Savvy Consumer: Applying for financial aid just got a little easier
Financial aid season has begun, and this year parents and students looking for federal grants and loans have an electronic tool to help them fill out the form.
It's called the IRS Data Retrieval Tool, which takes data directly from your e-filed tax return and puts it into the proper boxes on the Free Application for Federal Student Aid form.
The tool works for about 80 percent of all filers and became available Sunday.
Schools are recommending use of the optional tool because it improves the accuracy of information on the FAFSA and means that students selected for verification don't have to provide their tax forms to the school.
"It is a great feature that speeds up the application and review process," said David Ximenez, associate vice chancellor for enrollment services at Tarrant County College. Previously, around 40 percent of TCC students had to supply tax forms to verify data on their FAFSAs, he said.
Anyone who has filled out the FAFSA knows that it can be difficult to know exactly what is required in terms of financial disclosure. The FAFSA, created by the Education Department, does not use the same terms as the IRS in describing income and assets.
The data retrieval tool takes out most of that guesswork, said Mike Scott, director of financial aid and scholarships at Texas Christian University, where about half of the students fill out the FAFSA.
"It makes the form much easier for families to not have to interpret its terminology," Scott said. "The IRS tool is likely the first step toward making a dramatically different FAFSA form into a short, simple set of questions, which will make the process much less daunting to families."
The first step to using the new tool is to file your taxes -- and soon, said Karen Krause, director of financial aid at the University of Texas at Arlington.
"If you file your taxes electronically, give it two weeks before you fill out the FAFSA," she said. "There is a tiny delay to be able to use it."
If you don't e-file, it will take even longer before you can use the retrieval tool to fill out your FAFSA, she says.
Remember, even if you owe taxes, you can file your return now and delay paying the IRS until the filing deadline, which is April 17 this year because April 15 is a Sunday and April 16 is Emancipation Day, a holiday in Washington, D.C.
To use the new IRS tool, you need a valid Social Security number and a filed tax return from the previous year. A box on the FAFSA website, www.FAFSA.ed.gov, will port you to the IRS website, where you will be asked some security questions. Then the tax information will be automatically downloaded to your FAFSA form.
Not all parents and students will be able to use the retrieval tool, however, Krause said.
If your tax status is married and filing separately, or if you filed an amended tax return for the previous year, you cannot use the tool. Also, if your marital status has changed since Jan. 1, you will not be able to use it. Those parents or students who filed outside the U.S., or did not or will not file taxes, obviously cannot use it either.
The Education Department said it plans to send an e-mail to those who have already filed the FAFSA, which was available Jan. 1, and used estimates for their financial figures. The e-mail will remind them to go back and update the information with their actual numbers from their IRS tax filing.
Also, applicants who use the IRS data retrieval tool and then manually update a field, or who opt out of using the tool, may be selected for verification. You will need to explain why your update is more accurate than what was pulled from the IRS and back it up with documentation.
Filing the FAFSA as early as possible is important because many schools have moved up their financial aid filing deadlines, said Mark Kantrowitz, founder of Finaid.org.
"Deadlines are very early this year," he said. "It's already passed for Oregon [for a state grant program]. Fifteen states have deadlines in February, and 10 more have deadlines in March."
The University of Texas at Austin announced last week that it is moving its priority financial aid deadline to March 15, a couple of weeks earlier than usual.
"It was moved to March 15 because that matches the date on which the Texas Higher Education Coordinating Board requires qualifying resident students to file and ensure priority status for Texas' Top 10 percent scholarships," said Tom Melecki, the university's director of student financial services. About 58 percent of the UT-Austin freshmen who came from Texas high schools qualified for the Top 10 percent scholarship last fall.
Krause said UT Arlington's financial aid deadline has been moved to April 1. Around 25,000 students receive financial aid at the school. TCC and TCU officials said they have not moved their priority deadline for financial aid, which is May 1.
If you can't file your taxes now, TCU's Scott advises to go ahead and file using estimates. The FAFSA can now be easily updated with the tool when your taxes are filed.
Another benefit of the new tool is to help schools that are required to verify a certain number of FAFSA forms by asking parents for their tax forms, Krause said. Now those who don't use the IRS tool and are flagged for verification will have to fill out IRS Form 4506T, which allows the IRS to release your tax return to the school.
With the new form, the information will come from the IRS, just as high school transcripts go directly from the school to the college, instead of from the student.
Teresa McUsic's column appears Saturdays. TMcUsic@SavvyConsumer.net