Scholarship Providers Say Data-Sharing Confusion Delays Aid

"The Native Forward Scholars Fund, a scholarship provider for Native American students, typically doles out aid to about 1,300 students per year through 40 different scholarship programs. But this year, those funds were delayed; students started fall classes without knowing how much scholarship money was coming their way. The holdup stemmed from a breakdown in information-sharing between scholarship providers and colleges-a by-product of changes to the Free Application for Federal Student Aid."

"The Education Department transitioned last year to the Student Aid Index, a new financial aid eligibility formula that inputs some data directly from the Internal Revenue Service, rather than having students fill it out themselves. As a result, some pieces of information on the FAFSA are now subject to IRS privacy rules, not the Education Department's, adding extra layers of restrictions and creating confusion for financial aid offices about what data they can and can't share with scholarship providers and other outsiders."

"A report from the National Association of Student Financial Aid Administrators, based on a survey of at least 89 financial aid staff members from a variety of institutions in January, found that only 58 percent were willing to share federal income tax data from the FAFSA with scholarship-granting organizations-with student consent-and 22 percent said they would never share this information, even with student consent."

Scholarship disbursements were delayed for many students after colleges limited information-sharing following FAFSA changes. The Education Department shifted to the Student Aid Index, which pulls some data directly from the IRS and makes those elements subject to IRS privacy rules rather than Education Department rules. The shift added restrictions and confusion for financial aid offices, prompting many to restrict or end data-sharing with scholarship providers. A NASFAA survey found only 58 percent willing to share IRS-derived federal tax data with scholarship organizations with student consent, and many institutions reported modifying or ending external data agreements during the 2024-25 aid year.

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