Our district keeps the official records. I also keep a file on each student in my room with IEPs, test protocols and data. Once the student is dismissed, I move it to a separate filing drawer labled "dismissed/moved." I write on the outside of the folder if the student was dismissed or moved and the date. I keep the files for 5 years. I have them separated by years. I laminated construction paper and use it as a divider. The paper is turned long-ways up with "1 year old," "2 years old," etc. written at the top. The paper is placed at the front of the files for that category. Each year I simply move each divider back so that the 2 year old files are now behind the 3 year divider. The 5 year old files are then shredded.
Hope that helps!