Disabled IRS Data Tool Complicates Financial Aid Application Process

Days after the Internal Revenue Service's data retrieval tool for the federal financial aid system went down, federal officials announced late last week that the tool would be unavailable for several more weeks because of concerns about security. The data retrieval tool, introduced in the 2010-11 academic year, allows students and families to automatically import tax information already on file with the government into the Free Application for Federal Student Aid.

Although it is unclear what, specifically, prompted the shutdown, a joint statement issued by the IRS and the U.S. Education Department said the decision to suspend the tool was "a precautionary step following concerns that information from the tool could potentially be misused by identity thieves." The agencies added that "we believe the issue is relatively isolated, and no additional action is needed by taxpayers or people using these applications."

Numerous college access organizations have issued concerns that the ongoing issue will make applying for financial aid more difficult for low-income students, reported Inside Higher Ed, and could lead to more verification checks of aid applications—a process that could slow down the awarding of financial aid packages.

College access advocates and financial aid administrators said repercussions would go beyond a more burdensome financial aid application process, though. The shutdown of the tool could also complicate renewals and enrollments for income-driven repayment programs, Inside Higher Ed reported. Without the data retrieval tool, borrowers who want to sign up for an income-based repayment program will have to print out and mail in copies of their tax returns.

Additionally, the suspension could cause more instances of a new flag known as a Code 399, which arose from the switch to use of prior-prior year income data in this financial aid cycle. The change—which allows students to submit tax information from two years earlier rather than the tax year that is concluding as applications are due—created a one-time flag in the process that has affected campuses unevenly. If there are any updates to 2015 tax information that create discrepancies with what is already on file with the IRS, that can hold up release of financial aid a student already expected to receive in the current year.

The shutdown of the IRS data retrieval tool came as state aid deadlines arrived for Indiana (March 10) and Texas (March 15). Many colleges and universities also set their institutional deadlines for that March 15 date. Students can still submit their household financial information manually in the meantime, but that will potentially add more verification checks later in the process for those students.

The Texas Commission of Higher Education on Tuesday instructed the state's colleges and universities that they may extend the deadline for financial aid in light of the IRS tool's suspension, Politico Morning Education reported. The commission said in a memorandum that institutions have flexibility under state rules and that individual schools may decide whether to grant priority status to financial aid applicants who miss the state's deadline on Wednesday.


Related Links

Internal Revenue Service and U.S. Department of Education Joint Statement


Inside Higher Ed


Inside Higher Ed


Politico Morning Ed