Verification Made Clear: Answers to Your Most Common Questions

(Originally Posted August 20, 2025 and Updated September 15, 2025)

Over the past few months, the Department of Education has significantly increased its fraud prevention measures in the federal student aid process. As a result, schools are seeing a noticeably higher number of ISIRs flagged for verification—particularly V4 and V5—sometimes even after initial disbursements have been made. While these measures are designed to strengthen program integrity, they have also created new compliance challenges for institutions, requiring financial aid offices to carefully review updated guidance, adapt their verification procedures, and in many cases revisit aid already awarded.

With these changes in mind, we’ve outlined below the most common questions schools are asking—and the clear answers you need to stay compliant.

Q1: Our financial aid staff operates fully remote. What steps should we take to ensure compliance with the June 6, 2025 (APP-25-16) verification regulations regarding identity verification?

A1: According to the guidance, the review of a student’s identification must be conducted by an institutionally authorized individual. This allows the school to designate any employee to collect and verify identity documents; the reviewer does not need to be part of the financial aid department.

It is important to note that while ED has provided flexibility for schools to use virtual means of verifying identity, it is still preferred that a student’s identity be verified in person. The virtual method is available if the student is unable to verify in person, not to be more convenient for the financial aid office.

Additionally, while ED has not indicated that it will require schools to document that they attempted to verify the student’s identity in person prior to using the virtual option, we do recommend documenting your outreach as a best practice.

Q2: Are we required to report the outcomes of V4 and V5 verification to ED?

A2: ED released an Electronic Announcement (GENERAL-25-36) clarifying the requirements for reporting verification outcomes to the FAFSA Partner Portal.

Schools will not be required to report for the 2024-25 year.
Schools will be required to report all outcomes of V4 and V5 verification beginning with the 2025-26 award year. Reporting functionality should be available by August 31, 2025.

We strongly encourage schools to read the Electronic Announcement as it provides details on who, when, and how to report your verification data.

Q3: It appears that we have a high number of students being selected for verification. Can the institution manually select all applicants for V4 and simply make this a process for all staff to follow?

A3: Yes. We do not know of any regulation preventing schools from manually selecting all students for V4 verification, however, there are some points to consider:

You must ensure that the institution’s policies and procedures are updated to clearly indicate that you are requiring all students to complete the identity verification piece.
You must ensure that staff applies this policy consistently across all locations and students.
Consider timeframes—As indicated in the June 6, 2025 Electronic Announcement, FSA is scheduled to establish new procedures to improve the fraud detection process. It is our hope that once this new process is finalized, the volume of students being selected for V4 will decrease and the burden placed on institutions will ease. Updating the school’s procedures could cause the school to face continuous burden after ED finalizes the new process.

Q4: If we have incomplete 2024/25 verification as of June 6, 2025, do we need to obtain a Statement of Educational Purpose?

A4: It is our understanding that no, as of the June 6, 2025 Electronic Announcement (APP-25-16), you do not need to obtain a statement of educational purpose for students selected for V4 or V5, regardless of the award year that is selected. However, we do recognize that the Dear Colleague Letter (GEN-24-10) indicates in the July 23 Update note that the requirement for a Statement of Educational Purpose is no longer in effect starting in the 2025-26 award year which is causing confusion across the board. The Electronic Announcement indicates, ‘effective immediately’ and does not specify award years. Therefore, we believe that the removed requirement would apply to 2024-25 also and NASFAA appears to agree based on a recent AskRegs alert.

It is our goal to provide you information with the utmost clarity so we have reached out to ED for clarification on this matter and will provide any updates as they become available.

It is important to note that while your school can still request the Statement of Educational Purpose, you cannot require it to consider verification completed.

Q5: If a student’s ISIR is selected for V5 verification, but all federal tax information (FTI) has been transferred successfully from the IRS and has not been manually changed—including items like family size—what do we need to verify?

A5: In this case, the institution is only required to verify the student’s identity. Schools are not required to re-verify the transferred income and tax information when it is successfully transferred from the IRS and remains unchanged. This also includes cases where the student or parent confirms that the number of exemptions from the transferred tax year is accurate and no manual updates have been made to family size for the current year.

Please note that if manual updates are made that override transferred IRS data, those constitute conflicting information and must be re-verified. Any person, including a dependent student, whose FTI data indicates “no return on file” is still considered a Tax Return Non-Filer for Verification purposes and schools should take the proper steps in verifying income earned from work as outlined by ED.

Q6: What documentation is required if family size is not transferred from the IRS (manual updates made by the student/parent on the FAFSA)?

A6: If there are manual updates to the family size (student or parent), collect a signed statement from the applicant (and a parent if dependent) listing each family member’s name, age, and relationship for the application year (2024-25 and 2025-26).

The following exceptions still exist for the family size (previously named ‘household size’) where verification is not required:

Dependent: family size = 2 with a single parent, or 3 with married/partnered parents.
Independent: family size = 1 if single, or 2 if married.
When the manually updated family size matches the IRS-derived family size.

Q7: What do I do if my active student has pending disbursements of 2024-25 aid and is selected for V4 or V5 verification for 2025-26?

A7: On September 10, 2025, ED updated its Program Integrity Q&A to clarify that no, schools are not required to wait for 2025-26 verification to be completed before disbursing 2024-25 funds. If the student fails to complete verification for 2025-26 (i.e. does not submit documentation, withdraws before completion, etc.) and you do not suspect fraud, the student is eligible for any remaining 2024-25 funds if late disbursement requirements are met. Though ED has clarified that delaying disbursements is not required, it is still recommended if an institution suspects an issue with identity fraud.

As a reminder, schools only need to verify the student’s identity for V5 provided that the ISIR has FTI information populated and there was no manually entered financial information or family size that could create conflicting information. (See Q5 for details on when only identity must be verified.)

Q8: What do I do if my student is selected for verification and withdraws before completing verification?

A8: If a student is selected for verification but withdraws before the process is complete, the required actions will depend on the specific circumstances of the withdrawal.

Students who Withdraw Before Being Selected for Verification: If a student withdraws prior to being selected for verification (i.e. the selected ISIR populates after the Date of Determination (DOD)), and the student has no intent to return, no action is required.
Students who Withdraw After Being Selected for Verification: If a student is selected for verification and withdraws afterwards, but prior to the completion of verification, the school must adhere to the following guidelines to remain compliant:
- General Aid That Could Have Been Disbursed (ATCHBD) Rule: List only Unsubsidized & PLUS (non-need-based) aid unless identity verification is required and incomplete — in that case, no aid is listed as ATCHBD.
- Completion Deadline: A student who is Pell eligible must complete verification within 120 days of their last date of attendance, or prior to ED’s award year deadline (usually mid-September), whichever occurs earlier.

Let us look at a few specific examples as well:

Scenario 1: The student’s selected ISIR (V1, V4, or V5) is the same as the aid disbursed (e.g., 2024-25 ISIR selected, 2024-25 aid paid):

For Disbursed Aid:
- No grants should be listed on R2T4 (must be returned if overpayment).
- Sub & Unsub loans are okay to include on the R2T4 if they were paid on a valid, non-selected ISIR.
  Note: We discovered conflicting information in the FSA handbook between the Application and Verification Guide (AVG) and Volume 5-Withdrawals and the Return of Title IV Funds. We have contacted ED for clarification and will update you as the information becomes available to us.

For Aid that Did Not Disburse (ATCHBD): Follows general rule as indicated above.

Scenario 2: The student’s selected ISIR is for a different award year than the aid disbursed (e.g., 2025-26 ISIR selected, with both 2024-25 and 2025-26 pending aid):

Aid Disbursed (payment period 1):
- 2024-25 disbursed aid from a valid, non-selected ISIR can be listed.

ATCHBD (payment period 2):
- If V1 on 2025-26:
  - All pending 2024-25 aid can be listed.
  - Only include non-need-based (Unsub & PLUS) for 2025-26.
- If V4/V5 on 2025-26:
  - All pending 2024-25 aid can be listed.
  - No amount should be listed as ATCHBD for the 2025-26 aid year

Q9: A non filer submitted proof of their earned income (wages, consulting, etc.), but I’m unable to update this section on the FAFSA. What do I do?

A9: If the student/spouse/parent correctly indicated “will not file” (nonfiler) on the FAFSA, and there is no conflicting information, you do not update the FAFSA income fields. FSA verification guidance requires corrections only when documentation reveals conflicting or inaccurate FAFSA data. The FSA Handbook also states “The collection of documentation to verify income earned from work is used to determine if the applicant/spouse/parent was required to file a U.S. income tax return." Furthermore, NASFAA clarifies that W-2s and a non-filer statement are collected solely to confirm non-filing status—not to verify or adjust FAFSA income if the FAFSA already reflects non-filer status.

Conflicting information would include situations where the documentation shows the individual earned income above the IRS filing threshold for that tax year and filing status. In such cases, the individual would actually be required to file a tax return, and verification cannot be completed until that return is filed and provided.

In practice:

If income is below the filing threshold, retain the non-filer statement and W-2s in the student’s file as required verification documentation. FAFSA income fields remain unchanged.
If income is at or above the filing threshold, the individual must file a tax return, and verification is placed on hold until that documentation is submitted.

Always document your review and resolution in the student’s verification file.

_________________

Resources

Federal Register Notice Vol. 90, No. 109 for 2025-26 (September 4, 2024)
APP-25-16: Identity Verification Updates (June 6, 2025)
GENERAL-25-36: Reporting V4/V5 Verification Outcomes (August 12, 2025)
GEN-24-10: Statement of Educational Purpose Update (July 23, 2024)
Program Integrity Q&A (July 29, 2025)
FSA Handbook – Application and Verification Guide (AVG)
NASFAA AskRegs Alerts

_________________

McClintock & Associates will continue to share updates as new guidance emerges. For questions or assistance, contact us. Stay informed by signing up for our newsletter.