What Went Wrong With Verification?

By Allie Bidwell, NASFAA Senior Reporter

Over the last decade, the Department of Education (ED) has made attempts to reduce financial aid verification rates. But despite the attempts to ease the burden, a complex web of promised solutions and new requirements has resulted in little to no change in verification rates, creating a troubling situation for both students and schools.

Financial aid administrators know all too well how easily the verification process can derail students who otherwise would receive the financial aid needed to pursue their college dreams. Not only can it impose an undue burden on students who have already overcome incredible obstacles, but it also creates more work for aid administrators, taking their valuable time away from the people who matter most: their students.

A new resource, "History of Changes to Financial Aid Verification," first revealed at the 2018 NASFAA National Conference in Austin this summer, outlines the sort of "one step forward, two steps back" pattern that the financial aid community has come to know with regard to verification.

Nearly 10 years ago, ED first made the IRS Data Retrieval Tool (DRT) available for limited use. This tool alone should have greatly reduced if not essentially eliminated the need for verification, as it imports data already considered verified into a student's FAFSA. A few years later, during the 2012-13 award year, ED proposed creating a more targeted, fine-tuned verification system, while simultaneously removing the 30 percent cap. The latter was done with the expectation that the former would produce a more accurate and efficient verification system. Around the same time the DRT became available for more widespread use and was recognized as an acceptable form of verification documentation.

However, these seemingly positive changes ended up falling short of their promise. "In the end, the fine-tuning came up short while the amount of data elements and numbers of students selected for verification soared," NASFAA President Justin Draeger wrote in a recent op-ed published in The Hill.

Another stumbling block came along when ED imposed the verification of non-filing (VONF) status requirement in the 2014-15 award year, a cumbersome and lengthy process that was eventually extended to all schools.

With the implementation of prior-prior year (PPY) income data in award year 2017-18, there was more promise for reduced verification burden, as more applicants would be using the DRT. But shortly thereafter, the IRS DRT was suddenly taken offline — a move that was not initially transparently acknowledged by either ED or the IRS, and lasted throughout the 2016-17 and 2017-18 award years. Without the DRT, applicants required to submit documentation for VONF had to jump through additional hoops to obtain tax transcripts before ED allowed for alternative documentation. Soon after the DRT was restored, ED revealed there was a glitch in the verification model, but subsequently said there would be no changes to verification requirements for 2019-20.

In sum, a series of unfortunate events, some controllable by ED and some not, have led to this current predicament.

In attempting to make adjustments to the verification model, ED is caught between a rock and a hard place, as it tries to balance competing congressional mandates that seek to maintain program integrity while also making student aid funds available to needy families. Lawmakers are at the same time pushing for financial aid dollars to make it to the right students with as little burden as possible. But they also are quick to pounce on any anecdotes of financial aid abuse, misuse, or misappropriation.  

While the situation could be improved with greater transparency from ED as to the reasoning or data behind selection criteria, and whether there is data to show the necessity of VONF, the real solution is to fix the FAFSA. Simplifying and improving the FAFSA expanding the use of the DRT and by auto-importing data already considered verified by other federal agencies would eliminate the need for verification altogether.

NASFAA has proposed creating a tiered application that offers applicants a customized set of questions, rather than sticking with a blanket approach for applicants from all income levels. The more complex a family's financial status, the more data would be required from them. But by expanding the information that can be imported via the IRS, all applicants would have fewer questions to complete.

Take a look at the verification timeline and read NASFAA President Justin Draeger's full op-ed in The Hill on how fixing the FAFSA can solve the issues with verification.


Publication Date: 7/26/2018

Ashraf M | 7/27/2018 11:38:33 AM

It's never surprised me that IRS-DRT users were still selected at a high rate for verification. The truth is the data retrieval tool isn't very good at catching income deductions due to schedules C, D, E, or sometimes line-21 (carry over losses) on the 1040 form--most of which are business/investment income (or, usually, losses-on-paper) that artificially lower an AGI, and by extension, the EFC. But there's no way to see these deductions unless you actually look at the tax forms. Hence, everyone who's Pell eligible will always suffer with higher scrutiny, due to the few who are able to discount a lot of income.

Rita B | 7/27/2018 11:9:31 AM

Why would you work hard to correct malfunctioning software when you have thousands of free worker on campus to do your work for you? They are not free on campus and verification has cost billions in staff time over the years. MORE IMPORTANT I have yet to see data on how much verification has saved in reduced awards....last I heard it was a wash between reduced and increased awards. It is time for the financial aid to put its collective foot down--HARD.

Robert F | 7/26/2018 3:8:31 PM

What happened to the initiative discussed about two or three years back in regard to only verifying 1040 long form filers, or at least giving them greater scrutiny? It seems like with the recent tax reform bill passed there will now be fewer Schedule A filers. Anyway, it is the folks with large capital gains and losses, partnerships, S Corps, C corps and multiple rental properties that need the scrutiny. Seems like they could be more targeted in regard to the really wealthy and leave the poor folks alone. Fewer long forms and greater data matching would seem to accomplish the desired result of making sure Pell grants do not go to the merely "poor on paper" folks.

David S | 7/26/2018 1:21:12 PM

Sorry - typo (NASFAA...maybe consider an edit function?)...meant to say that I've seen Pell reduced by $50, not $5. Although a $50 reduction could be because another number was off by $5...

David S | 7/26/2018 1:18:25 PM

I'll keep hammering away at the point I made at an ED listening session at FSA. The IRS audits approximately 1% of tax filers, and the federal government acknowledges losing as much as $458B - that's billion with a B - a year to tax fraud. Nearly half a trillion every year. Meanwhile, in theory, 30% of the poorest students on America's college campuses (and we know in reality the figure is higher, maybe much higher), are forced to go through the annual ritual of having to prove for the 2nd time (1st time being the FAFSA) that yes, they are in fact poor. And I've literally seen verification "corrections" reduce a student's Pell Grant by $5.

Title IV aid started as part of LBJ's War on Poverty. Verification is part of a War on Poor People.

Pamela R | 7/26/2018 1:17:49 PM

I agree with the previous comments. In addition, we have seen an increase in parents filing incorrectly and/or initially stating that they are separated, but based on verification it becomes evident that they are living together, which can cause cancellation of initially awarded Pell and other need-based aid. More of these cases coming to light recently could have to do with implementation of prior-prior, as applicants have to plan 2 years ahead in order to effectively "pull one over" and exclude one of the parents' income, instead of just 1 year ahead. Until the congress and the IRS makes changes to available filing statuses so people (and tax preparers) are not willing to commit fraud to file HOH, and until there is some type of "marriage database" we will be dealing with this type of conflicting information. Also skipping asset questions based on low income has become problematic when we realize that a family with low income owns multiple rental properties and are partners in multiple businesses, so their income is low only on paper. The verification selection process needs to become much more sophisticated to select cases like these, in addition to the obvious errors as mentioned in a previous comment.

Amanda C | 7/26/2018 12:37:01 PM

They could start by not selecting students who use the DRT and just need to verify their HHS/college.
I agree with James C: stop selecting students year after year if subsequent years' AGIs are similar.

Tyler B | 7/26/2018 9:31:01 AM

This is a great article with amazing plans for future changes but those changes can't possibly take effect until 2020/2021 if they are even taken under consideration by the DOE. The DOE has been promising streamlined approaches and fewer verification selections but has provided neither for more than a decade. The adjustment to their algorithm this year was supposed to have reduced verification numbers but ours are nearly double over the 2017/2018 numbers. There has never been transparency from the DOE or data to back up what they are requiring we request from families as part of the process. The DOE should provide more transparency and data to back up why changes like the VONF letter requirement are necessary. If additional requirements don't change the outcome why are they increasing barriers to our neediest families?

James C | 7/26/2018 9:5:18 AM

I don't believe the Department uses prior year FAFSA data in determining who to select. For example, if a student was selected for verification in the prior year and it resulted in no significant changes and in the subsequent year the data is similar (AGi, household size) they should not be selected. Too many applicants get selected every year (almost all pell recipients seem to get selected). On the other hand obvious errors are not selected. For example when student and parent AGI are equal or both parents income from work are exactly the same value. These are obvious errors that should be selected and aren't.

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