SHEEO Policy Brief: Data Use Implications of the FAFSA Simplification Act and FUTURE Act
By: Sean Baser, SHEEO Senior Policy Analyst
- This brief was updated on September 11, 2024, to reflect information presented during a July 24, 2024, webinar.
- This brief was updated on November 20, 2024, to reflect information from the ED’s November 7, 2024, Electronic Announcement.
Background
The adoption of the FAFSA Simplification Act and the FUTURE Act mandates that the U.S. Department of Education (ED) collect contributors’ (students, their spouses, and parents/stepparent) federal tax information (FTI) directly from the IRS to determine eligibility for federal student aid, beginning with the 2024–25 award year.1 FTI received via the Institutional Student Information Records (ISIR) on the new, simplified FAFSA is no longer considered FAFSA data and is subject to stricter privacy regulations under the Internal Revenue Code compared to previously collected income data, and is only permitted for use in administering federal, state, and institution financial aid programs, or outreach (with student consent) for federal means-tested benefit programs.2,3
This shift in data access and use significantly limits the ability to employ longstanding financial variables for financial aid analyses, institutional research, compliance, legislated reporting, and other non-aid-awarding purposes. State agencies, institutions, the federal government, and other designated entities have relied on both original (e.g., adjusted gross income) and derived (e.g., Pell Grant eligibility) financial data from the FAFSA to enhance student success and institutional effectiveness through evaluation, research, and planning. For example, institutional research offices have used adjusted gross income to provide comprehensive socioeconomic analyses of student populations. Development and financial aid offices conduct and report on detailed program analyses, research, and projections to improve aid administration and to comply with state mandates. Institutional and state leaders use FTI for strategic planning to improve student success. These entities and their partners are now concerned that losing access to this data may jeopardize their ongoing initiatives, creating uncertainty that impedes their ability to effectively analyze, report, and improve student outcomes and social mobility.
ED Guidance and Recent Developments
Postsecondary stakeholders have requested guidance from ED regarding the use of original and derived FTI beyond awarding aid.4 In May 2023, ED issued guidance on the use of FTI beyond awarding aid, as per the new regulations of the FUTURE Act and FAFSA Simplification Act, which impose stringent rules on the use of FTI.1 Subsequently, ED released a series of training videos offering piecemeal guidance on implementing the new FAFSA and permissible uses of FTI (see Appendix, Table 1).5
The initial guidance from the webinar series stated that FTI may not be redisclosed to other entities or individuals, even at the aggregate level, for purposes other than those directly related to financial aid (e.g., research).6 Following subsequent inquiries, ED hosted a virtual webinar at the Federal Student Aid Training Conference for Financial Aid Professionals in November 2023, which provided the clearest direction yet on the changes in laws and regulations with the simplified FAFSA and the handling of FTI under the new rules.1,3 In February 2024, ED provided further guidance, indicating that aggregate-level research for the purpose of financial aid reporting to federal and state entities could be shared with research offices if related to the administration of aid programs.7
In April 2024, ED clarified in an updated government announcement that elements derived from FTI, such as Pell eligibility and the Student Aid Index (SAI), are not considered FTI and may be used for research, planning, and practice.1 They also confirmed that institutions may use FTI for mandatory Integrated Postsecondary Education Data System (IPEDS) reporting, provided the data are aggregated for three or more individuals.8 ED indicated that additional guidance and use cases will be provided in the future. In July 2024, ED hosted another virtual webinar that expanded on FTI data use, offering use cases and an extensive Q&A session that addressed derived data issues and hinted at an upcoming Dear Colleague letter with more guidance.9
In November 2024, ED released an electronic announcement with updated guidance on the access, disclosure, and use of FAFSA data. The guidance clarified that FAFSA data includes derived variables from the ISIR, including verification status, total income, adjusted available income, and discretionary net worth. However, it noted that FTI is excluded from these definitions of FAFSA data and non-FAFSA data, with ED indicating that future guidance will address FTI. 10
Although informative, ED’s webinars have yet to deliver a definitive guide that clearly outlines the permissible uses of FTI, including common practical applications. It remains uncertain whether state agencies, institutions, and other designated entities will be able to share, access, or use FTI data beyond existing derived variables for purposes other than administering aid programs. While Pell, SAI, and other derived variables are valuable for research and practice, they lack the nuance that access to FTI previously provided to institutions.
Recommendations
Given this context and ED’s positive steps in providing guidance on derived data usage, ED should further extend support by offering the following to state agencies, institutions, and other stakeholders before the 2024–25 academic year:
- Specify how FTI data collected on the simplified FAFSA can be used and shared by state agencies and institutions, including detailed use cases and frequently asked questions (FAQ).
- Provide guidance on how institutional and state financial aid offices can use FTI for research, analysis, and projections to administer financial aid programs more effectively.
- Clarify the extent to which financial aid elements (e.g., state need-based aid) can be derived and used for research, planning, and evaluation by institutions and state agencies.
- Develop new derived data elements, such as income bands from FTI data (e.g., adjusted gross income), with input from stakeholders including financial aid administrators, state agencies, advocacy organizations, and researchers. Ensure that income bands have sufficiently narrow ranges to capture discernible differences and account for income fluctuations while safeguarding student privacy.
- Provide comprehensive guidelines on consent procedures and a decision-making tree for supporting financial aid stakeholders with the disclosure, sharing, and use of FAFSA and FTI data.
Appendix
References
1 ED, Office of Federal Student Aid. (2024). Access and use of federal tax information (FTI) for federal student aid programs beginning 2024–25 FAFSA processing cycle [Updated April 18, 2024]. https://fsapartners.ed.gov/fsa-print/publication/1004982
2 ED, Office of Federal Student Aid. (2024, April 19). Updates to FAFSA completion initiative and means-tested benefits outreach [Updated April 19, 2024]. https://fsapartners.ed.gov/fsa-print/publication/1005836
3 ED, Office of Federal Student Aid. (2023, November 30). Data use and considerations under the FUTURE Act and FAFSA Simplification Act. Federal Student Aid Training Conference. https://fsapartners.ed.gov/training/federal-student-aid-fsa-training-conference/program/sessions/2023/data-use-and-considerations-under-future-act-and-fafsar-simplification-act
4 Carrasco, M. (2023, December 1). FSA outlines provisions of federal tax information and FAFSA data use. NASFAA. https://www.nasfaa.org/news-item/32246/FSA_Outlines_Provisions_of_Federal_Tax_Information_and_FAFSA_Data_Use
5 ED, Office of Federal Student Aid. (2024). Webinars and training videos: FAFSA simplification. https://fsatraining.ed.gov/course/view.php?id=107§ion=8
6 ED, Office of Federal Student Aid. (2023, June 13). Better FAFSA better future Q&A — summer session 1 live webinar. https://fsatraining.ed.gov/mod/page/view.php?id=11063
7 ED, Office of Federal Student Aid. (2024, February 22). Better FAFSA better future Q&A –session 2 live webinar. https://fsatraining.ed.gov/mod/page/view.php?id=11879
8 ED, Office of Federal Student Aid. (2024, April 22). Better FAFSA better future Q&A –session 3 live webinar. https://fsatraining.ed.gov/mod/page/view.php?id=118
9 ED, Office of Federal Student Aid. (2024, July 24). FAFSA data use in 2024–25. Webinars and training videos: FAFSA simplification. https://fsatraining.ed.gov/mod/page/view.php?id=11998
10 ED, Office of Federal Student Aid. (2024, November 7). Guidance for state grant agencies and institutions of higher education on the access, disclosure, and use of FAFSA data for the application, award, and administration of student aid programs.https://fsapartners.ed.gov/fsa-print/publication/1006306
