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Summary: The DoE's new rules require colleges and universities to verify that each first-time FAFSA applicant presents a valid, unexpired government-issued photo ID and that the applicant matches this ID. You can do this in-person, via video call, or via a NIST IAL-2 compliant solution like Nametag.
The U.S. Department of Education (DoE) is cracking down on student aid fraud by changing their identity verification requirements in the financial aid application process. This article explains what colleges and universities need to know about these new rules, and how to quickly ensure your institution’s effective compliance using Nametag.
Why is the U.S. Department of Education (DoE) implementing new identity verification requirements for student aid?
The United States is facing a crisis of "ghost students”, fake identities used by fraudsters to apply to colleges and universities. Once enrolled in classes, fraudsters can, amongst other things, apply for financial aid, get a .edu email address, and access cloud storage. The problem has gotten so bad that the federal government is taking action.
According to the San Francisco Chronicle, 20% of California community college applications in 2023 were fake. At some institutions, up to 60% of applicants have reportedly been found to be fraudulent. Santiago Canyon College in California had to purge over 10,000 ghost student enrollments. At Merced College, half of registrations for one spring semester were fake.
All told, the U.S. Department of Education (DoE) has uncovered nearly $90 million in financial aid fraud from the past 3 years alone. In response, the Department has issued a sweeping set of identity verification requirements.
“Every dollar stolen by a ghost is a dollar denied to a real student attempting to change their life.” — Jordan Burris, former White House official
Who is affected by the U.S. Department of Education’s new identity verification requirements for student aid?
The Department of Education’s new identity verification requirements apply to colleges, universities and other higher education institutions that process or administer federal financial aid programs such as Free Application for Federal Student Aid (FAFSA®). The updates are focused on first-time financial aid applicants who are expected to receive Title IV aid for the first time.
In addition, the Department has announced that it has updated its process for identifying potentially fraudulent applications, which will increase the number of applicants selected for V4 verification.
What are the U.S. Department of Education’s new identity verification requirements?
There are four components to the Department of Education’s new identity verification requirements. They apply to both future applicants and students already selected for verification before the updates were announced.
1. A new Statement of Educational Purpose is no longer required for V4 or V5 verification.
The Statement of Educational Purpose is a federal form which attests that student aid funds will only be used for the specified purpose. Typically, this form must be signed with real ink in the presence of a notary public. The DoE’s new rules mean that student aid applicants selected for additional verification no longer have to go through the process, but they will need to meet the photo ID requirements explained below.
2. Live video calls are now accepted for applicant ID verification.
First-time FAFSA applicants are required to present a valid, unexpired government-issued photo ID. If they can’t present it in person, applicants can now show their ID on a live video call. On the call, an “institutionally authorized individual” must check the validity of the document and verify that the applicant matches their ID. This option has major drawbacks, however.
Video calls are a great option for students who can’t appear in person to present an ID. But they create major burdens on college enrollment teams who will have to handle thousands of identity verification video calls each semester.
Additionally, it’s hard to tell whether an ID is legitimate on a grainy video feed, especially when fraudsters have access to “A New Generation of ‘Unbeatable’ Fake IDs”. The fraud prevention value of a video call is so low, it effectively nullifies the anti-fraud intent of the rule.
Learn more about the perils of video verification calls →
3. NIST IAL2-compliant software is now accepted for applicant ID verification.
In lieu of video calls, colleges and universities can now use NIST IAL2-compliant identity verification software like Nametag to verify student aid applicants in compliance with the Department of Education's new requirements. Nametag is one example of an IAL2-compliant identity verification provider with solutions built for higher education and student application verification.
Notably, schools must keep a copy of the applicant’s ID document, as well as retain a record of the date that their identity was verified and the name of the NIST IAL-2 compliant entity that did the verification.
Allowing higher ed institutions to use NIST IAL2-compliant identity verification is a major step forward in empowering colleges and universities to reduce student aid fraud without creating an undue burden on their staff.
Watch a demo of remote identity verification with Nametag →
4. Schools must report suspected financial aid fraud to the Office of Inspector General (OIG).
Finally, the DoE’s new documentation clarifies the reporting requirements for suspected or confirmed financial aid fraud. In short, if you suspect that an employee, student or other has misrepresented themselves or altered documentation to fraudulently obtain federal funds (such as trying to pass off a fake or deepfake ID as real), you must report this to the OIG.
How is the Department of Education implementing their new identity verification requirements?
The DoE’s new identity verification policies are coming in two phases:
Summer 2025: Higher Education institutions must verify the identity of Free Application for Federal Student Aid (FAFSA®) applicants before aid can be disbursed. Students must present a valid, unexpired government-issued photo ID either in person, on a live video call, or via NIST IAL-2 complaint remote identity verification software. Schools must retain a copy of the ID and document the date and name of the verifier.
Fall 2025: The Department will launch a permanent identity screening process for all FAFSA applicants. Schools are expected to continue verifying flagged students under V4 and V5 protocols, but the new federal process aims to catch more fraud earlier while easing downstream verification workloads.
How does Nametag help Colleges and Universities comply with the DoE’s new identity verification requirements?
Nametag provides a range of identity verification solutions for colleges and universities that help ensure your timely, effective, and privacy-preserving compliance with the Department of Education's new requirements while preventing data breaches, improving efficiencies and reducing IT costs.
Of all the NIST IAL-2 compliant identity verification providers, only Nametag offers the combination of security, usability, and privacy that colleges and universities need to ensure their timely and effective compliance.
For example, you can start verifying student aid applicants in under 10 minutes; then later expand your deployment to prevent social engineering attacks at your IT helpdesk; securely onboard new users; protect the self-service password reset process; enable secure self-service MFA resets; and more.
Security: Nametag solutions are built on Deepfake Defense™, the only identity verification engine built for workforce-grade assurance.
Experience: First-time users verify themselves through Nametag in under 30 seconds thanks to real-time feedback in an adaptive interface.
Reusability: Returning users reverify in seconds with just a selfie, ensuring that the person enrolling is the same person who applied to begin with.
Integrations: Plug-and-play connections with Identity & Access Management (IAM) providers, IT service management tools, and other applications.
Contact us today to learn more about Nametag’s solutions for higher education.
Looking ahead: What’s coming next for Higher Education identity verification?
These latest rules aren’t simply a one-and-done compliance mandate. The Department of Education’s crackdown signals a broader shift in how trust is managed in higher ed. Institutions that take proactive steps by reviewing workflows, updating policies, and reinforcing systems will be better positioned to protect legitimate students, minimize operational disruption, and meet federal compliance mandates with confidence.
Bottom line: The age of “trust by default” is over. Colleges must now verify before they disburse, and verify before students connect.
We’re staying on top of the DoE’s requirements and other news impacting Higher Education. If you’re worried about “ghost students”, student aid fraud, deepfakes, account takeovers and IT burdens, drop us a note!
