U.S. to Ease Financial-Aid Process for Students Affected by Shutdown of Application Tool

By Douglas Belkin Features Dow Jones Newswires

The Department of Education moved to ease the burden on tens of thousands students facing extra scrutiny in the financial-aid process because of problems with an online tool that automatically imports information from tax returns into applications for federal student aid.

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The move comes after a security breach prompted the Internal Revenue Service to suspend its Data Retrieval Tool, which is used by millions of students to fill out the Federal Application for Student Aid. That breach may have compromised the personal information of up to 100,000 taxpayers.

The inability to use the IRS tool has led to an uptick in students, a disproportionate number of whom are from low-income families and are applying for Pell Grants, being flagged for extra scrutiny.

Now, such students will be allowed to submit a paper copy of their tax return to verify their family's income information, rather than the more lengthy process of seeking a copy of the return from the IRS.

The workaround could ease the process of applying for financial aid for tens of thousands of students, said Justin Draeger, president of the National Association of Student Financial Aid Administrators.

"This is very good news; it will help students move through the process faster," Mr. Draeger said.

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The digital retrieval tool, which allows tax returns to be imported to the Free Application for Federal Student Aid form, was taken offline in March after identity thieves used it to gather information to file fake returns seeking refunds. About 8,000 fraudulent refunds were issued, costing $30 million, said Internal Revenue Service Commissioner John Koskinen. IRS filters stopped 52,000 returns and prevented 14,000 illegal refund claims from being sent.

The Education Department's move on Monday gives colleges and universities the flexibility to accept tax returns for students whose applications prompt further scrutiny. Advocates for students fear many of those students will simply not continue to apply for school.

"These flexibilities are an important step toward making the process easier," U.S. Secretary of Education Betsy DeVos said in a statement Monday.

Write to Douglas Belkin at doug.belkin@wsj.com

(END) Dow Jones Newswires

April 24, 2017 16:50 ET (20:50 GMT)