How Popular Was the IRS Data Retrieval Tool?

The financial aid application season for the 2017-18 academic year started out on a high note for current and prospective students. Thanks to the adoption of “prior prior year” or “early FAFSA,” students could file the FAFSA beginning October 1 instead of the following January 1 for the 2017-18 academic year. Students took advantage of this change in large numbers, with about 5.4 million students completing the FAFSA before the previous opening date of January 1.

But FAFSA filing hit a significant roadblock in early March when the federal government quietly pulled access to the IRS Data Retrieval Tool (DRT), which allowed students to quickly and seamlessly transfer their tax records from the IRS to the FAFSA. The tool was down for nearly a week before the IRS issued a statement explaining that the site had been taken offline due to security concerns—and now it looks like the Data Retrieval Tool will be down until next fall at the earliest. Students can still complete the FAFSA by inputting information from their 2015 tax returns, but this is an extra hurdle for many students to jump.

It is possible that the DRT outage is already affecting FAFSA filing rates. Nick Hillman of the University of Wisconsin-Madison (one of the best higher ed finance researchers out there) and his sharp grad students Valerie Crespin-Trujillo and Ellie Bruckner) have been tracking FAFSA filing trends among high school students since the start of this application cycle. Their latest look at filing trends (which they update every Friday) shows the following, which suggests a possible dip due to the DRT outage.

One question that hasn’t been addressed yet is how many students were actually using the DRT when it was pulled. Unlike the great data that Federal Student Aid makes available on FAFSA filing trends, far less data are available on DRT usage. But I was able to find two data points that provide some insights about how many FAFSA filers used the DRT. The first data point came from Federal Student Aid’s 2016 annual financial report, which listed the DRT as a priority for the department. As the highlighted text below shows, about half of all applicants who filed taxes used the DRT in the 2014-15 filing season.

A tidbit of more recent data comes from a presentation that Federal Student Aid made to a conference of financial aid professionals last fall. As shown below, 56% of the 2.2 million FAFSA filers in October 2016 used the DRT. Early FAFSA filers may have different characteristics than filers across the whole application cycle, but this again shows the popularity of the DRT.

Another important group of students use the Data Retrieval Tool—students who are enrolling in income-driven repayment plans. These students have to certify their income on an annual basis (and a majority of borrowers already struggle to do this on time), which becomes more time-consuming without the DRT. It’s still possible for students to do by submitting documentation of income, but the loss of the DRT makes that a lengthier process. I was unable to find any information about DRT usage among people in income-driven repayment programs, but my gut instinct is that it’s a fairly high percentage of borrowers.

The bottom line here—the lengthy outage of the IRS Data Retrieval Tool doesn’t mean that students can’t apply for federal financial aid or income-driven student loan repayment programs. But it does create an additional roadblock for millions of students, their families, and financial aid offices to navigate. Only time will tell whether the DRT outage is associated with lower FAFSA or income-driven repayment filing rates, but a small negative effect seems plausible.

Thanks to Carlo Salerno of Strada Education for inspiring me to dig into the numbers. Twitter conversations can be useful, after all!

Author: Robert

I am an assistant professor of higher education at Seton Hall University. All opinions are my own.

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