In a sign of renewed cooperation between Republicans and Democrats in the Senate Health, Education, Labor and Pensions Committee, a bipartisan group of Senators introduced legislation to enable sharing of IRS data with the U.S. Department of Education. The sharing of IRS data will help students who are applying for federal student financial aid.
Senators Alexander (R-TN), Whitehouse (D-RI), Murray (D-WA) and Gardner (R-CO) introduced the Faster Access to Federal Student Aid (FAST) Act of 2018 (S. 3611) on November 13, 2018.
The FAST Act requires the IRS to share limited income and tax information of financial aid applicants with the U.S. Department of Education.
The data sharing will help the U.S. Department of Education simplify and streamline the process of applying for financial aid. The specific improvements include:
- Income-Driven Repayment Plans. Currently, borrowers in the income-driven repayment plans (ICR, IBR, PAYE and REPAYE) must recertify their income and family size annually. Failure to recertify in a timely manner can cause problems, such as the capitalization of interest and delays in loan forgiveness. The IRS data sharing will automate this process.
- Total and Permanent Disability Discharge. After a disabled borrower’s federal student loans are discharged, there is a three-year post-discharge monitoring period during which the borrower’s annual earnings cannot exceed the poverty line for a family size of two. If the borrower’s earned income is above the threshold or if the borrower doesn’t provide documentation of their earned income, the U.S. Department of Education will reinstate the borrower’s obligation to repay their student loans. The IRS data sharing will automate the annual reporting of earned income.
- Free Application for Federal Student Aid (FAFSA). Financial aid applicants currently may use the IRS Data Retrieval Tool (IRS DRT) to transfer information from their federal income tax returns to the FAFSA. Applicants who do not use the IRS DRT may be required to provide an IRS Tax Return Transcript or a Verification of Non-Filing Letter from the IRS, if their FAFSA is selected for verification. The IRS data sharing will automate and simplify this process, eliminating delays and barriers to financial aid eligibility. This is likely to increase the number of students who apply for and receive student financial aid.
Although this legislation is being considered during the lame duck, it is likely to pass and be enacted. Otherwise, it will be taken up during the next session of Congress.