Students seeking FAFSA financial aid still hurting from Trump tax plan change

Students seeking FAFSA financial aid still hurting from Trump tax plan change


By:  Karin Price Mueller
NJ.com

We’re deep into the college application season.

Families across the country are completing the FAFSA — the Free Application for Federal Student Aid — which determines eligibility for certain kinds of money help for college.

Weeks into the process, the federal government still hasn’t fixed an unintended consequence of the Trump tax plan, which may exclude some eligible students from aid.

A bipartisan group of senators, including Sen. Bob Menendez of New Jersey, has been asking the Department of Education and the Internal Revenue Service (IRS) to help these students, to no avail.

Today the senators made yet another request in this drawn-out battle that puts financial aid at risk for students across the country.

At issue is a question on the FAFSA that some families can no longer answer automatically using the IRS Data Retrieval Tool.

The Data Retrieval Tool, under the old tax rules, used to transfer comprehensive information to the FAFSA, including capital gains, unemployment pay, prize money, gambling winnings, student loan interest deductions, self-employment tax and educator expenses.

Under the new tax plan, because of how the 2018 Form 1040 was reorganized, taxpayers who report that information have to do it on separate schedules. Those schedules, though, cannot be electronically transferred until the Data Retrieval Tool is updated.

But that’s something the Department of Education is refusing to do.

It may not seem like a big deal — at least when you’re preparing your tax return — but it can be a big deal when you try to complete the FAFSA.

Because the Data Retrieval Tool wasn’t updated to match the new tax forms, some families will need to enter the information automatically, leaving lots of room for error, therefore risking financial aid for those who may be eligible.

Further, families under a certain income previously qualified for FAFSA’s Simplified Needs Test, which automatically gave low-income families an Estimated Family Contribution of zero, meaning they could be eligible for more financial aid. But now, this automatic test doesn’t work, potentially leaving out families who would have otherwise been eligible.

The senators were asking the Department of Education and the IRS to make the fix for students who are completing the form this year.

In a letter to the senators dated Oct. 15 — two weeks after the FAFSA application went live — the Department of Education said it made changes to two FAFSA questions, noting it has taken “proactive steps” to ensure the new tax forms “will not disrupt the financial aid process.”

The letter also said the Data Retrieval Tool would be updated to eliminate this problem for the 2021-2022 application season.

That’s nowhere near good enough, the senators said in their response today.

They demanded an immediate patch to the system so all applicants can once again use the Data Retrieval Tool, thereby eliminating the potential for mistakes that could put aid at risk.

“This Administration’s failure to properly address their computer glitch, a symptom of Trump’s Tax Scam, has made this year’s FAFSA form confusing and complicated," Menendez said in an emailed statement. “I worry that without straight forward and proper guidance, families will be denied the financial aid they are otherwise entitled to.”

"The Department of Education has a responsibility to students across the country, and I will continue pressing them to amend the FAFSA form to make the application process easier and to ensure students receive the correct amount of aid,” he added.

So will it happen? The Department of Education did not respond to our inquiries, but we’ll keep watch and let you know.

Learn more about how to complete the 2020-2021 FAFSA here.