If you’re applying for college financial aid for the upcoming school year, the already daunting process of filling out the online Free Application for Federal Student Aid (FAFSA) is going to have even more hurdles.

That's because an online tool that lets you automatically import tax information and helps reduce errors that can delay processing has been shut down by the Department of Education because of data security problems. You must now input all the data needed from your tax return by hand. 

In mid-March the Department of Education said the IRS data retrieval tool would be offline for just a few weeks. But now, as the scope of the security problem has become more clear, it has revised the estimate. Now the tool won't be available till the start of the next financial aid filing season in October.

Identity thieves have hacked into the files of as many as 100,000 FAFSA applicants, using the information to submit fraudulent tax returns and get refunds, according to IRS Commissioner John Koskinen, who testified about the problem in a Senate Finance Committee hearing Thursday.

The timing couldn’t be worse. It’s the height of college admissions season, when students are finding out which colleges have accepted them and are applying for aid. Filling out the FAFSA can be intimidating. The application has more than 100 questions and requires detailed financial information, including the student and family's adjusted gross income, tax deductions, and interest income.

With the data retrieval tool, which was introduced in 2010, the Department of Education estimates that it can take less than an hour to complete once you have all your documents gathered. Financial aid experts say the process will now take longer and could result in costly delays for students. 

“Not having the data retrieval tool makes the process more complicated for everyone,” says Shannon Vasconcelos, director of college finance for college admissions advice provider College Coach and a former financial aid officer at Tufts University and Boston University. “It could discourage students from applying for financial aid or following through during the process, especially first-generation students who may not get much guidance from their family.”
 

Many Students Affected

Though students could have applied for financial aid as early as last October for the 2017-2018 academic year, many wait for an admissions offer to fill out the FAFSA. In recent years, roughly 40 percent of aid applicants applied for aid between April 1 and Sept. 30, according to the Department of Education.

The problem also affects the 6 million student loan borrowers who are in income-driven repayment (IDR) programs and must recertify their income every year to qualify. If you’re struggling to afford your loans, an IDR plan can reduce your monthly payment to as little as 10 percent of your discretionary income (the amount left over after factoring in your taxes and spending on necessary items such as food and rent). 

Consumer advocates say the shutdown of the data retrieval tool has far-reaching consequences for students.

“The extra step of getting together paper tax information and manually inputting it is going to be a real setback to those who already find the process really confusing,” says Suzanne Martindale, a staff attorney and education debt expert at Consumer Reports.

“We already know there are students who don’t access financial aid even when they're eligible for it. The concern is that there will be even more people who won’t get the aid they need and are entitled to to help them afford college.”

How to Avoid FAFSA Mistakes and Delays

The IRS is beginning to notify people who already filed their FAFSA and may have been affected by the hack, but in the meatime you should watch for suspicious activity by checking your credit report. You can get a free copy once a year from each of the three major credit reporting agencies at annualcreditreport.com

If you haven't filed yet, you can still go online to fill out your FAFSA or to apply for or be recertified for an income-driven repayment plan. You’ll just need a paper copy of your tax return to refer to for the income data. For the 2017-2018 year, you must use information from your 2015 tax return. If you don’t have a paper copy, ask your tax preparer, if you used one. 

Otherwise, the IRS says you can download a tax transcript at Get Transcript Online. You can also order a transcript by mail or call the IRS automated line at 800-908-9946 to have it sent.

Here’s what you can do to make the process go smoothly:

  • Budget more time. With no tool to help, it’ll take longer to complete your FAFSA application and IDR forms. If you need a tax transcript, it will take five to 10 days to receive it. 
  • Be careful. If you’re manually transcribing information from your 2015 tax return into your FAFSA, proofread your work. If you have a typo or you copy information from the wrong line, it could dramatically affect your financial aid eligibility. After the FAFSA has been processed, you’ll get a Student Aid Report with your information. Check that carefully for errors, too. 
  • Be prepared for verification. About 30 percent of FAFSA filers are selected every year for verification, which requires you to submit additional documentation to your school’s financial aid office to check the accuracy of the FAFSA information. You are more likely to be selected for verification if you don’t use the data retrieval tool, so odds are higher now that your application might be held up, says Vasconcelos from College Coach. If you are selected, you’ll need to submit a copy of your tax transcript before you can receive your aid.
     
  • Remember, time is of the essence. Delays in getting the necessary documentation together could affect whether you receive your financial aid in time to enroll in college, says Diane Cheng, associate research director at The Institute for College Access and Success, a nonprofit that advocates for affordable higher education. Many states and colleges require the FAFSA for their own aid programs, many of which are awarded on a first-come, first-served basis.

    Also, borrowers who miss annual deadlines to recertify can face unaffordable spikes in monthly payment amounts that increase their risk of delinquency and default, as well as additional interest that can add substantial costs, Cheng says. 

  • Don’t be deterred. Not being able to import tax information may be a headache, but don't let it keep you from applying for financial aid. About 20 percent of undergrads don’t apply for financial aid, according to an analysis by the National Center for Education Statistics. Most of them fail to do so because they believe they won't qualify for assistance or don't need the money, but 9 percent say they didn't do so because the forms were too much work.