IN CONCERT ILLINOIS ASSOCIATION OF STUDENT FINANCIAL AID ADMINISTATOR ANNUAL CONFERENCE April 8 – 10, 2015 Embassy Suites, East Peoria, IL

Professional Judgment Bruce Foote University of St. Francis

Topics We Will Cover Introduction Underlying Concepts Dependency Status Cost of Attendance Satisfactory Progress Questions

Disclaimer The materials in this presentation are collected from NASFAA, Department of Education, past research, and of course, opinion. I will make every effort to use the later very sparingly--but bear in mind that when you ask me for it, I will not hesitate to share it with you.

HEA of 1986, Sec. 479A Professional Judgment “DISCRETION OF FINANCIAL AID ADMINISTRATORS” Sec. 479A. “Nothing in this part shall be interpreted as limiting the ability of the financial aid administrator, on the basis of adequate documentation, to make necessary adjustments to the cost of attendance and expected family contribution computations to allow for treatment of the individual students with special circumstances. In addition, nothing in this part shall be interpreted as limiting the ability of the student financial aid administrator to use supplementary information about the financial status of eligible applicants in selecting recipients and determining the amount of awards under subparts 1 and 2 of part A and parts B, C, and E, of this title.”

Correction? Correction: FAFSA information initially reported incorrectly can be corrected. This does not constitute professional judgment. EXAMPLE: Divorced parent reports total income from jointly filed tax return and was divorced at the time of filing. Not PJ.

Update? FAFSA information was correct at the time of filing but has changed since that time. The three items that may be updated are: Dependency Status Household Size Number in College

Adjustment? An adjustment is a change to the student’s application data by the FAO under professional judgment authority in order to achieve a specific result. You will need to insure that whatever action you take it is appropriate, necessary and properly documented.

Professional Judgment Principles You can use discretion in certain areas when a student’s family has unique circumstances. Special circumstances must differentiate an individual student from a class of students. Must be made on an individual case-by-case basis. Across the board changes are not permitted in professional judgment.

Professional Judgment Principles (continued)... Policies and procedures to objectively identify students for whom professional judgment decisions may be appropriate are acceptable business practices. EXAMPLE: A policy that states that the dollar value of the adjustment must exceed 5 percent of the family’s AGI.

Professional Judgment Principles (continued)... Professional judgment is highly subjective. There is no right or wrong answer. You must make your own decision. It is important to understand that many FAOs will approach a similar situation and arrive at equally valid solutions. While a professional judgment decision is “legal”, your institution may have policies about what will and will not be taken into consideration under professional judgment.

Professional Judgment Principles (continued)... Must be documented. Must adjust data elements. Must use the resulting EFC for all federal aid programs. Must resolve any inconsistent and conflicting information prior to adjustment.

Things You Can’t Do With Professional Judgment Change a student’s status from Independent to Dependent. Adjust the EFC directly. Alter the need analysis formula itself. Include expenses for post-enrollment activities (bar exams, CPA, etc.). Circumvent statutory FSEOG selection criteria. Can’t make changes in the general program requirements.

Things You Can’t (Continued)... Can’t give allowances that are already taken into consideration by Income Protection Allowance: Food30% Housing22% Transportation 9% Clothing/Personal16% Medical11% Other12%

IPA Example Income Protection Allowance $28,890 The amounts already being taken into consideration by need analysis Food $8,667 Housing$6,356 Transportation $2,600 Clothing/Personal $4,622 Medical $3,177 Other $3,468 Total$28,890

Documentation Requirements You have the authority to request and use supplemental material. Special circumstances and action taken must be documented. You cannot document “after the fact” or “during an audit.” You have the right to an attorney to be present during questioning ☺

Two Types of Documentation A written request from the student and: Letters Bills Receipts Pay Stubs Other Third Party Documentation A clear record of: Decision made and how it was reached. Decision date. Description and date of actions taken. Citations of policy and procedures. Name and title of decision maker.

Maintaining Documentation Documentation may be maintained in paper or electronic files.

Important Considerations Would a “reasonable” person reviewing the same set of circumstances reach a similar decision to yours? Is the method you have chosen to adjust an “appropriate” method based on the situation at hand? You don’t have to make a professional judgment decision at all!

Professional Judgment Dependency Status

The FAO may override dependency status on a case-by- case basis for students with “unusual circumstances” The FAO must write a statement outlining the situation and how the decision was reached Both the statement and all other supporting documentation must be maintained in the student’s file The following are not singly or in combination to be considered “unusual” Parental refusal to contribute Parent unwilling to complete FAFSA or provide verification information Parent does not claim student for IRS purposes Student demonstrates self- sufficiency

Dependency Status Unusual circumstances do/might include: Abandonment by parents An abusive family environment that threatens the student’s safety The student is unable to locate his or her parents

Dependency Status The presence of the conditions listed above would not preclude the student being considered as being an unaccompanied youth who is homeless or self-supporting and at risk of being homeless If the student was too old to be considered a youth (i.e. >21) then professional judgment override could be considered

Dependency Status The FAO can’t use professional judgment to change an Independent student to a Dependent student… The FAO can use professional judgment to adjust either budget components or adding support-in-kind as untaxed income

Dependency Status All documentation must support and include the reasoning for the dependency override Information used to support the professional judgment decision should definitely be obtained fro third-party sources If third-party documentation is reasonably “not obtainable”, the FAO may (but doesn’t have to) accept a signed and dated statement from the student or family member detailing the unusual circumstances

Note… An institution can, without gathering additional documentation, accept an override granted by another school (but you don’t have to) in the same academic year Remember all overrides do not automatically carry over from one year to the next—the override should be reviewed each year to determine if the situation has remained the same as granted by the original override

Professional Judgment Data Elements

Potential Reasons For Adjustment 1)—Extreme medical expenses that exceed IPA percentage 2)—Unexpected home repairs 3)—Expenses relative to the death of a family member 4)—Loss of income relative to the death of a family member 5)—Loss of income due to loss or change of job 6)—Loss of income or asset due to natural disaster 7)—Loss of income due to retirement 8)—Bankruptcy 9)—Relocation due to job requirements 10)—Divorce 11)—Loss of untaxed income 12)—Adjustments due to parent in college

Potential Reasons (Continued)... 13)—Adjustments to compensate for income producing assets 14)—Dependency overrides 15)—Adding untaxed income to Independents (i.e., cash support, support-in-kind) 16)—Cost of education increases/budget adjustments 17)—Adjustments for Elementary/Secondary tuition 18)—Student loan payments 19)—Computer purchases 20)—Loan refusal or reduction 21)—Converting a regular IRA into a Roth IRA 22)—Adding back depreciation and other “paper” losses 23)—Reduction or loss of Dependent student income 24)—Inclusion or exclusion of people in the household

Base Year, Estimated Year or Calendar Year??? You can (and should) decide which of the treatments of income will be most appropriate for this student. The decision is completely up to you, and perhaps institutional policy (but why handcuff yourself with this policy?).

Other Considerations You should try to ensure that your adjustments are appropriate and follow through the professional judgment. EXAMPLE: If you are lowering AGI, you would logically follow through and adjust income from work and federal tax paid to reflect the new income figures.

Parent In College Parent in college can be taken into consideration with professional judgment. Care should be taken to make the “appropriate” adjustment! For example: Is the parent taking one class or is the parent a full-time student?

Professional Judgment Cost of Attendance

COA Components Tuition and Fees Room and Board Books, Supplies, Transportation, Personal Expenses, and Computer Costs

Additional Allowances Dependent Care Expenses Disability-related Expenses Cooperative Education Programs Study Abroad Loan Fees

Restrictions <Half-Time (T&F, B&S, Transportation and Child Care) Correspondence (T&F, Required B&S, and, if a required residential component, Transportation and R&B) Incarcerated (T&F, B&S if required) No transportation ☺

Professional Judgment Restrictions Can’t add post-enrollment costs such as bar exam, CPA exam, etc. Can’t “create” new cost components. Expenses must be incurred by the student for the student for the period of enrollment.

Important Note If the cost is an academic requirement for the degree program, it may be included in the cost of attendance. If a nursing program requires an exam to graduate, and the exam has a $25 fee, then the fee can be added to the cost of attendance.

PJ for Tuition & Fee Component School policy must state if school uses average or actual T&F charge. May us professional judgment to deviate from policy on a case-by- case basis.

PJ for Room & Board You may use professional judgment to increase or decrease R & B on a case-by-case basis.

PJ for Computer Costs School decides if and under what circumstances it will add computer costs. Any deviation from policy constitutes professional judgment. It is extremely important that you have policy in place and follow that policy. Policy should address areas such as “one-time purchase”, upgrades, software, etc.

PJ for Child Care Allowance Adding your standard child care allowance is NOT professional judgment. Adjusting the standard child care allowance IS professional judgment.

Questions??????????????