The FAFSA is available on October 1st for the first time starting in 2016. How the FAFSA and DRT will work together will be different than it has been in the past. The new change in the FAFSA process is often called Prior Prior or Early FAFSA. This FAFSA timing change will significantly affect the financial aid process for a variety of reasons.
With this change, a family will submit the FAFSA using the DRT process. The DRT is an abbreviation for the Data Retrieval Tool. The DRT process allows families to easily import their IRS income tax return information and transfer the data directly into their FAFSA from the IRS website. It notifies the college that the information submitted on the FAFSA is the same information that was submitted to the IRS. This is an important step in the financial aid process since the colleges need to have a verification process before federal and state funds can be disbursed.
In 2009, the DRT process replaced the paper submission of a family’s income tax data. In the past, the DRT process was typically used after the initial FAFSA was submitted, especially for entering college freshmen. This was due to the timing of the final tax information being available. This is no longer a problem because of the tax year used in the Prior Prior or Early FAFSA process.
For many families, this FAFSA timing change will eliminate some of the confusion regarding the income part of the FAFSA submission. The DRT process verifies only the income information for the college’s financial aid office and prevents fraud. It should be used for both the parent(s) and student income information if a tax return was submitted. The other FAFSA information should be as of the day of the submission such as financial asset information.
With this significant financial aid change, here are the steps and issues you may face when submitting your FAFSA starting in October 2016.
Setting up the FSA ID
Before a family starts the FAFSA, both the student and a parent will need to set up their FSA ID. The FSA ID is a person’s electronic signature and access code to the financial aid process. It allows the student and parent to cross the bridge from the FAFSA to the IRS system. For students, parents and borrowers, the FSA ID is needed to get access to any federal student aid records online. This new login process authenticates the user and allows them to access the following websites or processes:
- FAFSA on the Web
- National Student Loan Data System (NSLDS)
The EFC PLUS blog, “FSA ID replaces FAFSA PIN”, will give you a quick 2 minute view of the FSA ID set up on the actual federal government website.
Each FSA ID requires a unique email address along with a user name and password. The email is a critical piece of information since it is one of the ways to reset or reclaim your password if forgotten. Since most people will not use their FSA ID that often, selecting an email that you use often is recommended.
A series of five personal questions and answers need to be completed as part of the FSA ID process. This is all part of the authentication process. With the FSA ID, you will also be requested to verify your email. A 6 digit code will be sent to your email which you will need to enter into the FSA ID system after it is received. This is just another added security change.
It is important not to share your password with anyone, as this is your electronic signature for any of the federal financial aid documents.
FAFSA DRT Process Section
Before you need to use the DRT system, the person applying for financial aid will need to complete a series of questions about themselves and their family depending on the student type. Once you reach the income part of the FAFSA, a series of three questions will appear to see if you are able to use the DRT system. Most people will be able to use the process.
After answering the questions, the FAFSA screen will tell you that you are leaving the FAFSA system and moving to the DRT system. You will need your FSA ID to cross that bridge. The FSA ID process includes a verification of your social security number, which is how it is linked to the IRS System.
Once in the IRS system, you will get a screen that contains some of your personal information. At this point, you need to have your 1040 form in front of you at the computer. The information on the screen needs to match the tax form exactly. As an example, if your tax form has street instead of the abbreviation of ST, you need to input the word street. Another problem is middle initial and middle names not matching up so please check information carefully. At times, this can be frustrating, but it is worth the effort since the alternative will require more work.
DRT May Not Be Available
For some people, the DRT system may not be available or the matching process did not work. If that is the case, you will need to take an additional step in the process. Colleges need to verify that the information on the FAFSA is valid and the DRT is the best way to do that. The alternative when the DRT is not available is to submit a FAFSA using the proper year information and requesting a Tax Transcript from the IRS. This can be an alternative method of verification for the colleges. A paper 1040 form will normally not be enough formal documentation for the colleges.
There are reasons why the DRT process may not be available beside the matching problem. They would include the following:
- Amended Tax Return
- People on Extension
- Recently filed return (7 – 21 days after electronic IRS submission is DRT able to get access, paper submission are longer)
- More Complicated Returns
- Some foreign or US territory returns
- Have an outstanding balance or in a payment plan
If any of the cases are the reasons, contact the colleges that you are applying to and confirm with them the best method of submitting your FAFSA form. This is especially true if you are going to qualify for need-based financial aid. Many colleges have formal appeal letters or forms that they may require you to complete.
Financial Differences from FAFSA Taxes Used
Since the prior year taxes are being used for the FAFSA submission going forward, the time frame is much longer than in previous years. This may become a significant issue for many families. If this has occurred, you still need to use the DRT system for your initial FAFSA submission. As stated earlier, the colleges need the DRT flag set for audit reasons within the financial aid process.
Once you have submitted your FAFSA using DRT, you will need to draft a short letter explaining the change in income. This letter should be to the point with bullet points and numbers making it easy for the reader at the college financial aid office. In addition to the letter, you may need to provide documentation to justify the appeal. If the appeal is accepted, then the college will make an adjustment to the FAFSA. This is called Professional Judgment.
Here are a few reasons why an appeal should be submitted:
- Reduction of Income
- Job Loss
- Job downsizing
- Separation or Divorce
- One time increase in income
- Substantial change in expenses
It is not recommended that you submit an estimated FAFSA first with the current numbers. The DRT verification is important. This is a significant change from the previous year’s process. Prior to 2016, the tax return year was much closer to the FAFSA submission date. These financial changes may have been reflected in the more current tax information and would be verified at the end of the financial aid process. Now it is inverted with the DRT process coming first.
FAFSA and DRT Process Summary
The FAFSA and DRT process will be very different starting in 2016. Prior Prior and DRT may help by taking some of the stress out of the FAFSA process. The Data Retrieval Tool (DRT) is an easy, fast and more accurate way to get your income tax information to FAFSA form. This is especially true for entering freshmen. Due to the inversion of the process, the people with financial changes could see more work but only time will tell.
It may also change the award letter process in the coming years. Colleges will have completed applications and financial information much earlier. This may result in earlier admission and award letters, which would also reduce some of the stress of the college decision process.[/vc_column_text][/vc_column][/vc_row]