IRS Data Retrieval Tool

For the first time since it was taken down due to security concerns in March, millions of student loan borrowers can once again use the IRS Data Retrieval Tool (DRT) to electronically transfer their tax information into the online application for income-driven repayment (IDR) plans. Using the DRT, borrowers will be able to apply for IDR and update their income online at StudentLoans.gov, without needing to separately provide their tax returns.

We thank the Department of Education and IRS for working together to restore secure access to this critical tool, and for doing so without creating burdensome new requirements that would make it difficult for low-income students to use the DRT. We look forward to a full restoration of the DRT by October 1st, when it will become available for students completing the FAFSA to qualify for financial aid in the 2018-19 year.

For more information about the DRT outage, see our previous blog posts:

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This week, the Department of Education shared new information about its plans to restore access to the IRS Data Retrieval Tool (DRT), a tool that helps millions of students and borrowers easily transfer their tax information into the online FAFSA and the online application for income-driven repayment (IDR) plans for federal student loans. The tool has been unavailable for more than two months after being taken offline due to security concerns. Facing pressure from governors, legislators, colleges, financial aid professionals, and student advocates, the Department has committed to getting the tool secured and back online by the end of this month for the over four million borrowers who use it for IDR. However, the Department and IRS will not have the DRT back up for FAFSA use until the next application year starting in October, an extended outage that will continue to affect millions of students.

The DRT will be restored for student loan borrowers by the end of May. We thank the Department for committing to this timeline, since new data show that about 4.5 million borrowers use the DRT to apply for IDR plans or annually update their income information in those plans. As detailed in our earlier blog post and a recent MarketWatch piece, the DRT outage is more than just an inconvenience for borrowers. While the DRT is down, borrowers with taxable income cannot complete the process of applying for IDR or updating their income online at StudentLoans.gov. Borrowers who miss annual deadlines to update their income information can face unaffordable spikes in monthly payment amounts that increase their risk of delinquency and default, as well as interest capitalization that can add substantial costs.

Students still applying for financial aid for the upcoming 2017-18 year will not have access to the DRT at all. This extended outage will impact millions of students, as more than half of all aid applicants (more than 11 million students) applied for aid on or after April 1 in recent years. Many of these applicants used the DRT, and a greater share were expected to use it in 2017-18 due to recent improvements to the FAFSA timeline.  

For students applying for federal financial aid for the 2018-19 year, the Department and IRS are on track to restore access to the DRT by the time the FAFSA opens on October 1, and to do so in a way that protects access for low-income students. This is encouraging news, particularly since new data show that roughly half of all FAFSA filers use the DRT to transfer tax information from the IRS. As discussed in our earlier blog post, the DRT outage is causing millions of students to face a more complicated, daunting, and time-consuming process to apply for aid. Delays in that process can prevent students from getting their financial aid in time to enroll in college.

Given the importance of the DRT in helping students access financial aid and manage their loan payments, we echo the National College Access Network’s statement that the DRT outage “is an emergency, not a mere inconvenience.” It is essential to quickly restore the DRT in a way that balances student access and data security.

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20 million students complete the FAFSA every year to apply for financial aid from the federal government, states, and colleges. More than six million federal student loan borrowers are currently enrolled in income-driven repayment (IDR) plans to help keep their payments affordable and avoid default. For years, these students and borrowers have been able to use the IRS Data Retrieval Tool (DRT) to easily transfer their tax information into the online FAFSA and the online application for IDR plans. The DRT was abruptly taken down a month ago due to security concerns, and the Department of Education recently announced that it is expected to be offline until the next FAFSA season begins in October 2017.

The DRT is not just a “convenience” (as the IRS has described it), but the centerpiece of major improvements in simplifying essential financial aid processes. It has greatly increased efficiency and accuracy for consumers, colleges, and loan servicers. And its outage will have profound impacts on millions of students and borrowers who still need to apply for aid, complete verification, and submit IDR forms this year. We urge the Department of Education and IRS to work together to restore secure access to the DRT as soon as possible, and to do so in a way that avoids creating barriers to access for low-income students, such as requiring complicated financial or personal information.

We blogged last week about a number of things the Department of Education should be doing to mitigate the effects of the DRT outage. Meanwhile, as long as the DRT is down, students and borrowers are facing a more complicated, daunting, and time-consuming process to apply for aid and keep their student loan payments affordable. Each additional hurdle makes it less likely that people will get all the way through the process and be able to meet crucial deadlines.

How many students and borrowers will be affected by the DRT outage between now and October?

  • More than 8 million students (40% of all aid applicants) applied for aid between April 1 and September 30 in recent years. Many of these applicants used the DRT, and a greater share were expected to use it in 2017-18 due to recent improvements to the FAFSA timeline.  
  • 3.4 million federal student loan borrowers applied for IDR or updated their income information electronically and had access to the DRT in the most recent year.*

How will students and borrowers be affected by the DRT outage?

For the FAFSA:

  • Instead of using the DRT to quickly transfer their tax information and pre-populate the answers to up to 20 high-stakes questions, students will have to get a copy of their 2015 tax return and manually input their data into the FAFSA (both the 2016-17 and 2017-18 FAFSAs require 2015 tax data). If they don’t have a tax return on hand, they can try to retrieve information from their tax software or tax preparer if they used one, or request a tax transcript from the IRS, but getting an official tax transcript can take up to 10 days by mail. It is possible but more difficult to quickly get an electronic transcript: you first need to have a mobile phone under your own name plus a personal credit card, mortgage, home equity loan, or car loan – hurdles that make that process inaccessible for many, particularly low-income families.
  • After submitting the FAFSA, students who don’t use the DRT may be more likely to be selected for an additional process called “verification” and required to get an official tax transcript to confirm their FAFSA information before they can receive their aid. For example, Purdue University reported that the share of aid applications flagged for verification doubled from 10% to 20% after the DRT was taken offline. The Department of Education has touted the DRT as “the fastest, easiest, and most secure method of meeting verification requirements.” Without it, students have to request official tax transcripts, with the hurdles discussed above. We, along with a bipartisan group of 43 lawmakers and national associations of financial aid professionals, college admissions counselors, and college access professionals have asked the Department to also accept signed tax returns while the DRT is not available.
  • The additional delays in getting the necessary documentation to apply for aid or complete verification will affect whether students receive their financial aid in time to enroll in college. Many states and colleges require the FAFSA for their own aid programs, many of which are first-come, first-served. For example, a Buzzfeed article reports that Texas state grants for needy students have already run out for this year, so students backlogged in verification are losing out on $5,000 of grant money. Additionally, more than half of financial aid administrators surveyed said that verification sometimes, often, or almost always results in students being unable to enroll on time. Without the DRT, the delays caused by verification will be even worse.

For IDR plans:

  • Borrowers with taxable income cannot complete the process of applying for IDR or updating their income online at StudentLoans.gov, which took an average of just 10 minutes when the DRT was available. The online application will create a PDF that borrowers will need to send into their loan servicer, along with a copy of their most recent tax return. Depending on their servicer, borrowers may be able to upload the required documents onto the servicer’s website or will need to mail or fax everything.
     
  • The additional hurdles for documenting income without the DRT affect not only borrowers who are applying for IDR, but also borrowers who are already in IDR. They are required to update their income documentation every year, and borrowers who miss those annual deadlines can face unaffordable spikes in monthly payment amounts that increase their risk of delinquency and default, as well as interest capitalization that can add substantial costs. As mentioned in our earlier blog post, we urge loan servicers to give borrowers in IDR more time to submit their updated income documentation while the DRT is down. 

* There are no publicly available data on how many electronic IDR applications were previously submitted between April and October (each borrower is on his or her own timeline), or how many borrowers specifically used the DRT.

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This post was updated on 4/24/17 to reflect changes from the Department of Education.

The IRS Data Retrieval Tool (DRT) allows students to automatically transfer their tax information into the online FAFSA or application for income-driven repayment (IDR) plans, instead of having to manually enter detailed tax return information. Millions of students each year rely on this streamlined online process to apply for federal student financial aid and to keep student loan payments affordable. Unfortunately, the DRT was abruptly taken down several weeks ago due to security concerns.

This week, a bipartisan group of 43 lawmakers from the House and Senate wrote a joint letter expressing concern about the DRT outage and recommending that the Department of Education and IRS take specific actions to improve communications and reduce the impact on students affected by the outage. Earlier this month, we joined a similar letter with national associations of financial aid professionals, college admissions counselors, and college access professionals.

Just today, the Department of Education announced that the DRT will be offline until the start of the next FAFSA season, which is expected to be October 1, 2017. This extended outage has very troubling implications for students applying for aid and borrowers trying to manage their student debt. The Department must take immediate steps to better communicate with and help students apply for the financial aid they need to get to and through college, as well as help borrowers access affordable loan payments that can keep them out of default. The Department should quickly move to:

  • Improve online communications about the DRT outage on all relevant federal websites and social media accounts, and engage in direct outreach to borrowers. Those communications should make clear that the DRT is currently down and provide specific guidance on what students, families, and borrowers should do in the meantime.
    • For example, prominent notices and guidance should be posted on:
      • The FAFSA homepage: As shown below, the FAFSA homepage includes an outage notice in the announcements, but it is not immediately clear what the outage means for students and users must scroll down for any guidance.

  • StudentAid.gov: On StudentAid.gov, the outage notice is one of several rotating items in the announcements bar at the bottom of the page, which can be easily missed.

  • StudentLoans.gov: There is currently no notice or announcement about the DRT outage on StudentLoans.gov, where borrowers go to apply for IDR plans and annually update their information to keep their payments tied to income.
     
  • The IDR application itself. There is currently no mention of the DRT outage on the online IDR application on StudentLoans.gov. As shown below, there are instructions within the application for how to proceed without the DRT, but borrowers may still start the form thinking that they can use the DRT, as they may have in previous years. Without the DRT, those borrowers cannot complete the application process online, but will have to print out the pre-filled application and mail it to their loan servicer, along with their paper tax return. (Update: The Department of Education has added a notice about the DRT outage to the IDR application.)
  • The Department’s Facebook and Twitter pages: Although it’s helpful that DRT outage notices are “pinned” at the top of both pages, the Department should regularly post those announcements so the public will see them in their feeds.
  • Additionally, the Department should directly email all borrowers in IDR plans who are approaching their annual deadlines to update their income information, informing them about the outage, telling them what they’ll need to do, and encouraging them to submit their paperwork early, since it may take loan servicers extra time to process their documentation without the DRT.
  • If students’ likelihood of being selected for verification is based on their use of the DRT, the Department should revise its verification selection criteria to prevent increases in the number of students who have to go through that complex extra process.
     
  • For FAFSA applicants selected for verification, the Department should allow signed copies of tax returns to satisfy documentation requirements. Students and parents used to be able to use the DRT for this, and the process of requesting an official tax transcript can be very burdensome (as documented by the National College Access Network). (Update: The Department of Education announced on 04/24/17 that it is making this change.)
     
  • The Department should adjust its criteria for requiring colleges to resolve conflicting information between the 2016-17 and 2017-18 FAFSAs, which are both based on income during calendar year 2015. This will help ensure that students get the aid they need and avoid disruptions in the middle of the year.
     
  • The Department should urge loan servicers to give borrowers in IDR more time to turn in their updated income documentation. Borrowers who miss their annual deadlines can face unaffordable spikes in monthly payment amounts that increase their risk of delinquency and default, as well as result in interest capitalization that can add substantial costs. Under current regulations, loan servicers have some flexibility in setting their deadlines; instead of setting deadlines 35 days before the end of the borrower’s annual payment period, they can set them closer to the end of the payment period. As long as borrowers submit documentation before their servicer’s deadline, they are not penalized, even if their paperwork is not fully processed before their next payment period starts. 
     
  • The Department should ensure that its loan servicers and Federal Student Aid Call Center employees are well-equipped to help students, families, and borrowers navigate financial aid processes in the absence of the DRT

It is also crucial that while the Department and IRS work together to restore access to the DRT as soon as possible, they prioritize finding a way to maintain the security of the tool without creating barriers to access. We urge them to avoid requiring complicated financial or personal information that the low-income students who rely on the tool are unlikely to be able to provide.  

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