17
MAR
2017

The IRS Data Retrieval Tool Suspension

Remember the changes in the FAFSA: the prior, prior year tax information (even though what a family earned
two years ago has no bearing on what the family can pay for college now) and the earlier opening date for the
FAFSA? All of these changes were built around a much hyped tool called the Data Retrieval Tool allowing
families to link directly to the IRS database and download the tax information.

Behind the scenes, a process called verification was changed to incorporate this tool. The Department of
Education requires supporting documentation for the information entered into the FAFSA. For years, a physical
copy of the tax return was sufficient, but with this download tool, an internal flag was created. When the
download tool was used, this flag was “turned on” creating the acceptable documentation. Because the Dept. of
Education wanted families to use this download tool and set the flag (eliminating all sorts of paperwork),
a physical copy of the tax return wouldn’t work. Instead, if the family didn’t use the data retrieval tool, the family
had to get a tax transcript, a print out of what is in the IRS database. Getting the transcript is time consuming
and convoluted, but that is OK, the Data Retrieval Tool is simpler and will include most of the families.

Well, as in all good government programs, someone decided this several year old tool is no longer secure.
Without any announcement the IRS suspended use of the Data Retrieval Tool about 10 days ago. Now families
have to enter all the tax information by hand, hoping they don’t put the wrong information in the required boxes.
Now the internal flag can never be set. This means that families must use the tax transcript to support their
FAFSA data. This will increase paperwork, frustration, and difficulty.

One reason is the tax transcript requires an address, the one on the tax return, as part of the identifying information.
But the IRS uses  standardized addresses. This means the address you typed on your form may not be what is in
the IRS database. How is a family going to know this? By having their transcript request denied indicating the
address is incorrect. “But it matches my form!!!” Yep, but it doesn’t match the database. Now what? To get a
standardized version of your address, go to www.usps.com, click look up a zip code, enter street address, city,
and state, then click find. Use this address on your form 4605 T-EZ.

Not only will this affect high school seniors trying to determine which college he or she can afford, but it will affect
all those students applying for income-based repayment plans. You see, this much vaunted tool is a central part of
the loan repayment process as well (all those changes made by the Obama administration).

Justin Draeger, president and CEO of NASFAA (National Association of Student Financial Aid Administrators)
states, “All the processes that we’ve built around the application and verification process have been built around
this data retrieval tool.” This means financial aid offices will have processing backlogs for student aid offers.
These same offices will have backlogs processing “exceptions” known as professional judgment. Students will not
get timely responses and face more steps to receive financial aid packages. And those graduates needing
income-based repayment plans to not default on their student loans will be facing additional backlogs and hurdles.

For the most at risk students (first one in family to attend college for example), this could be a significant reason a
student will not attend college. Open access colleges, mostly community colleges, don’t have the staff nor the
budget to adjust to this additional paperwork, leaving many two year degree and transfer students facing hurdles
that may keep them from attending college. Ironically, this tool and its attendant changes was supposed to make
college access easier.

 

Susan Teerlink is the accountability and admissions coach for College Funding Advisors, LLC,
located in Harrisonburg, VA. She was also a co-author on the book Secrets Of How To Avoid
Overpaying For College  and is involved with GRASP, the Great Aspirations Scholarship
Program, a non-profit based in Richmond, Virginia.  You can read her other articles at
www.collegeplanningvirginia.com.

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