Senators Introduce Bipartisan Bill to Simplify FAFSA and Reduce Verification through ED-IRS Data Sharing

By NASFAA’s Policy & Federal Relations Staff

A group of bipartisan senators yesterday introduced the Faster Access to Federal Student Aid (FAFSA) Act of 2018, a bill that would, through better integration with the Department of Education (ED) and the Internal Revenue Service (IRS), simplify the application, verification, and student loan repayment processes. Introduced by Chairman of the Health, Education, Labor and Pensions (HELP) Committee Sen. Lamar Alexander (R-TN), Ranking Member of the HELP Committee Sen. Patty Murray (D-WA), Sen. Sheldon Whitehouse (D-RI), and Sen. Cory Gardner (R-CO), the bill takes the important step of amending both the Internal Revenue Code (IRC) and Higher Education Act (HEA) to allow for cross-agency data-sharing that would improve and streamline the federal student aid system. The bill implements a portion of NASFAA’s FAFSA simplification proposal, which was presented by NASFAA President Justin Draeger in a Senate Health, Education, Labor, and Pensions Committee hearing in November 2017.

The IRC currently does not allow for the IRS to share taxpayer data with ED. The IRS Data Retrieval Tool (DRT) was designed to work around the lack of data-sharing authority by instead having the applicant obtain their own tax information from the IRS, and then import that information into the FAFSA. The FAFSA Act would amend section 6103(l) of the IRC to allow the IRS to disclose tax return information to authorized ED officials for the purposes of “determining eligibility for, and amount of, Federal student financial aid.” The allowable information to be disclosed would include all items currently brought over from the DRT, and would also include “the filing status of such taxpayer,” including whether the applicant had filed taxes.

With information coming directly from the IRS, verification burden should be greatly reduced because applicants who currently fall into categories that are ineligible to use the DRT would presumably be eligible to have their tax data shared directly between IRS and ED. The legislation should also largely do away with the increasingly difficult verification of non-filing requirement (VONF), since the bill includes filing status as one of the shared IRS information elements.

The FAFSA Act would also permit ED to share tax return information “solely for the use in the application, award and administration of Federal student financial aid, State aid, or aid awarded by eligible institutions or such entities as the Secretary of Education may designate” to eligible institutions of higher education, state higher education agencies, and certain scholarship organizations with the applicant’s consent.

The bill further permits taxpayer data sharing between IRS and ED for the purpose of verifying income for applicants requesting or renewing eligibility for income-driven loan repayment plans as well as for the 3-year monitoring period after a borrower has received a discharge for total and permanent disability.

In addition to providing a more streamlined, less burdensome process for students and families, the bill would create a more secure data-sharing experience, reduce applicant errors in reported income, and reduce improper payments. The bill also aims to improve cost estimates and forecasting of the federal student aid programs by including research, oversight and analysis as an allowable use of shared IRS information. In addition, ED may use IRS data for “producing aggregate statistics for reporting, research, or consumer information on the performance of programs or institutions of higher education.”

“The FAFSA Act not only makes the application process easier for students, but does so while preserving the integrity of the student aid programs,” said NASFAA President Justin Draeger. “These are the sort of common-sense, bipartisan solutions students and families need from Washington D.C. and we applaud these Senators for their commitment to removing barriers to a postsecondary education. The financial aid community urges swift action on this bill so that work can begin to reduce the application and data verification burden that continues to overwhelm students and institutions.”


Publication Date: 11/14/2018

Kimberly L | 1/10/2019 11:10:13 AM

I agree with Tracy and Irma. I have seen far too many ISIRs where the student and or parent indicates they have absolutely no income, no assets, and receive no public assistance. Often times, these ISIRs have not been selected for verification. However, if there are several people in the household on these ISIRs, we will often select the student for institutional verification. Most of the time, there is income AND a filed tax return. I understand that many students and families are intimidated by the FAFSA, however, that should not give people license to ignore or omit facts. I have been in this industry for over 30 years. Far too often, students and families do not take advantage of FAFSA workshops offered at schools. In addition, many of the students and families want to approach the FAFSA like an instant-credit application. The FAFSA should be approached like an open-book test about the student's family. I understand that we want to lighten the load on students and financial aid administrators, however, we should also preserve the integrity of the program.

Laura M | 11/21/2018 12:0:47 PM

A thought to be sure to include foreign tax filers in the plan. They can currently get irs nonfililing letters or transcripts that exclude their income. To be considered equally, they should be providing foriegn income tax statements. Maybe a question leading into the tax section asking if parents lived or worked in another country during the tax year?

Irma C | 11/20/2018 11:39:30 AM

I agree with Tracy. We do see where they were supposed to file but didn't. It'd also be great if it would just pull any wages listed to that social security number whether they filed or not. FAFSA's are being filled with didn't file hoping they aren't verified but once they're verified they actually turn in their tax transcripts. We see this a lot.

Joseph K | 11/14/2018 3:47:07 PM

This sounds like a positive step. I hope they could also transfer over or access the most current data in cases of amended returns. There is no need to provide the original inaccurate return data and a flag telling us the family amended the return after that. Common sense would provide the most current data for taxpayers in question.

Tracy H | 11/14/2018 12:3:03 PM

This is definitely a step in the right direction! Not only should it transfer over the filing status, but it should also transfer over information or present a flag indicating whether or not individuals appear or are REQUIRED to file taxes. We've gotten so many verification of non-filing letters from individuals that then turn around and give us copies of W-2's where the amount more than exceeds the threshold for being required to the verification of non-filing letter from the IRS essentially proves, verifies, and means absolutely nothing.

David S | 11/14/2018 10:20:57 AM

All positive steps. Hardly all that's needed, but this would be progress. Next...a study to determine just how necessary filing the FAFSA annually is, at the very least for low income households, and an earlier FAFSA, or even automatic 0 EFC for families on public assistance. Imagine a world in which a low income student can begin a college search knowing that they will qualify for a full Pell Grant from the time they start until the time they graduate. Imagine families being able to commit to the major financial obligation of educating their daughter or son knowing how much the whole thing is going to cost (just as we do when we purchase a home or a car), and not just a year at a time with their fingers crossed that it won't go up later.

Marguerite J | 11/14/2018 10:16:55 AM

this sounds wonderful! I really hope this initiative passes and becomes law, this will be a blessing to our neediest families.

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