Families with a college student may notice a few differences on this year’s Free Application for Federal Student Aid.
The form, commonly called the FAFSA, is the key application to determine college financial aid. Similar to last year, the FAFSA became available on Oct. 1, but this year brings a few changes — most of which are related to new security measures.
In early March, the IRS shut down the online data retrieval tool on the FAFSA because of data-security concerns. The tool, known as DRT, is meant to streamline the application process by transferring income information from tax records to the FAFSA form.
According to financial aid administrators, DRT can save families time if they are selected for verification, since the IRS has already confirmed the tax information the tool provides.
[See key words used in financial aid awards.]
But due to fraudulent activity, the IRS shut down DRT for several months to implement new security measures between the FAFSA and IRS websites. Financial aid experts say these measures were deemed necessary, since completing the FAFSA form hinges on sensitive information, such as family income, tax data and assets.
For families filling out the FAFSA for the 2018-2019 school year, here are three key changes to the form.
1. You won’t see tax information transferred via DRT. “To enhance the security and privacy of the sensitive personal data transferred into the FAFSA form from the IRS, the new solution will encrypt the applicant’s or parent’s information and hide it from view on both the IRS DRT website and on the FAFSA web pages,” according to an announcement from the Department of Education.
With the new safeguarded tool, data is hidden from the parent’s or student’s view during all stages of the data transfer process, financial aid experts say.
“Only the school will be able to see the numbers,” says Brad Barnett, senior associate director of financial aid and scholarships at James Madison University in Virginia.
When using DRT, applicants won’t be able to amend or edit data entered into the FAFSA, says Stephen Dash, CEO and founder of Credible.com, a multilender marketplace focused on student loans.
But Dash says the numbers should be accurate because they’re from the IRS. “If you’re in a vanilla-type of situation where there’s not a lot of complexity, the tool should work fine since it’s pulling from the IRS.”
While applicants can’t see the tax information used from DRT, they will still know other information upon submission, such as their estimated family contribution, Pell-grant eligibility and whether they qualify for direct loans.
[Discover the colleges and universities that claim to meet full financial need.]
2. Some families won’t be able to use DRT. “Because IRS-transferred information will not be displayed, applicants and parents who filed a joint tax return will no longer be able to transfer their combined income earned from work into the FAFSA form from the IRS DRT website,” according to the Department of Education guideline.
For parents who are married but are filing separate tax returns, they can still use the IRS retrieval tool. But for those who file jointly, each parent will have to enter income earned from work manually, according to the new guidelines.
3. Applicants with IRA or pension rollovers should be cautious. If an applicant received a check with an untaxed distribution from rolling over an IRA into a new retirement account, those funds may be calculated as income.
In fact, there’s a new question on the FAFSA that asks an applicant whether that amount includes an IRA or retirement account rollover.
The guideline states: “If the applicant or parent answers ‘yes,’ he/she will be required to provide the amount of the rollover in a new entry field. Our system will then subtract the user-reported rollover amount from the amount of the IRA or pension distribution that was reported to the IRS.”
[Learn about using an IRA to pay for college tuition. ]
Barnett from JMU says families can always contact a financial aid office about a particular situation, such as an IRA rollover, that may have affected their estimated family contribution. But he says, “that’s getting into that professional judgment area.”
He advises families in this particular circumstance to submit a letter to their financial aid office.
Trying to fund your education? Get tips and more in the U.S. News Paying for College center.
More from U.S. News
Declare Yourself Independent for College Financial Aid
10 Shattered Myths About Financial Aid
Strategies for Students Too Rich for Financial Aid, Too Poor for College
Everything You Need to Know About the 2018-2019 FAFSA originally appeared on usnews.com
