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Education Dept. steps up to help students stymied by financial aid application requirements

The Internal Revenue Service headquarters in Washington. (Andrew Harrer/Bloomberg News)

The U.S. Education Department will make it easier for families to provide proof of their income, clearing the way for some of the neediest college students to gain access to federal loans and grants.

The announcement arrives as ongoing disruptions at the Internal Revenue Service are hindering some students from verifying information on their financial aid applications, which could prevent them from enrolling in the spring semester or following academic year.

Some of America’s poorest college kids are in financial aid limbo, thanks to disruptions at the IRS

The Education Department said the notification it issued Wednesday to guide schools in handling verification requirements has nothing to do with what’s happening at the IRS. Plans for relaxing the rules have been in the works since November, according to the department.

Rather than having to obtain an official tax transcript to verify their household income, students can now provide signed copies of tax returns. College financial aid officers will also be allowed to accept signed statements from applicants whose families do not file tax returns. The changes will take effect immediately to the benefit of students still completing verification for the 2018-2019 academic year and those in the midst of the process for the following year.

The arrival of the agency’s guidance could not have been more timely, said John Falleroni, senior associate director of financial aid at Duquesne University.

“I had just completed a call with a parent who was in this situation. During the call, I could only acknowledge the absurdity of the scenario but stated that I did need the tax transcript for final processing,” he said. “It was wonderful to call her back with the new guidance. Within hours, I had received a tax copy, completed verification and provided a package.”

Every year, about one-third of all students who fill out the Free Application for Federal Student Aid, known as FAFSA, must provide further proof that the information they supplied is accurate. The Education Department can flag students for verification at random, but higher-education experts say the neediest students are frequently audited, especially if the income reported on their application appears too low to support their household.

"There is a lot of pressure on the department to keep improper payments low, understandably, but … there’s an awful lot of verification that results in very little change in students' expected family contribution or their award,” said Kim Cook, executive director of the nonprofit National College Access Network. “We may be casting too wide a net.”

Colleges puzzled by surge in FAFSA verification requests

Some students selected for income verification are allowed to import tax records directly from the IRS into their financial aid applications — a data service that remains up and running. Others who do not qualify for that feature can verify their income using an IRS tax transcript. They can still request a transcript by phone or mail, which takes two weeks, but the system that takes online requests has been down since at least Jan. 2.

The IRS said the tax transcript system is inaccessible because of routine maintenance and should be back up and running about Monday. College financial aid officers said they received no advance warning of the outage, which is out of character for the IRS, leading to suspicions that the partial government shutdown could be the root of the problem. The IRS is among the federal agencies operating with a skeletal staff.

On Monday, White House officials said the administration planned to recall some IRS personnel to process and send out Americans' tax refunds. But the IRS said those plans will not have any impact on the maintenance outage affecting the tax transcript service.