News: Federal Policy & Advocacy

5 Questions About FAFSA Simplification Implementation

Monday, February 10, 2020  
Posted by: Carrie Warick, Director of Policy and Advocacy
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In December, Congress passed and the president signed the FUTURE Act, which included significant enhancements to the data sharing that takes place between the U.S. Departments of Treasury and Education. These changes will eliminate up to 22 questions on the FAFSA (or about 20% of the form), according to the bill sponsors, because these fields will automatically populate with information from the IRS. This is great news for students and families.

In the first month of 2020, NCAN received questions from our members about the implementation of this more robust data sharing process. In short, there aren’t a lot of answers yet, but here’s what we’re watching as the FUTURE Act implementation progresses.

1. When will the changes take place?

By far the most popular question about the FUTURE Act is: When will we actually see a shorter FAFSA? While there has not been an official announcement from the Office of Federal Student Aid (FSA), the FAFSA for any given year is developed over a 14-month cycle. So NCAN anticipates that full implementation could take several FAFSA cycles.

As Megan Coval, vice president for policy and federal relations at the National Association of Student Financial Aid Administrators, told U.S. News & World Report, "[This bill is] a really big change and will require a lot of work in the back end by the IRS and the Department of Education.”

The law dictates that FSA and IRS submit a written report to Congress 90 days after the law goes into effect to demonstrate their progress. That report will give us a better idea of the implementation timeline.

2. What are the 22 data fields to be transferred?

The talking points across Capitol Hill all included the line that the FUTURE Act would eliminate up to 22 questions from the FAFSA. While it’s impossible to know exactly which data fields will transfer from the IRS to the FAFSA until a draft is released, it is NCAN’s understanding that those fields are based on the current fields for IRS Data Retrieval Tool (DRT) users. The goal of this law is to make that transfer happen for a much larger proportion of filers. It’s also possible additional fields could be added if IRS and FSA can agree.

The fields currently transferred on the DRT are:

  • Tax year.
  • Tax filing status.
  • Type of tax return filed.
  • Adjusted gross income (AGI).
  • Income earned from work (if filing single or head of household).
  • Income tax paid.
  • Education tax credits.
  • Untaxed pensions/IRS distributions.
  • Tax-exempt interest income.
  • IRA deductions and payments.
  • Status of amended returns.

For a dependent student whose parents also have these fields transfer, the FAFSA would have 22 fields transfer. Additionally, the student’s name and Social Security number (which are used for an identity match, along with their address) would transfer.

3. Will all FAFSA filers benefit from these changes?

The intention of the FUTURE Act FAFSA changes are for all filers to be able to have their tax information, or the status of non-tax-filer, transferred from the IRS to the FAFSA form. However, we don’t know yet what that will look like in practice.

For example, if an eligible student has parents who are undocumented, file a foreign tax form, or have requested several tax filing extensions, how will their data be handled? These are the types of questions that FSA must consider while designing this new FAFSA.

4. How will the new match take place?

The current IRS Data Retrieval Tool requires a student to login with their FSA ID, name, and address as it appears on their tax form in order to access the transfer portal to move their data from the IRS to the FAFSA form. One of NCAN’s hopes is that this new direct data sharing will make the matching process easier for students. Currently, the address field in particular can make it difficult to gain access if the FAFSA filer does not type their address exactly the same way as it appears on the tax return, for example typing “St.” instead of “Street.”

Second, the FUTURE Act requires for all parties who have their data transferred to consent to the transfer. How this consent is gathered will also be part of the new FAFSA process.

5. Will the verification process be affected?

Verification change resulting in decreased verification melt is the second big goal of these FAFSA adjustments. The algorithms that determine who is selected for verification are highly confidential so that the system cannot be gamed. This makes predicting changes difficult. The most likely positive benefit is that non-tax-filers will not need to obtain confirmation of their tax status, as that information will now be available through the new IRS to FAFSA match.

It seems unlikely that all financial verification will completely disappear, but those who would not have pre-verified data should greatly, greatly decrease. However, verification will likely remain for number in family and number in college, as those are not tax field questions.

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