your award real fast.

It's kinda fun.
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