Professional Judgment in Today’s Economy

1. SUSTAINABILITY SCASFAA 2009/2010 Professional Judgment in Today’s Economy Tabatha McAllister SCASFAA Annual Spring Conference Wednesday, April 15, 2010 Embassy Suites

2. Define professional judgment • Review current statute • How is it applied? • Discuss importance of documentation

3. Professional Judgment Professional judgment is the authority provided under the Higher Education Act (HEA) for financial aid administrators to exercise discretion in specific areas of student aid administration. Professional judgment is not regulated by the Department of Education (DOE).

4. Professional Judgment Areas • Dependency status • Needs analysis • Expected family contribution • Cost of attendance • Satisfactory Academic Progress • Loan Eligibility • Denial or reduction of Stafford or PLUS Loans • Unsubsidized loan eligibility “new”

5. Principles of Professional Judgment • Provides flexibility to deal with unique circumstances affecting individual students • Allows personal intervention in cases that merit individual attention • Enables response to individual circumstances that were not anticipated in legislation or regulation

6. Professional Judgment Prohibitions PJ cannot be used to: • Change student status from independent to dependent • Create a new category of costs • Adjust the bottom-line EFC • Change the EFC formula itself • Make across-the-board changes

7. What areas PJ Does Not Apply? PJ cannot be used to: • Make an otherwise ineligible student eligible for Title IV aid • Circumvent the intent of the law or regulations • Include certain post-enrollment expenses in COA

8. PJ Triggers • Review of student’s FAFSA • Other information in student’s file • Student request for help • FAFSA instructions

9. How do you decide to consider PJ? • Is student or family experiencing unique circumstances? • Does unusual situation affect ability to contribute or student’s ability to complete program? • What should special treatment be? • What documentation is needed? • Are the circumstances already addressed in Federal Methodology? • What does office Policy and Procedures indicate?

10. Professional JudgmentNeeds Analysis

11. PJ- EFC/COA • Dear Colleague Letter GEN-09-04; issued April 2, 2009 • Encourages FAAs to consider special circumstances during these challenging economic times

12. Examples of special circumstances listed in section 479A of the HEA— • Elementary or secondary school tuition expenses • Medical, dental, or nursing home expenses not covered by insurance • Unusually high child or dependent care costs • Recent unemployment of family member or independent student

13. Examples of special circumstances listed in section 479A of the HEA—cont’d. • Family member or student is a dislocated worker • Change in housing status resulting in homelessness • Other changes in family’s income, family’s assets, or student’s status

14. Use of professional judgment is— • Not limited to these circumstances • Not required in these circumstances • Examples are just that: • Ideas about the types of conditions you might consider

15. Remember— • Must first resolve any conflicting information before making an adjustment • Must verify base year data if selected for verification • Adjustment is only valid at the school making it • Must use resulting EFC consistently for all FSA funds

16. To adjust the EFC— • Must adjust a data element in the formula (e.g. AGI) • May not— • Change the formula itself (e.g. asset conversion rate) or the tables • Make an adjustment to the PC, SC, or EFC • Make the adjustment on the initial FAFSA

17. Federal Methodology • Things to remember— • Income Protection Allowance (IPA) • For parents and independent students with dependents • Increases as family size increases • Decreases as number in college increases • Asset Conversion Rate • Education Savings and Asset Protection Allowance • Increases with the age of the parent/independent student • Deducted from net worth

18. Options to address loss of income • Option 1: Use income from the prior tax year (no change) • Option 2: Adjust income based on current tax year (e.g., use estimated 2010 income to award 2010-11) • Option 3: Adjust income based on current academic year (e.g., use estimated income from July 1, 2010 – June 30, 2011 to award 2010-11) • Option 4: Adjust income based on the next 12 months (e.g., use estimated income based on the date loss of income occurred & the next 12 months

19. PJ COA Adjustment • COA components may be adjusted to reflect individual unusual circumstances • Adjustments to COA must be made under categories defined by statute • Financial aid administrator may not create a new cost category through PJ

20. Costs must be those incurred by the student, for the student, for the period of enrollment, except: • one-time cost of obtaining the first professional credentials for a student in a program requiring professional licensure or certification • for independent students for care of dependents (e.g., child, elderly, etc.) • adjusted to include food and shelter costs for dependents when family income falls below income protection allowance

21. Documentation— • Must document the reason for the determination • Must maintain documentation supporting the decision

22. Examples of documentation • Medical bills not reimbursed by insurance • Elementary/Secondary school tuition bills • Child care or dependent care bills • Pay stubs • Documentation of unemployment • Tax returns

23. Needs Analysis Discussion

24. Dependency Overrides

25. Dependency Status • Independent student is defined in Section 480(d) of the HEA • Meets one of eight criteria specified in the HEA and reflected on the FAFSA or • Is a student for whom a financial aid administrator makes a documented determination of independence by reason of other unusual circumstances

26. Dependency Overrides (continued) • Case-by-case • Documented! • Determination and supporting documentation • Unusual circumstances • Per Webster: rare, extraordinary, uncommon, unexpected, distinctive

27. Examples that may constitute “unusual circumstances” • Student’s voluntary or involuntary removal from parents’ home due to an abusive situation that threatened the student’s safety and/or health • Incapacity of parents such as incarceration or a disability or mental or physical illness • Inability of the student to locate the parent(s) after making reasonable efforts • Other extenuating circumstances sufficiently documented by a signed letter from a third party

28. Dependency Overrides (continued) • Conditions that do NOT qualify as “unusual circumstances” individually or in combination • Parents refuse to contribute • Parents are unwilling to provide information • Parents do not claim the student as an income tax dependent • Student demonstrates totally self-sufficiency • [DCL – GEN 03-07]

29. PJ –Dependency Override Documentation • Documentation • Must document the reason for the determination and maintain documentation supporting the decision • Supporting documentation from a third party with knowledge of the unusual circumstances

30. Third party includes— • Counselors or teachers • Clergy • Community groups • Government agencies • Medical personnel • Courts • Prison administrators

31. Depedency Override Reminders • You may make an otherwise dependent student, independent • You may not make an independent student, dependent • Annual determination—must affirm each year that the unusual circumstances still exist

32. Effective for the 2009-10 award year, a financial aid administrator may rely on a dependency override performed by another institution for the same award year • [Section 480(d)(2), College Cost Reduction and Access Act of 2007]

33. Dependency Override Discussion

34. Loan Eligibility

35. Unsubsidized “new” • FAAs may offer a dependent student an unsubsidized FFEL/DL without parental data being provided on the FAFSA if the FAA verifies that— • The parent or parents of such student have ended financial support of the student, and • The parents refuse to file such form

36. Eligible for base amount for grade level & additional $2,000 • Must collect and maintain appropriate documentation • Signed and dated statement from parents • Has stopped providing financial support and date • Will not provide financial support in the future • Refuses to complete parental section of FAFSA

38. Professional Judgment in Eligibility Determination And Resource Analysis November 1993, Monograph Number 10 Updated June 1997 October 2007, Monograph Number 21 http://www.nasfaa.org/PDFs/2007/Monograph21.pdf Professional Judgment in Eligibility Determination And Resource Analysis May 2009, Monograph Number 22 http://www.nasfaa.org/PDFs/2007/Monograph22.pdf Dear Colleague Letter DCL ID: Gen-09-05 May 8, 2009 http://www.ifap.ed.gov/dpcletters/GEN0905.html FSA 2009 Conference (Handouts) Use of Professional Judgment to Address Families Impacted by the Economy SASFAA 2010 Conference (Handouts) Professional Judgment its Your Decision