The IRS and Dept. of Ed Just Made Applying for Financial Aid Even More Difficult

IRS Data Retrieval Tool

Earlier this month, the Internal Revenue Service (IRS) and U.S. Department of Education Office of Federal Student Aid issued a joint statement announcing that they had removed the IRS Data Retrieval Tool.

This change could significantly impact millions of students. Individuals rely on the IRS Data Retrieval Tool when they complete the Free Application For Federal Student Aid (FAFSA) or an application for an income-driven repayment plan (IDR).

There is currently no date listed as to when the tool will be back online, according to the homepage for FAFSA pictured below.

IRS Data Retrieval Tool.png

What is the IRS Data Retrieval Tool?

When applying for FAFSA or an IDR plan, the government prompts you to enter your family income and assets. The forms need to be precise, so there’s no room for guesswork. Therefore, the information you enter must match your taxes exactly.

That’s where the IRS Data Retrieval Tool comes in. It makes the process a lot simpler and more precise by pulling your financial information directly from the tax returns you previously filed.

According to Jesse O’Connell, deputy director of finance and federal policy with the Lumina Foundation, the loss of this tool is a major imposition. Plus, it makes the process much more labor intensive.

For example, instead of being able to import their tax information directly into the FAFSA form, students now have to enter each field by hand.

“This also increases the likelihood that they’ll be selected for a secondary review step called verification,” O’Connell explains. “It’s when a college financial aid office is required to ask for additional documentation to confirm the information entered into the form.”

With the IRS Data Retrieval Tool out of commission, students and their families will likely find it more challenging to apply for financial aid without making any errors the first time around.

“This process can be confusing for some students and families and is yet another barrier between them and successful enrollment,” says O’Connell.

Why was the tool removed?

In their joint statement, the IRS and Department of Education cited concerns about data security and potential misuse from identity thieves. While they did not say how long it would be until they reinstated the tool, they said it could be several weeks.

The backlash has been significant. Members of Congress, including Sen. Lamar Alexander (R-TN), chairman of the Senate Committee on Health, Education, Labor, & Pensions, sent a public letter to Betsy DeVos, the new Secretary of Education about the situation.

In the letter, Congress members cited the impact the tool’s removal will have on students, particularly low-income individuals. They are requesting a briefing on the issue – and the Department of Education’s plans to fix it – by March 24.

How does this change affect those applying for FAFSA or IDR?

For some individuals, the IRS Data Retrieval Tool is an essential aid for completing FAFSA or an IDR application.

Without the tool, individuals have to use digital or paper versions of previous tax returns to complete their applications. If you did your taxes online with software such as TurboTax, it might not be a big deal. But if you filed using the paper forms and lost your return, you could be out of luck.

And students who can be claimed as dependents face additional difficulties. They have to hope their parents kept the forms handy–and that they have a good relationship with their family– or they will be unable to complete their applications.

What can students do instead?

If getting a paper or digital version of your tax returns is not an option, don’t wait for the IRS Data Retrieval Tool to return.

“Students should still pay attention to deadlines and get their FAFSA completed in a timely fashion,” says O’Connell.

It’s important to complete your FAFSA application as soon as possible. The earlier you submit your FAFSA, the better your chances are when it comes to receiving grants or loans for your education.

“Certain states or institutions have limited pools of grant funding and allocate it on a first-come, first-served basis,” O’Connell explains. “So filing the FAFSA later in the cycle could result in missing out on aid funding that a student might have otherwise received.”

If you cannot get your previous tax returns, you can get the necessary information with one of the following options:

1. Visit the IRS Get Transcript website.

With this service, you can register for an online account and view your tax return transcript. To get your transcript, you need the following information:

  • Your Social Security Number
  • Your date of birth
  • The mailing address used to file your return
  • Mobile phone number
  • Credit card or car loan account number to verify your identity

2. Request a paper transcript.

If you do not have online access or do not have all the identifying information necessary for the web transcript, you can also ask the IRS to mail you your transcript. You can call 1-800-908-9946 and request a transcript.

With either option, you will not get a complete return. However, you will get enough information to complete your FAFSA or IDR application.

Applying for financial aid is still possible

While the loss of the IRS Data Retrieval Tool is a huge inconvenience, don’t let it derail your education plans or repayment options.

Pursue alternatives to get the necessary information and complete your forms as soon as possible to ensure you get the financial aid or relief you need.

For more information about getting financial aid, check out our complete guide on finishing your FAFSA on time.

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