IRS Data Security Breach Affects 3.5 Million Student Loan Borrowers

The Internal Revenue Service (IRS) reported on Wednesday, May 27, 2015, that hackers accessed tax records for approximately 100,000 taxpayers using the online IRS Get Transcript tool. The hackers used personally-identifiable information (PII), such as Social Security Numbers, date of birth and address, to download transcripts of previous years’ federal income tax returns. These transcripts, in turn, were used to file false income tax returns for the current year, intercepting about $50 million in federal income tax refunds.

The IRS has responded by temporarily disabling the online Get Transcript tool. Taxpayers can continue to obtain tax transcripts by mail by filing IRS Form 4506-T.

Impact on Federal Student Aid

Borrowers in the income-contingent repayment (ICR), income-based repayment (IBR) and pay-as-you-earn repayment (PAYE) plans must submit annual documentation of income to determine their monthly loan payment under these repayment plans. Usually this documentation is provided in the form of an IRS Tax Transcript. Accordingly, these borrowers will be affected by the disabling of the Get Transcript tool.

The FAFSA (Free Application for Federal Student Aid) is not affected by the attack on the IRS Get Transcript tool, as the FAFSA has additional layers of security before applicants can access the IRS Data Retrieval Tool.

Nevertheless, it is likely that the IRS Get Transcript tool and IRS Data Retrieval Tool will add more security controls, such as the use of ReCAPTCHA to prevent automated bots from accessing these tools. (ReCAPTCHA requires the individual using a tool to perform a task that only real people can complete, such as reading distorted text.)

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