08 Jun Getting Your Hands DRT-Y: Reflections on Year Two of the FAFSA and the IRS Data Retrieval Tool

by Linda Peckham, Senior Training Strategist, Great Lakes Higher Education Corporation and Affiliates

When Norman Caito first learned of the requirement that aid applicants pull their IRS data into their 2012-13 FAFSA data online, he was encouraged. “I was thrilled with the concept that I’d be able to review accurate application data early in the awarding cycle,” said Caito, Director of Financial Aid Operations and Services at the University of San Francisco, “At USF, verification of application data is critical to our mission of getting the right funds to the right students.”

The process is enabled by the Data Retrieval Tool (DRT), which was designed to pull actual tax return data into the FAFSA to make it easier on families to complete the application—and to ease the verification process for aid administrators. Although the DRT was available in the 2011-12 application cycle, it was not mandatory. Effective with the 2012-13 processing cycle, the Department of Education adjusted the verification requirements to include that certain elements from the FAFSA could only be verified with DRT data, or through the use of an official IRS tax transcript submitted by the applicant.

Caito and other aid executives have learned the hard way that the regulation may have had the best of intentions—to simplify verification processes and reduce potential financial aid fraud—but its implementation has been challenging. Successful adoption of the process has required patience and out-of-the-box thinking, as well as some labor-intensive work-arounds when families are unable to successfully transfer their IRS data to the FAFSA.

Leslie Limper, Director of Financial Aid at Reed College, shares Caito’s observations. “Verification is very important here at Reed, so we communicated the new information about the DRT to families early and encouraged them to use it.”

Limper discovered that most families in her applicant pool followed their instructions faithfully and were happy to comply with the new process. However, continued snags between the IRS, the Central Processing System, and sometimes even the U.S. Postal Service resulted in process failures and lag times that have impacted aid offices’ ability to review and verify information in a timely manner. Limper adds: “The things we found out about how to really make this process work, we learned on our own. As a result, we’ve been adjusting our processes and dates all year long to accommodate families and the processing challenges we’ve encountered.”

Susan Fischer, Director of Student Financial Aid at the University of Wisconsin-Madison, says the new process has presented a new “balancing act between administrative burden and good customer service to families.” Her team spent many hours revising processing and verification requirements at the beginning of the year to ensure that their office could meet processing deadlines and help families with the new approach. “We are dancing as fast as we can,” says Fischer, who cautions fellow aid administrators to find the most efficient way to verify data and disburse aid prior to the academic year.

According to Caito, Limper, and Fischer, some of the most common problems that families encounter with the DRT include:

  • IRS data not being available for transfer within the 2-3 calendar days that had been promised (thus FAFSA processing was delayed).
  • Delays in receiving IRS transcripts when requested because of address match issues.
  • DRT or transcripts not being available to those who owed money to the IRS for 2011.
  • Delays in the availability of either the DRT or the transcript request for taxpayers who filed towards the end of the cycle in April.

To reduce some of the administrative burden caused by processing delays, the Department of Education recently adjusted its guidance to allow schools to use paper tax returns to verify data for filers “who have unsuccessfully attempted to use the DRT or obtain a transcript” until July 15th. But many schools are continuing to ask families to use the tool or the transcript anyway. “The process is here to stay and we’d rather have families stay on this path whenever possible,” says Heather McDonnell, Associate Dean of Financial Aid and Admissions at Sarah Lawrence College.

Thinking ahead to next year, aid colleagues suggest the following tips to help better prepare your applicants for the DRT or transcript request process:

  • Clearly explain the DRT process to parents on your initial verification document or institutional application and ask them to “check off” which process they intend to use (DRT, transcript request, or non-tax filer status). Use this data to help track application results in your FAMS system and send targeted follow-up messages to families as needed.
  • Remind parents that the DRT or transcript request process works faster if they file their tax returns electronically, rather than by paper.
  • Inform joint tax filers that the IRS will only recognize data transfer requests from the filer whose name is first on the tax return and/or whose IRS PIN is being used to identify the IRS record.  As an example, if the mother is helping the student file the FAFSA, but is not listed first on the parental joint tax return, and attempts to access and complete the IRS data transfer site, the IRS will neither recognize nor approve the data transfer.
  • Remind families that although FAFSA guidance indicates that the DRT or the transcript should be available around three weeks after they have filed, this timeframe is extended towards the end of the federal tax deadline in April. If FAFSA filers wait until April to file their returns, they can expect that the DRT or transcript request will take up to six weeks to process.
  • Explain that when requesting a paper transcript, the filer’s mail address must exactly match what the IRS system has on file. In cases where the postal service has abbreviated addresses or the filer has moved, the IRS may delay sending out a transcript until the issue is resolved.