How to Prevent Millions of Dollars In Financial Aid Errors

Contact: Erin Timmons
Managing Editor
(202) 785-6959

The National Association of Student Financial Aid Administrators Advocates For a Switch To Prior-Prior Year Tax Data

Washington, D.C., September 30, 2014 - Too many students seeking financial aid for higher education have incorrectly reported their family income on the Free Application for Federal Student Aid (FAFSA), leading to millions of dollars of “improper payments” from the Pell Grant program, according to a recent federal report. The National Association of Student Financial Aid Administrators (NASFAA) has a solution that could be implemented now to help prevent the errors.

In fiscal years (FY) 2012 and 2013 together, approximately $1,560 million was spent on improper Pell Grant payments, according to findings from a FAFSA/Internal Revenue Service's (IRS) Data Statistical Study cited in a recent study from the Office of the Inspector General (OIG). Both years posted an error rate between 2.2 and 2.5 percent – and inaccurate self-reported income on the FAFSA was “the most significant root cause of potential Pell program improper payments,” according to the OIG.

Errors can occur when filers do not use the IRS Data Retrieval Tool (DRT), the report stated – but the tool is unusable for many students who do not have their tax information ready when completing the FAFSA, which is available each year on January 1. 

One policy change would greatly alleviate this issue. Using prior-prior year income information on the FAFSA, instead of using prior-year data as is done currently, would make it easier to submit a FAFSA through expanded availability of the IRS DRT and would increase the accuracy of income reporting. PPY is already authorized in law, so the federal government has the authority to implement a switch to PPY but has not yet taken action. 

NASFAA has long advocated for PPY, which has also been a staple in recent pieces of proposed Congressional legislation. NASFAA experts are available to discuss the many ways PPY could help students, taxpayers, and federal agencies to better ensure access to and success in higher education. Please email us at or call (202) 785-6959 to set up an interview.


The National Association of Student Financial Aid Administrators (NASFAA) is a nonprofit membership organization that represents nearly 20,000 financial aid professionals at more than 3,000 colleges, universities, and career schools across the country. NASFAA member institutions serve nine out of every ten undergraduates in the U.S. Based in Washington, D.C., NASFAA is the only national association with a primary focus on student aid legislation, regulatory analysis, and training for financial aid administrators. For more information, visit