On the eve of spring filing deadlines for college financial aid applications, data security concerns have caused federal officials to disable an important online resource used by millions of students and parents. Since 2010, the Internal Revenue Service’s Data Retrieval Tool (DRT) has streamlined the annual financial aid application process by allowing students and parents to electronically import household tax information already on file with the IRS directly into the student’s online Free Application for Federal Student Aid (FAFSA). The FAFSA is the single most important form tied to federal and state grants, loans work-study funds and other aid for undergraduate and graduate students. The DRT makes the aid application process faster while reducing errors. The DRT also is used for online applications by student loan borrowers seeking to enroll in the federal government’s income-driven repayment programs. Last week, without explanation, the DRT was removed from government sites.
After being prompted for an explanation, the IRS and the U.S. Department of Education disclosed that security concerns forced removal of the DRT and it would remain unavailable for several weeks. In a joint statement, the agencies stated the temporary suspension of the DRT was “part of a wider, ongoing effort at the IRS to protect the security of data.” The agencies said the action was “a precautionary step following concerns that information from the tool could potentially be misused by identity thieves.” The agencies did not divulge whether concerns were prompted by an actual identity theft incident or a breach, but stated, “we believe the issue is relatively isolated, and no additional action is needed by taxpayers or people using these applications.” The agencies indicated they were exploring the scope of the issue and jointly investigating it. While “actively working on a way to further strengthen the security of information provided by the DRT,” the agencies offered no specific timeframe for returning the online tool or other details of the security problem.
Although the 2017-18 FAFSA has been available for completion - with the DRT - since last October, sources estimate that millions of students still have not filed the form. The alternative to the DRT not only makes the process more cumbersome, but creates inevitable mistakes and delays. Applicants must manually enter requested tax information from their tax returns, risking entry errors. Also this is the first year the FAFSA requires prior-prior year tax data. That means students and parents must have readily available copies of their 2015 tax returns, and returning applicants without access to the programmed, automatic loading function of the DRT may enter wrong tax year information based on prior experience. If 2015 tax returns are unavailable, applicants have to obtain copies of tax transcripts from the IRS, adding further delay if the information cannot be retrieved online. (A mailed paper copy takes 5-10 business days.)
In addition, experts say applicants who manually enter financial information into the FAFSA are more likely to face an audit—known as “verification”—requiring proof of family income and assets. Thus with the disabling of the DRT, colleges face a significant increase in verifications leading to more delay and backlogs in aid determinations. The loss of the DRT adds an additional hurdle for student borrowers struggling to repay existing loans who will now encounter delays in obtaining an income-driven plan.