Safeguarding Federal Tax Information is of utmost importance. FSA added a Blue Note on September 17 to previously released guidance that reinforces data use limitations of FTI. This includes prohibiting the use of these derived values for research and limiting their use to the application, award, and administration of student aid programs.
From the announcement:
“Update on September 17, 2025: When implementing modifications outlined in our Feb. 11, 2025, update that expanded Federal Tax Information (FTI) to now include derived FTI values listed on the Institutional Student Information Record (ISIR), institutions of higher education (IHEs) and third-party servicers and vendors should prioritize the FTI safeguards and data use limitations as explained below . This includes prohibiting the use of these derived values for research and limiting their use to the application, award, and administration of student aid programs as outlined in the Higher Education Act (HEA) and Internal Revenue Code (IRC).
If the derived FTI values were previously redisclosed to another entity under the permissions of the FAFSA Data Use provisions detailed in ED’s November 2024 Electronic Announcement: (GENERAL-24-129) 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, institutions and individuals must take appropriate steps to destroy and/or retract any disclosed and used values that are now considered FTI. ED expects institutions and their third-party servicers and vendors to appropriately label FTI as Controlled Unclassified Information (CUI) consistent with the ISIR Record Layout for 2026–27 and succeeding FAFSA cycles. Given system challenges and implementation limitations, ED does not expect the derived FTI values to be labelled with the CUI markings retroactively for 2024–25 and 2025–26 ISIRs.”
Below is a summary of the guidance:
Key Change
- Federal Tax Information (FTI) rules now extend to include derived FTI values found on the Institutional Student Information Record (ISIR).
- Institutions of higher education (IHEs), third-party servicers, and vendors must treat these derived values with the same safeguards and data-use limitations as direct FTI.
Restrictions on Use
- Derived FTI values cannot be used for research.
- Their use is limited strictly to the application, award, and administration of student aid programs under the Higher Education Act (HEA) and Internal Revenue Code (IRC).
Redisclosure Requirements
- If derived FTI values were previously shared under FAFSA Data Use provisions (per ED’s Nov. 2024 guidance), institutions must:
- Destroy and/or retract those values.
- Ensure no continued use of data now classified as FTI.
Labeling and Compliance
- Institutions and servicers must label FTI as Controlled Unclassified Information (CUI), consistent with the ISIR Record Layout starting in the 2026–27 FAFSA cycle.
- Retroactive CUI labeling is not required for 2024–25 and 2025–26 ISIRs due to system limitations.
View the full announcement here: