PJ WHAT?! RMASFAA – October 17, 2017 Presenters: Jason McClain – Attain Consulting Services Manager Rhonda Pickerel - Attain Consulting Services Manager

Professional Judgment Overview What is Professional Judgment Types of Professional Judgments What is special about Prior, Prior and PJs Case Studies OJ Overview – For any of you who have been in this industry for any length of time, Professional Judgements are not a new thing. Today we are discussing how the change to Prior Prior year utilization of income information for filling out the FAFSA has increased the need for Professional Judgements, both in income and COA adjustments First - we will go over what is Professional Judgment and the types of PJs. It is important we all understand when you can and cannot exercise PJ. Second – we will discuss why the utilization of Prior Prior year income information has increased the need for Professional Judgements And then we will move into specific scenarios that commonly occur where a Financial Aid Office may determine it is best to use a Professional Judgement process.

What is Professional Judgment? The Higher Education Act of 1965, as amended, provided authority to exercise discretion as a financial aid administrator: when modifying data used to calculate the EFC, performing dependency overrides, resolving conflicting information, reporting cases of fraud, and determining a student to be an unaccompanied homeless youth. A financial aid administrator may use professional judgment on a case by case only. They cannot be made for all students or groups of students. They must be well documented. Professional judgment may not be used to waive general student eligibility requirements or to adjust the student’s cost of attendance simply because school feels that the language in the HEA is not adequate or appropriate

Types of Professional Judgments & Special Cases Performing a Dependency Override Adjustments to Expected Family Contribution (EFC) data elements Denial or reduction of Direct Loan or PLUS Loan eligibility Awarding unsubsidized Direct Loan without parental FAFSA data. Satisfactory Academic Progress (SAP) Adjustment to the Cost of Attendance (COA) A student’s Unaccompanied Homeless Youth status

Areas Where Professional Judgment Does not Apply Changing a student from independent to dependent. Creating a new category in the COA. Adjusting the “bottom line” EFC directly. Change FM formula or the values in the EFC tables. Waiving the general student eligibility requirements. Circumventing FSEOG selection criteria. Circumventing the intent of the law or regulations. Including expenses related to post-enrollment activities in the student’s COA unless on a one-time basis for the cost of obtaining a first professional credential for a student in a program requiring professional licensure or certification.

General Guidelines in Your PJ or Decision Making Process Are these unique circumstances that are not dealt with in the need analysis formula or other Title IV regulations? Is the special circumstance justified in that it affects the student’s ability to pay or complete their program of study? What should your special treatment be? What documentation do I need to support this decision? Will this decision be justifiable in an audit or program review? If student was selected for verification by CPS, ensure verification is completed prior to PJ. Ensure all C codes are resolved prior to PJ. Conflicting information must be resolved prior to any PJ adjustments.

Dependency Overrides FAA’s decision that an otherwise dependent student is independent is an exercise of PJ Must be done on a case by case basis The schools must document its decision to do a dependency override and collect the documentation to supports its decision Dependency override considerations: Nature of student’s estrangement from the parents? Is the student estranged from both parents? Third party relationship to student. Is the third party unbiased? Does the student’s income and other resources justify financial self- dependence?

Dependency Override Documentation Letter from the student. Letters from knowledgeable, non-vested third parties (e.g., counselors, teachers, clergy, relatives, social workers, etc.). Copy of student’s federal tax return. Copy of parent’s tax return. Copy of lease, rent receipts, utility bills, health insurance, etc… Court documents. Documentation may include the items listed on the slide

What Does Not Qualify as Unusual Circumstances for a Dependency Override Parents refuse to contribute to the student’s education. Parents are unwilling to provide information on the FAFSA or for verification. Parents do not claim the student as a dependent for income tax purposes. Student demonstrates total self-sufficiency.

Unaccompanied Homeless Youth A financial aid administrator can also determine if a student is an unaccompanied youth who is either homeless or is self supporting and at risk of being homeless. It is important that you examine students’ living situations and claims on a case by-case basis. If a student does not have, and cannot get, documentation from any of the above authorities, you must determine if she is an unaccompanied youth who is homeless or is self-supporting and at risk of being homeless.” For students you determine to be unaccompanied homeless youths or unaccompanied, self-supporting youths at risk of being homeless, select the homeless youth determination option (#4) in the dependency override field in FAA Access to CPS Online or EDE. 2017-2018 FSA Handbook, AVG 115-116 - Special cases

Adjustments to the EFC Data Elements FAA may not adjust the EFC itself FAA may adjust data elements used to calculate the EFC Must be done on a case by case basis Adjustments to the data elements may result in an increase or decrease to the EFC, which impacts need FAA decides which adjustment is most appropriate The choice of the data element of corresponding value must fit the students situation For example, changes to income or loss of income

Documentation for EFC Data Element Adjustments Copy of federal tax returns Receipts Cancelled checks Billing statements Signed, itemized statement of expenses Proof of loss of job or reduction in income Signed statement for estimated or projected income Documentation of state unemployment insurance payments

Adjustments to the Cost of Attendance Cost Of Attendance (COA) – An estimate of the student’s educational expenses for their period of enrollment. Institutions are responsible for identifying the costs associated with the required COA components (Based on HEA section 472) for students with common attributes. Allowable components are: Tuition and Fees Allowance for books, supplies, transportation and miscellaneous personal expenses Allowance for room and board Allowance for dependent care, if applicable Loan Fees for students receiving student loans Allowance for one time direct costs of obtaining a certificate or license, if required Other components that apply to specific groups of students

Adjustment to the COA (continued) FAA may adjust the components of the COA FAA may change the amount of any component of the COA Must be done on a case by case basis FAA must document and collect the documentation that substantiates the special circumstances of the student Reasons for COA adjustments may include Increased cost in transportation Increased costs on daycare Additional costs for equipment or supplies needed for classes Unforeseen medical expenses

Denial or Reduction of a Direct Loan Reasons for denial of a direct loan Borrower indicates an unwillingness to repay the loan (must be able to document the rationale) Student has other resources to cover the COA Must be made on a case by case basis Documentation must be kept in the student’s file Denial cannot be based on bankruptcy Cannot be part of a pattern practice of denying access to loans because of refusing to certify a loan or reducing loan eligibility borrower’s race, sex, religion, national origin, age, income, selection of lender or guarantor, or physical, emotional or intellectual challenges

Awarding Unsubsidized Loan without FAFSA Dependent students whose parents refuse to complete the FAFSA have the option of a Direct unsubsidized loan Financial aid office must obtain documentation: Parent refused to complete the FAFSA Parents do not and will not provide financial support Financial aid office could get the above information from a 3rd party if the parents refuse to provide documentation Student must still complete the student section of the FAFSA

Satisfactory Academic Progress Appeals Approval of a SAP appeal constitutes professional judgment When you approve an appeal for mitigating circumstances you are suspending the academic progress standards for that student You are not eliminating Satisfactory Academic Progress standards for that student. When you grant an appeal, you are acknowledging that because of the documented unusual circumstances, the student continues to be FSA eligible even though she falls below your school’s academic progress standard.

What is Special About Prior Prior Length of time between income reported and year applying Family size (Divorce, Death, Marriage, Birth) Career Changes (Loss of income, New Career, Lay Off, Promotions) Health Changes (Disability, Workman’s Comp, Social Security, Illness) Prior prior year may create more need for FAA’s to exercise professional judgment. We had situations that changed from year to year. Now that we are looking at two years past, it is more likely for income information to be different. Remember, the concept of the FAFSA is to determine a families ability to pay for college and it is a snapshot in time. Now it is based on 2 year old tax information.

What is Special About Prior Prior Recommended Best Practices according to NASFAA in the PPY Toolkit (http://www.nasfaa.org/ppy_best_practices) “For professional judgment (PJ) decisions, maintain the status quo to the extent possible. Continue to use the income that best reflects the student’s current situation. Do not ask applicants for more information than necessary to make a PJ decision. Update school policies and procedures to reflect how the use of Prior-Prior Year may change PJ processes, including the timing of when you will consider appeals. Use test environments within the financial aid processing system to look for effective approaches to professional judgment, including which changes have an effect on financial need and awards. This could also be used to train staff to identify changes that will yield adjustments in the student’s financial aid package.” It is important to understand the responsibilities of an administrators and institutions in considering the use of Professional Judgments.

Best Practices for Professional Judgment Ensure your policies on professional judgment are maintained in writing and updated each year: Policy and procedures should include: Who has the authority to exercise PJ Details of each type of PJs and acceptable documentation Procedures on how and who makes adjustments to EFC data elements on ISIR or COA components Procedures on how students are notified of results of PJ decisions As a best practice, create individual PJ forms for students to complete on the web or on paper Ensure processes are in place to notify students of the results of PJ outcomes Ensure PJ documentation is placed on the student’s physical file or imaged file

Case Studies

Case Study #1 Sue Smith – Dependency Override Scenario – Sue (incoming Freshman) is applying for the 2017/18 Award Year and she is considered a dependent student based on her age. She was living with her mother when she completed the FAFSA. She has not seen her father for over 10 years. Although her mother completed the FAFSA, she is no longer living with her mother as the relationship became abusive and Sue moved in with her grandparents until college begins. Sue is asking for a dependency override and completes the PJ form. She states her relationship with her mother is broken and she is afraid for her safety.

Case Study #1 – Dependency Override PJ Considerations – Review documentation that student has provided with PJ application, which may include: Letter from grandparents that state when the student moved in with them and any information that would substantiate the student’s relationship with the mother. Letter from teacher or guidance counselor providing additional confirmation of student’s relationship with mother. Letter from student describing the nature of the estranged relationship with her mother and further clarification of the father’s relationship to the family. Any court documents that would support an abusive relationship with mom. Implementation of PJ is approved – To override the student’s dependent status on an initial application through FAA Access, the FAA should use the Dependency Override code of “1” (see the EDE Technical Reference for more information). If the student has already applied, you can use FAA Access to authorize or cancel an override; overrides cannot be done on the SAR. If she had an override done at another school in the current year, that will be noted with the school’s federal code on FAA Access. Only the school performing the override will receive that transaction. If the student adds your school to the transaction or if she gives you her data release number (DRN), you can access the record.

Case Study #2 John Smith – Income Change Scenario – John Smith lost his job six months ago. He is an independent student, single and will be a Senior in college during the 17/18 academic year. He filed his FAFSA in January 2017. PJ Considerations – Student information provided on the FAFSA was based on student being employed fulltime; however, John can request a Professional Judgement for an income adjustment based on the significant change in income. Common acceptable documents – Letter or notice from employer of layoff showing dates of layoff Documentation of UI benefits (if receiving) Will reduction of income have a significant impact on EFC? Did student find another job since he lost his main source of income, if so get documentation of wages for new position. If approving the PJ - Adjustments should be made to both the AGI and earned income on the ISIR. Although it isn't common, financial aid administrators may make adjustments for income changes and job loss that occur in the middle of the award year. Estimated income should be used only for the remainder of the award year, with actual income used for the award year so far. For example, if a student enrolled for 2017-2018 aid year and is laid off on January 1, 2018, one could use professional judgment to replace prior prior tax year income with actual income from July 2017 through December 2017 inclusive and estimated income from January 2018 through June 2018 inclusive.

Case Study #3 Jane Doe - COA adjustment Scenario – Jane (independent student) plans on beginning her first 4 year, undergrad, degree in August of 2017. Jane filled out the FAFSA in November of 2016 for the 2017/18 Award Year. In February of 2017, Jane was in a car accident resulting in significant medical bills, most of which are not covered by her insurance. PJ Considerations – Jane completed the PJ form and turned in medical bill receipts and hospital bill receipts along with insurance paperwork. Is the amount already covered in the IPA? Are the amounts covered by insurance? If partially covered, what amounts are not covered? If PJ is approved – adjust misc. personal expenses in COA to reflect additional health care costs. Allow for the amount that is already in the IPA.

Professional Judgment and Special Cases Resources 2017-2018 Federal Student Aid (FSA) Handbook AVG Chapter 5, pages 109-116 DCL GEN 11-14 PJ and Unemployment Benefits DCL GEN 16-03 Prior Prior Year Data and PJ DCL GEN 16-14 Conflicting information between 2016–2017 and 2017–2018 DCL GEN 15-16 Homeless Youth Determinations NASFAA PJ Guide and NASFAA Prior Prior Year Toolkit

Questions & Wrap-up