Analysis: Bipartisan Legislation Would Allow IRS-ED Data Sharing, Fund MSIs

By Jill Desjean, NASFAA Policy & Federal Relations Staff

Editor's Note [12/11/2019]: The House on December 10 overwhelmingly passed an amended version of the FUTURE Act, which was sent back to the Senate for a final vote. The Senate quickly passed the bill late the same day under unanimous consent. The bill was sent to the desk of President Donald Trump, who is expected to sign it into law.

Editor's Note [12/5/2019]: The Senate on Thursday morning unanimously passed the FUTURE Act. NASFAA released a statement in support of the bill, and called on House leadership to take swift action to bring the bill to the full floor for a vote. Below is NASFAA's summary of the Senate-amended FUTURE Act.

On Tuesday, a bipartisan group of senators introduced a proposal that would provide $255 million in permanent, annual mandatory funding to Minority-Serving Institutions (MSIs) and simplify the financial aid application, verification, and student loan repayment process for millions of students and borrowers. The proposal, in the form of an amendment to the House-passed Fostering Undergraduate Talent by Unlocking Resources for Education (FUTURE) Act, would allow for direct data sharing between the Internal Revenue Service (IRS) and the Department of Education (ED). This is the same data-sharing provision that was included in last year’s FAFSA Act, a bill that NASFAA has strongly supported

While the House-passed FUTURE Act, which cleared the floor on September 17, would extend $255 million in annual MSI funding for just two years, the new proposed amendment would provide a permanent funding stream to support STEM education at MSIs. Senate leaders determined they could pay for permanent MSI funding with $2.8 billion in annual savings estimated by the Congressional Budget Office from improved accuracy in the federal student aid programs as a result of direct data sharing between IRS and ED, presumably from reduced improper payments and removing the risk of fraud in income-driven repayment (IDR) plans from self-certified income. 

Because the Internal Revenue Code (IRC) currently does not allow for the IRS to share taxpayer data with ED, the bill takes the important step of amending both the IRC and the Higher Education Act (HEA). The IRS Data Retrieval Tool (DRT) was designed to work around the lack of direct data-sharing authority by instead having the applicant retrieve their own tax information from the IRS, and then importing that information into the FAFSA. The amended FUTURE Act would amend section 6103(l) of the IRC to allow the IRS to disclose tax return information directly 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 transferred via the DRT, as well as the taxpayer’s filing status, whether they filed a lettered tax schedule, and whether the individual(s) had filed taxes.

The current DRT has several shortcomings, including the fact that there are categories of FAFSA filers who cannot use it, such as married couples filing separately and those who have filed amended returns. With information coming directly from the IRS, more income data will be confirmed by the IRS upon application, which should lead to a reduction in applications selected for verification, and a corresponding reduction in the associated burden on students and institutions. The legislation should also largely do away with the verification of non-filing  (VONF) requirement, since the bill includes whether the individual(s) filed tax returns as one of the shared IRS information elements.

The bill would also permit ED to share tax return information “solely for the use in the application, award, and administration of student financial aid or aid awarded by 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, which would be obtained on the FAFSA.

The bill further permits taxpayer data sharing between IRS and ED and/or its contractors for the purpose of verifying income for applicants requesting or renewing eligibility for income-driven loan repayment plans as well as for the three-year monitoring period after a borrower has received a loan discharge for total and permanent disability. A Government Accountability Office report published in July raised concerns around the potential for fraud in IDR plans. Direct data sharing would remove the need for students to self-certify their income to prove eligibility for federal IDR plans, safeguarding the integrity of the federal student aid programs without creating overly burdensome bureaucratic barriers for students.

Notification of ED’s authority to request tax return information from the IRS would be provided on the FAFSA, on applications for IDR plans, applications for total and permanent disability, and on the Master Promissory Note.

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 oversight and analysis as an allowable use of shared IRS information. It specifically excludes criminal investigations or prosecutions from the approved uses of IRS data. 

Finally, the bill also provides some additional funding for the Pell Grant program.

The Senate is expected to take up the measure as early as this week. If it passes the Senate, House leadership will decide whether to take the measure to the full House floor for a vote. NASFAA continues to be very supportive of direct data sharing; stay tuned for opportunities to become engaged in advocacy on this issue.


Publication Date: 12/5/2019

David S | 12/5/2019 2:44:31 PM

Real live progress, and better still, this bill (with a few tweaks, I believe) passed the Senate earlier today (and imagine the Senate acting as a legislative body, what a concept). I know that NASFAA has worked tirelessly for these improvements, and a big thank you to everyone for your efforts on behalf of our students and families.

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