2018–19 Verification A NASFAA Authorized Event Presented by Shannon Crossland, SWASFAA President LASFAA Conference – New Orleans, LA October 17,

2018–19 Verification A NASFAA Authorized Event Presented by Shannon Crossland, SWASFAA President LASFAA Conference – New Orleans, LA October 17, 2018 Welcome Introductions Resources – Slides, Study Guide, Workbook Encourage Other Resources – FSA Handbook, iFAP, Code of Federal Regulations Housekeeping – Restrooms, cell phones, break Around the room – introduce – Name, school, and role

Introduction to Verification
Lesson 1 Introduction to Verification Verification is the process used by the institution to check the accuracy of the information provided on the FAFSA. We will discuss the principles of verification, when required, data elements, tracking groups, documentation

Verification of FAFSA Data
Accuracy Validity Equity As stated previously, verification is the process used to check accuracy Verification ensures the accuracy of data used to establish eligibility for need-based Federal aid.

Verification of FAFSA Data
Regulations define which applications, data elements, and documentation Verification applies to recipients of subsidized Title IV aid Federal Pell Grant Federal Supplemental Educational Opportunity Grant (FSEOG) Federal Work-Study (FWS) Direct Subsidized Loans Verification regulations define: Whose applications are subject to verification; what FAFSA information to verify and acceptable documentation Applicants who receive funds from Pell, SEOG, FWS or SUB loans are subject to verification Verification selection by CPS is indicated on student’s Institutional Student Information Record (ISIR) and Student Aid Report (SAR)

Conflicting Information
Must be resolved for all award years, even retroactively, unless: Student dies during the award year; or Conflicting data are received after the student is no longer enrolled at the school and does not intend to re-enroll at the school in the future School decides what documentation it deems appropriate to resolve any conflicts Verification often identifies conflicting information between FAFSA data and other information the school has available. **** Conflicting information requirements apply to ALL applicants; verification requirements apply only to those who are selected. ALL conflicting information must be resolved for all award years Exceptions are listed in the slide - REMINDER *** As part of administrative capability, schools are required to resolve any conflicting data for all award years.

Verification Selection Process
Applications may be selected by: OR Central Processing System (CPS) Institution Applicants are selected for verification in one of two ways CPS or the institutions *** Schools must verify CPS-selected applicants Now, let’s talk about exclusions.

Verification Exclusions
Verification is not required under certain circumstances Entire application Spousal data Parental data Certain data elements Institutional exemption Applicants, parents, spouses, etc. are excluded under certain circumstances AS LONG AS there is no conflicting information. The reason for exclusion MUST be documented. We will discuss in detail these exclusions in the next slides.

Institutional exemption
Exclusions Entire application Spousal data Parental data Certain data elements Institutional exemption Entire application excluded if student: Only qualifies for unsubsidized Title IV aid (see exceptions) Transfers and was verified at another school Will not receive aid for reason other than failing to complete verification ENTIRE Application NOTE – A student that is eligible for both subsidized and unsubsidized Title IV aid cannot circumvent verification by accepting ONLY the unsubsidized loan.

Exclusions Entire application Spousal data Parental data Certain data elements Institutional exemption Entire application excluded if student: Is selected for verification or changes verification tracking groups after ceasing to be enrolled at the school for the award year and all Title IV aid is already disbursed Dies during the award year No longer enrolled – Verification must be completed within application processing deadlines AND the student must be offered any late Title IV disbursements within deadlines. Late disbursement CFR (j)

Exclusions Entire application Spousal data Parental data Certain data elements Institutional exemption Entire application NOT excluded if selected for: High school completion, and Identity/Statement of Educational Purpose NOTE: Student eligibility issues must be verified if selected in tracking group V4 or V5 while still enrolled

Exclusions Entire application Spousal data Parental data Certain data elements Institutional exemption Parental data is excluded if both parents: Die, or the only parent on the FAFSA dies Are mentally incapacitated, or the only parent on the FAFSA is incapacitated If both parents die after filing the FAFSA, the student is required to update dependency status.

Exclusions Entire application Spousal data Parental data Certain data elements Institutional exemption Parental data is excluded if both parents: Cannot be contacted and whereabouts are unknown Reside in a country other than the U.S. and cannot be contacted by normal means of communication

Exclusions Entire application Spousal data Parental data Certain data elements Institutional exemption Spousal data excluded if applicant’s spouse: Is deceased or mentally incapacitated Cannot be located because contact information is unknown and cannot be obtained by the applicant

Exclusions Entire application Spousal data Parental data Certain data elements Institutional exemption Spousal data excluded if applicant’s spouse: Is residing in a country other than the U.S. and cannot be contacted by normal means of communication

Exclusions Entire application Spousal data Parental data Certain data elements Institutional exemption Number in dependent student’s household if: Parents are married and household size is 3 Parent is unmarried and household size is 2 Given

Exclusions Entire application Spousal data Parental data Certain data elements Institutional exemption Number in independent student’s household if: Student is married and household size is 2 Student is unmarried and household size is 1 Given

Exclusions Entire application Spousal data Parental data Certain data elements Institutional exemption Institution is excluded (exempt) if a foreign school participating in Federal Direct Student Loan (Direct Loan) Program and not located in a state, as defined in regulation Study abroad students are subject to verification if home institution is in a state Costa Rica TTU example **Remember – A student may not decline or reject SUB Title IV funds in order to circumvent verification. Now let’s discuss the Verification Selection Process

Verification Selection Process
ISIR Electronic SAR Paper SAR Customized approach Varies from one applicant to another May be information not used in EFC ED uses a customized approach to select applications for verification. Criteria are determined annually and published in the Federal Register Application data is run through verification selection algorithm initially, and each time corrections are made. NSLDS Student FAA

Verification Tracking Groups
Standard Verification Group Custom Verification Group Aggregate Verification Group V1 V4 V5 Assigned to 1 of 3 for 1819 Each applicant is assigned a Verification Tracking Flag List above – now let’s talk about each group. *** See page 59 of your study guide – illustrates information items that must be verified within each group.

Tax filer income information Nontax filer income information Household size Number in college V1 “Standard” Use pg. 59 with slide Overlapping of information

High school completion Identity and Statement of Educational Purpose V4 “Custom” Use pg. 59 with slide

Tax filer income information Nontax filer income information Household size Number in college High school completion Identity and Statement of Educational Purpose V5 “Aggregate” Use page 59 with slide Let’s talk a minute if the tracking group is reassigned Applicants may be moved from a previously assigned group to the V5 – updated FAFSA or new information The student is required to verify only the FAFSA information in the new tracking group that was not verified in the prior. If student wasn’t verified – verify only the V5 requirements Remember – if student only eligible for unsub- don’t have to verify all just HS completion and Identify and Statement of Educational purpose.

Automatic-Zero EFC Qualifiers
Data Element to Verify (any tracking group)* Dependent Student’s Parent(s) Independent Student (and Spouse) Adjusted gross income Tax filers Income earned from work Nontax filers Household size No Yes Student’s high school completion, identity, SEP V4 and V5 Applicants who qualify for zero EFC are required to verify only certain items – as you can see, it varies slightly between dependent and independent. * If applicant does not qualify for Automatic Zero EFC, update the application and verify remaining data elements applicable to tracking group.

Quick Quiz 1: 1. Except for high school completion, identity, and Statement of Educational Purpose, which of the following Title IV aid programs may qualify the applicant to be excluded from federal verification requirements?  Federal Pell Grant  IASG  TEACH Grant  FSEOG  FWS IASG TEACH Page 9

Quick Quiz 1: 2. Match the verification data element to the tracking group: All are V1 and V5 except Statement of education purpose – V4 Page 9

Quick Quiz 1: 3. What is the key difference between verification and conflicting information? 4. Residents of the Northern Mariana Islands and the Federated States of Micronesia are exempt from verification.  True  False Verification is the process used by the institution to check the accuracy of the information the student and the dependent student’s parents provide on the FAFSA. Resolution of conflicting information involves confirming the accuracy of all of the information related to the student’s application throughout the institution that is suspected to be incorrect. FALSE Pages 9-10

Quick Quiz 1: 5. Match the verification data element to the tracking group: All are V1 and V5; except HS and Identity – V4 and V5 Page 10

Quick Quiz 1: 6. The student’s entire application is excluded from verification of income information if the student is eligible only for ___________ student assistance, such as ___________, ___________, ___________, or ___________ funds. Unsubsidized Unsub loan, PLUS, IASG, TEACH Page 10

Quick Quiz 1: 7. The parental data of a dependent student applicant may be excluded from verification under which of the following circumstances?  At least one of the parents is mentally incapacitated  Both parents’ contact information is unknown and cannot be obtained by the applicant  Both parents reside in a foreign country and cannot be contacted by normal means of communication  Both parents are mentally incapacitated  Both parents are deceased and the student is adopted All three middle ones – contact, reside, mentally incapacitated Page 10

Quick Quiz 1: 8. If both parents die after the student has applied as a dependent student, the student is required to update his dependency status.  True  False 9. Which of the following data elements may be excluded from verification under certain circumstances?  High school completion status, if the student self-certified it on the FAFSA  Number in the independent student’s household, if the student is married and the household size is two  Number in the dependent student’s parent’s household, if the parent is unmarried and the household size is two TRUE # in HH for independent and dependent Page 11

Quick Quiz 1: 10. Except for high school completion, identity, and Statement of Educational Purpose, which of the following Title IV aid programs are excluded from federal verification requirements?  FWS  Direct Subsidized Loans  Direct Unsubsidized Loans  Direct PLUS for parents  Direct PLUS for graduate and professional students Unsub PLUS Page 11

Quick Quiz 1: 11. An independent student’s spousal data are excluded from verification under which of the following circumstances?  The spouse is deceased  The spouse is mentally incapacitated  The spouse cannot be located because his or her contact information is unknown and cannot be obtained by the applicant  The spouse applied for Title IV aid at another school and is only eligible for unsubsidized student assistance  The spouse resides in a foreign country and can be contacted by normal means of communication First 3 – deceased, incapacitated, cannot be located Page 11

Quick Quiz 1: 12. Which of the following are exempt from verification requirements?  Foreign institutions not located in a state  Study abroad students whose home institutions are located in a state  Federally required verification data elements at institutions participating in the campus-based programs  Graduate and professional students Foreign institutions not located in a state Page 11

Quick Quiz 1: 13. If a student is selected for verification after he or she is no longer enrolled for the award year and there are pending Title IV aid disbursements, the student must submit verification documents to the school before the earlier of __________ or __________. 14. SNAP benefits and child support paid must be verified for 2018–19 if they are indicated on the applicant’s ISIR.  True  False 120 days after the student’s last date of enrollment for the award year, or the final award year processing deadline published annually in the Federal Register FALSE Page 12

Is ED’s customized approach to verification appropriate, or should all students who are selected for verification be required to verify all of the same data elements? Does your institution verify data elements beyond those which are selected by the CPS? If so, for which data elements? What research does the institution do to justify the selection of each additional data element? Are there valid reasons for the selection? Group discussion/ great to take back to your offices for working groups, training opportunities Page 13

Should your institution be selecting additional data elements (such as dependency status, assets, other real estate and investments, etc.) for verification? If so, which data elements, and why? Beginning with the 2017–18 award year, ED eliminated federal verification of other untaxed income reported on the FAFSA, indicating that historical data revealed no significant changes in expected family contributions (EFCs) as a result of verifying untaxed income. Do you agree? Do you have institutional data that conflict with ED’s findings? Page 14

Learning Activity Page 15
Encourage group to review and do learning activities prior to exam See study guide for answer keys

Learning Activity 1: Required Verification Data Elements
Review each of the following student scenarios on page 15. Answer the questions and check your responses using the Answer Key on page 111. Page 15

Peter Quill is a single independent student who lives with his father, Ego. His father is incapacitated and received Medicaid and SNAP benefits for the last five years. Peter is his primary source of support. Peter correctly includes Ego as a dependent on his FAFSA. Peter also pays a small amount of court-ordered child support. Peter is selected for verification tracking group V5 and qualifies for the Auto-Zero EFC. Peter was not required to file an IRS Form 1040, so he filed a 2016 Form 1040A tax return with an adjusted gross income (AGI) of $24,989. Page 15

    Learning Activity 1: Required Verification Data Elements
Which of the following data elements must be federally verified for Peter?   AGI  U.S. income tax paid  Income earned from work  Untaxed portions of IRA distributions  Untaxed portions of pensions  IRA deductions and payments  Tax-exempt interest income  Education tax credits  Child support paid  Household size  Number in college  Medicaid and SNAP benefits  High school completion status  Identity/Statement of Educational Purpose    Page 15

Diana Prince is a dependent senior at Themyscira Community College. She lives with her single mother, Hippolyta. Hippolyta’s only source of income (and AGI) is the $35,000 a year she earns at the U.S.-based Amazon Forest Preservation Society (AFPS); she is not required to file an IRS Form 1040 tax return, so she files a Form 1040A. Diana also works at the AFPS in a paid internship during the summer. She does not earn enough to be required to file a federal tax return, so she doesn’t file one. Diana is selected for tracking group V1, and qualifies for the SNT formula when calculating her EFC. Page 15

Which of the following data elements must be federally verified for Diana or her mother?    AGI  U.S. income tax paid  Income earned from work  Untaxed portions of IRA distributions  Untaxed portions of pensions  IRA deductions and payments  Tax-exempt interest income  Education tax credits  Child support paid  Household size  Number in college  SNAP benefits  High school completion status  Identity/Statement of Educational Purpose         Page 15

Required Data Items for CPS-Selected Applicants
Federal Register Dear Colleague Letter Requirements are announced annually. Data required to be verified is posted in the Federal Register Additional information in DCL Note: requirements – DCL17-05 Best practice – review these annually.

General Documentation Requirements
May file FAFSA using estimated income Must complete verification using actual income according to the filed tax return Specified year is the prior-prior year (PPY) For 2018–19, the specified year is 2016 Be aware of which year’s income and tax data is reported on the FAFSA. 2016 2017

IRS DRT allows tax filer to “Link to IRS” and bring tax data into FAFSA
The IRS DRT is the principal source of verification documents, as long as the data remains unaltered. Equivalent to obtaining a tax return transcript

Tax Data Documentation via IRS DRT
+ 1040, 1040A, and 1040EZ 1040 and 1040A only Tax return type Tax filing status Exemptions claimed AGI Income earned from work U.S. taxes paid Untaxed portions of IRA distributions IRA deductions and payments Untaxed portions of pensions Tax-exempt interest Education tax credits This slide shows the specific information that is pulled in via the IRS DRT Reminder – data elements pulled in are masked and not visible to the student/parent online or on paper. Data is considered to be accurate. Exceptions in which a FA Administrator may need to change: Rollover amounts not reported correctly; amended tax return; PJ

IRS Request Flag Description Blank 00 01 02 03
IRS DRT not available in the application method used by the student or parent (for example, paper FAFSA, EDE, or FAA Access) 00 Not eligible to use the IRS DRT and was not presented with the option in FAFSA on the Web (FOTW) 01 Presented with the option to use the IRS DRT in FOTW and elected to use it, but did not transfer IRS data to the FAFSA 02 IRS data were transferred from the IRS and not changed by the user prior to submission of an application or correction 03 IRS data were transferred from the IRS and changed by the user prior to submission of an application or correction The next two slides are the request flag assignments The 02 is significant because this means all IRS DRT data elements can be considered verified without further documentation. All other flags mean additional review and documentation are required.

IRS Request Flag Description 04 05 06 07
IRS data were transferred from the IRS and then changed by the student or parent on a subsequent transaction 05 Presented with the option to use the IRS DRT in FOTW, but did not elect to use it 06 IRS data were transferred from the IRS, but a subsequent change made the student or parent ineligible to use the IRS DRT 07 IRS data were transferred from IRS, but the IRS indicated that an amended tax return was filed **** Resource – Page 60 of the student guide IRS Data Retrieval Tool Decision Tree

IRS Data Field Flags Appear on ISIR for each DRT data element
Indicates: Whether data element was transferred into FAFSA from IRS If data element was subsequently changed IRS Data Field Flag “1” usually means data element can be considered already verified Effective for – data field flags Since this is new I recommend reading in detail starting on page 18 of the study guide provided for you. Indicates – see slide

IRS Data Field Flags Appear on ISIR for each retrieved data element
Indicates: Whether transferred If subsequently changed Flag Description IRS data not transferred 1 Transferred, unchanged 2 Transferred, changed 3 Field corrected on this transaction* 4 Field corrected on a previous transaction* Blank IRS DRT was not used Data field flag of 1 – indicates data element remains unchanged Use the data field decision tree REFERENCE – 8/7/17 electronic announcement and the ISIR Guide *IRS Request flag is 02, 03, 04, or 07.

Data Element Considered Verified?
IRS Request Flag IRS Data Field Flag* Data Element Considered Verified? Blank, 00, 01, 05 Blank or 0 No; need Tax Return Transcript 02 1 Yes; no additional documentation 03 or 04 06 Yes, but only if correct person is on FAFSA/ISIR 07 Yes, unless 1040X indicates data element was amended This table illustrates conditions when an a “1” data field flag can and cannot be used in conjunction with the request flag to complete verification. * IRS Data Field Flags “2” through “4” mean transferred data changed, so additional documentation is needed to complete verification.

IRS Data Retrieval Tool Decision Tree
IRS Data Field flag of “1” eliminates need to document that data element Request flag “02” or “03” or “04” Request flag “06” for correct person Request flag “07” unless amended **Note – While you can use the IRS data field flag “1” to complete verification, be cautious to first look at which IRS request flag is assigned and request additional information and documentation only when necessary.

Ineligible to Use IRS DRT
Tax return has not yet been filed Puerto Rican or non-U.S. tax return filed Taxes filed electronically within last 3 weeks Taxes filed by mail within last 11 weeks Parents are unmarried and living together Change in marital status after end of tax year and before filing FAFSA Conflict between marital and tax filing statuses The next two slides list conditions when student and/or parent cannot use IRS DRT

Married independent student and spouse filed separate tax returns Married parents filed separate tax returns Married and filed taxes as head of household First 3 digits of SSN are “666” for Pacific Islanders Neither married parent has a valid SSN Both parents entered all zeros for SSN

IRS Request Flag “06” Appears when student or parent used IRS DRT and later changes non-DRT data, making that person ineligible to use DRT School must: First confirm if correct individual’s information is on the FAFSA; and Then verify required data for correct individuals if application is selected for verification FLAG 06 When it appears and what you must do *** note – IRS Request Flag 06 MUST be resolved regardless of the individual is selected for verification. ED does not specify what is acceptable documentation when they applicants are not selected for federal verification. The school decides. Refer to EA dated 8/7/17 Now, let’s look at acceptable documentation when the IRS DRT is not or cannot be used.

Tax Return Transcript Can be requested: IRS Get Transcript Online
IRS Get Transcript by Mail Mail or fax IRS Form 4506-T or 4506T-EZ Income Verification Express Service Point out sample page on slide – says Tax Return Transcript *See page 63 of study guide – timeline for access to Irs DRT and tax transcripts

Alternative Tax Transcripts
Acceptable Alternatives Record of Account Transcript Return Transcript for Taxpayer (RTFTP) Tax Return Database View (TRDBV) Transcript Any IRS Tax Transcript with all required data An institution may accept as documentation any IRS tax transcript that includes all of the income and tax information required to be verified. Certain transcripts are not acceptable alone: Information returns processing transcript request – wages Tax account transcript – acceptable ONLy for use with Form 1040 X to verify amended tax files We will discuss documentation requirements later in the presentation. See IRS Publication 17 for more information – Your Federal Income Tax for Individuals

Verification Worksheets
ED provides suggested text annually School may: Use ED’s suggested text or create its own Create a comprehensive worksheet or customize it according to selected data School must use ED’s Identity and Statement of Educational Purpose text as is EDs suggested text start on page 79 of your study guide and NASFAA has provided samples which are available on page 93. Note – Schools must used EDs Identity and Statement of Educational Purpose text as is.

Acceptable Signature Formats
“Wet” Photo-copied Faxed Electronic Electronic – PIN to sign for identification and authentication – explain TTUs electronic signature Must comply with Eds standards for electronic signatures in electronic student loan transactions – these standards apply to all areas wherein institutions choose to use electronic records and signatures. Now let’s move to documentation requirements

See page 64 -78 of the study guide
Point out samples See page 101 of study guide for verification data and tax form comparison Use these references for your exam.

Acceptable Alternatives
AGI—Tax Filers Acceptable Alternatives Unaltered IRS DRT data Tax Return Transcript Other tax transcript listing tax account information Foreign tax returns U.S. Territory tax returns Review the columns from page 64 of the study guide Point out tax related identity theft on page 65

AGI—Tax Filers Adjusted Gross Income
Tax Return Transcript Adjusted Gross Income Per Computer (Transcripts—1040, 1040A, and 1040EZ) 1040 Line 37 1040A Line 21 1040EZ Line 4 1040X Line 1C (Correct amount) FAFSA Student Question 36 Parent Question 85 Can see comparison Note income earned from work is not require to be verified for a tax filer only AGI is unless there is conflicting information and unchanged IRS DRT can be used to confirm income earned from work for unmarried tax filers.

AGI—Tax Filers: Documentation Exceptions
Tax return filing extensions Amended tax returns Government cannot locate tax account information Special circumstances published by ED Separating income on joint tax returns Review page 66 of study guide for information regarding each of these exceptions. Name a few. Use for exam Note on amended tax returns – IRS request flag 07 must be resolved whether or not the student is selected for verification.

Income Earned from Work—Tax Filers
Not required to be verified for tax filers in any tracking group May consider data to be validated if: Eligible to use IRS DRT; Marital status is single, separated, divorced or widowed, and did not file jointly; and IRS Request flag of “02” and Data Field Flag of “1” for income earned from work No conflict if different than AGI Review slide

Income Earned from Work—Tax Filers*
Tax Return Transcript 1040 Transcript—Wages, Salaries, Tips, etc + Business Income or Loss: Sch C Per Computer + Farm Income or Loss (Schedule F) Per Computer 1040A Transcript—Wages, Salaries, Tips, etc + Business Income or Loss: Sch C Per Computer + Farm Income or Loss (Schedule F) Per Computer 1040EZ Transcript—Wages, Salaries, Tips, etc 1040 Lines Schedule K-1 (Form 1065), Box 14, Code A Form W-2, Box 1 1040A Line 7 Form W-2, Box 1 1040EZ Line 1 Form W-2, Box 1 1040X Part III Supporting Documents (if indicated, such as W-2, Box 1; Schedule C; Schedule F; Schedule K-1, Box 14, Code A FAFSA Student Questions 39 and 40 Parent Questions 88 and 89 Reminder – not a required data element for tax filers and schools can consider data validated based on bullets in previous slide. *Not a data element selected for federal verification when the individual is a tax filer.

Income Earned from Work—Nontax Filers
U.S. Individuals Statement or verification worksheet; Form W-2 from each employer; and IRS Verification of Nonfiling Letter* Foreign Residents Wage and Tax Statement or equivalent; Statement or verification worksheet; and Verification of Nonfiling from tax authority* See page 71 of study guide Reminder to resolve any conflicting information. *Except dependent student

Verification of Nonfiling
IRS Verification of Nonfiling Letter dated after October 1, 2017 is required from: Dependent parent who did not and was not required to file a tax return Independent student (or spouse, if applicable) who did not and was not required to file For 2018–19, not required from dependent student Groups V1 and V5, even if income is zero

Verification of Nonfiling
Acceptable Alternatives Tax Transcript or Tax Account Transcript stating “no record of return filed” or “no transcript on file” Any version of Form stating no record of tax return (or provided as verification of nonfiling) Any IRS document dated on or after October 1, 2017 indicating no tax record on file for tax year Signed statement and any W-2s, if no SSN, ITIN, or EIN and income is below filing threshold Foreign VNF or proof of tax filing requirements, wage statement, and signed statement Review slide

U.S. Income Tax Paid—Tax Filers
Verify using: Unaltered information via IRS DRT; IRS Tax Return Transcript; or Alternative IRS tax transcript listing tax account information Signature not required Review slide. Documentation required – page 72 of study guide

U.S. Income Tax Paid—Tax Filers
Tax Return Transcript 1040 Transcript—Income Tax After Credits Per Computer minus Excess Advance Premium Tax Credit Repayment Amount 1040A Transcript—Tentative Tax Per Computer minus Total Credits Per Computer 1040EZ Transcript—Total Tax Liability TP Figures Per Computer minus Health Care: Individual Responsibility 1040 Line 56 minus Line 46 1040A Line 28 minus Line 36 1040EZ Line 10 1040X 1040X Line 8 (or if box 8962 is checked on 1040X Line 15, use 1040X Line 8 minus Line 29 from IRS Form 8962) FAFSA Student Question 37 Parent Question 86 This slide shows where you can find this information.

Untaxed Income and Benefits—Tax Filers
Verify specific types of untaxed income: Untaxed portions of IRA distributions Untaxed portions of pension and annuity distributions IRA deductions and payments Tax-exempt interest income Education tax credits Signature not required when data is validated via IRS DRT Refer to page 73 of study guide – see next slides for where to find this information

Untaxed Portions of IRA Distributions Tax Return Transcript Total IRA Distributions minus Taxable IRA Distributions (Transcripts—1040 and 1040A only) 1040 Lines 15a minus 15b (excludes rollovers) 1040A Lines 11a minus 11b 1040EZ N/A 1040X Part III Supporting Documents, if indicated FAFSA Student Question 45e Parent Question 94e Untaxed Pension and Annuity Distributions Tax Return Transcript Total Pensions and Annuities minus Taxable Pension/Annuity Amount (Transcripts—1040 and 1040A only) 1040 Lines 16a minus 16b (excludes rollovers) 1040A Lines 12a minus 12b (excludes rollovers) 1040EZ N/A 1040X Part III Supporting Documents, if indicated FAFSA Student Question 45f Parent Question 94f

IRA Deductions and Payments Tax Return Transcript KEOGH/SEP Contribution Deduction + IRA Deduction Per Computer (Transcripts—1040 and 1040A only) 1040 Lines 1040A Line 17 1040EZ N/A 1040X Part III Supporting Documents, if indicated FAFSA Student Question 45b Parent Question 94b Tax-Exempt Interest Income Tax Return Transcript Tax-Exempt Interest (Transcripts—1040 and 1040A only) 1040 Line 8b 1040A 1040EZ N/A 1040X Part III Supporting Documents, if indicated (e.g., 1099-INT, Box 8; DIV, Box 10) FAFSA Student Question 45d Parent Question 94d

Tax Filers—Untaxed Income and Benefits
Education Tax Credits Tax Return Transcript Education Credit Per Computer (Transcripts—1040 and 1040A only) 1040 Line 50 1040A Line 33 1040EZ N/A 1040X Amount of nonrefundable education tax credits included in X Line 7, as explained in Part III and/or amended Form 8863 showing corrected amount on Line 19 FAFSA Student Question 44a Parent Question 93a

IRA, Pension, and Annuity Rollovers
Rollovers are excluded from EFC IRS DRT: If distribution received, tax filer is asked to enter amount of any rollover IRS Request Flag = “3” and IRS Data Field Flag = “2” Not using IRS DRT: Tax filer subtracts amount of rollover before reporting Untaxed Income Rollover amount excluded when filing paper FAFSA and not using DRT DRT – asked to enter amount flag changes to 3 and data field changes to 2

IRA, Pension, and Annuity Rollovers
Document amount of rollover using either: Signed written statement Signed and dated tax transcript For IRS DRT users, if entry of rollover amount is the only change, tax transcript is not required Collect only a signed statement Rollover amount only needs to be verified *know how to identify rollovers.

Quick Quiz 2: 1. Which of the following items are transferred from the IRS to the FAFSA using the IRS DRT?  IRA deductions and payments  U.S. income tax paid  Tax filing status  Payments to tax-deferred pensions and retirement savings plans  Untaxed portions of pension distributions Everything but payments to tax-deferred pensions and retirement savings plans Page 31

Quick Quiz 2: 2. A person who is required to report FAFSA information and will file a tax return, but who had not yet filed a tax return at the time the FAFSA was filed, should have included estimated AGI and other tax data on the FAFSA. If federally selected for verification, __________  the tax return does not need to be filed and a signed statement with W-2s may be used to complete verification.  the tax return must be filed and the resulting tax data documentation must be used to complete verification. The tax return must be filed and the resulting…. Page 31

Quick Quiz 2: 3. Which of the following IRS Request Flags indicates the IRS DRT was used and the data has not been altered?  00  02  03  05  06 02 Page 31

Quick Quiz 2: 4. Which of the following items are transferred from the IRS to the FAFSA using the IRS DRT?  Health Care Tax Credit  Adjusted gross income  Number of claimed exemptions  Untaxed portions of IRA distributions  Additional Child Tax Credit AGI Number of claimed exemptions Untaxed portions of ira distributions Page 31

Quick Quiz 2: 5. An alternative tax transcript known as the Return Transcript for Taxpayer (RTFTP) is required to complete verification for individuals identified by the IRS as victims of identity theft.  True  False False Page 32

Quick Quiz 2: 6. Which of the following IRS documents cannot be used alone to complete federal verification?  Record of Account Transcript  Tax Account Transcript  Return Transcript for Taxpayer (RTFTP)  Information Returns Processing Transcript Request-Wages (IRPTR-W) Tax Return DataBase View (TRDBV) transcript 7. List all four of the signature formats schools can accept on all verification documentation. Tax account transcript and information returns processing transcript request wages Wet/original signatures; photocopied signatures; faxed signatures; electronic signatures Page 32

Quick Quiz 2: 8. Which of the following items are transferred from the IRS to the FAFSA using the IRS DRT?  American Opportunity Tax Credit  Earned Income Tax Credit  Tax return type  Housing allowances for members of the military  Tax-exempt interest 9. An institution may accept as verification documentation any IRS tax transcript that includes all of the income and tax information required to be verified.  True  False American opportunity tax credit, tax return type, tax-exempt interest True Page 32

Quick Quiz 2: 10. Which of the following can be verified using the IRS Tax Return Transcript?  Untaxed IRA distributions  Payments to tax-deferred pension plans  Untaxed pension and annuity distributions  Veteran’s noneducation benefits 11. If an individual is otherwise required to provide an IRS Form W-2 for verification and is unable to do so, explain what he or she should provide instead. Untaxed ira distributions, untaxed noneducation benefits The taxpayer may provide a signed statement certifying for the tax year the amount of income earned from work, the source of the income and the reason why the w-2 is unavailable in a timely manner. An IRS wage and income transcript is also acceptable in place of a w-2 Page 33

Quick Quiz 2: 12. The institution should not accept an IRS Verification of Nonfiling Letter dated before __________.  April 15, 2017  May 1, 2017  October 1, 2017  July 1, 2017 October 1, 2017 Page 33

Quick Quiz 2: 13. Which of the following are required to verify income for a dependent student’s parent who is a nontax filer?  Tax Return Transcript indicating income earned from work  IRS Verification of Nonfiling Letter or confirmation of nonfiling from the relevant taxing authority  Signed statement indicating the source and amount of each source of income earned from work  Signed W-2 forms for each source of income earned from work  Signed statement indicating a tax return was not and is not required to be filed IrS Verification of nonfiling letter Signed statement indicating source and amount Signed statement indicated a tax return was not and is not required to be filed Page 33

Household Size and Number in College
Collect a signed verification worksheet or a signed statement listing: Names and ages of all household members Relationship of each to student Name of postsecondary institution in which household member is enrolled at least half time in Title IV-eligible program and institution The next five slides we will look at household size and number in college Review slide

Household Size—Dependent
Applicant and parent(s) Other children and other persons* + Unborn child* *Can include if parents will provide more than half support from 7/1/18 (or birth, if later) through 6/30/19. Can include siblings in graduate school, but not state-supported foster children. Other persons must be living with the parent at the time of FAFSA filing through 6/30/19.

Number in College—Dependent
Applicant Siblings and other persons* + Review slide *Can include any household member (except a parent) who is, or will be, enrolled at least half time in a degree, certificate, or other recognized credential at a Title IV-eligible postsecondary institution any time between 7/1/18 and 6/30/19.

Household Size—Independent
Applicant (and spouse) Children and other persons* Unborn child* + This slide illustrates an independents student household size Review slide *Can include if applicant will provide more than half support from 7/1/18 (or birth, if later) through 6/30/19. Can include dependents in graduate school, but not state-supported foster children. Other persons must be living with the applicant at the time of FAFSA filing through 6/30/19.

Number in College—Independent
Applicant Children and other persons* Spouse* + Review slide *Can include any household member who is, or will be, enrolled at least half time in a degree, certificate, or other recognized credential at a Title IV-eligible postsecondary institution any time between 7/1/18 and 6/30/19.

High School Completion
High school diploma always preferred Several types of documents can be used School may accept alternative documentation only when: Secondary school documentation is unavailable (e.g., closed school, deceased parent who provided home schooling) Foreign refugees, asylees, and victims of human trafficking who cannot obtain diploma or secondary school leaving certificate Review slides Note – graduate students are still required to verify high school completion – exception – not required if admission to the graduate program requires completion of at least two years of UG coursework acceptable for full credit toward a bachelor’s degree VERY unusual circumstances when alternative documents are acceptable.

Identity and Statement of Educational Purpose
*signature requirement Must used exact ED language See pg 78 for IDs that cannot be used to verify identity *photocopies of military IDs cannot be used to verify identity

Optional Institutionally Selected Data
Assets Cash, savings, and checking Real estate and investments Other forms of untaxed income Untaxed Income Payments to tax-deferred pension and savings plans Child support received Housing, food, and other living allowances paid to members of the military, clergy, and others Veterans noneducation benefits Other untaxed income not reported elsewhere on FAFSA Money received or paid on student’s behalf Dependent upon school policies not limited to above listed in slide

Cannot include resources specifically excluded from need analysis, such as: Federal veteran’s educational benefits Military housing/housing allowance State foster care or adoption assistance payments Means-tested welfare benefits Combat pay Foreign income exclusions In-kind support Care must be taken not to include the following – more examples on page 41 of your guide. These forms of income are prohibited by law from inclusion in the EFC calculation for Title IV purposes.

Exceptionally low income may be validated School may ask the applicant to explain how the family was supported School decides what constitutes acceptable documentation for anything other than federally required verification data Can be same as current or past ED requirements *school decision Document in policy

Financial Aid Administrators and Tax Expertise
Aid administrator must know: Whether required to file a tax return Correct tax filing status for a tax filer Cannot be claimed as an exemption by more than one person We are not expected to be tax administrators but we expected to know the items listed on this slide.; Tax questions should be referred to the IRS or a tax expert.

Quick Quiz 3: 1. Foster children for whom the state provides more than half support are not included in the household size for Title IV purposes.  True  False True Page 49

Quick Quiz 3: 2. Verification of household size on federally selected applications is required in which of the following circumstances?  The household size indicated on the dependent student’s ISIR is two and the parents are married  The household size indicated on the independent student’s ISIR is two and the student is married  The household size indicated on the dependent student’s ISIR is three and the parents are unmarried and living together  The household size indicated on the independent student’s ISIR is one and the student is divorced The household size indicated on the dependent student’s ISIR is two and the parents are married. Page 49

Quick Quiz 3: 3. If an institution has already collected the required verification documentation, and then determines the taxable and untaxed income amounts provided do not appear sufficient to support the household, the institution may request additional financial information to explain how the family was financially supported during the base year.  True  False True Page 49

Quick Quiz 3: 4. When an individual is required for the 2018–19 award year to verify his or her tax data, but that individual has received an automatic six-month extension to file his or her taxes with the IRS, which of the following documentation is required to complete verification?  A copy of IRS Form 4868, “Application for Automatic Extension of Time to File U.S. Individual Tax Return” the individual filed with the IRS for the tax year  Unchanged IRS DRT data or a copy of the IRS Tax Return Transcript or acceptable alternative tax transcript  A copy of a W-2 for each source of employment income received for the tax year  If self-employed, a signed statement certifying the amount of the individual’s AGI and U.S. income tax paid for the tax year  An IRS Verification of Nonfiling Letter or confirmation of nonfiling, dated on or after January 1, 2017 Unchanged Irs DRT… Page 49

Quick Quiz 3: 5. If the student is unable to appear in person at the school to verify his or her identity and Statement of Educational Purpose, the student must appear before a __________ to __________ his or her identification and Statement of Educational Purpose. 6. What 14 forms of documentation are acceptable to verify high school completion status? Notary public Present and sign 6. See page 75 of guide Pages 49-50

Quick Quiz 3: 7. Payments to tax-deferred pension and savings plans can be verified using which of the following codes listed in W-2 Boxes 12a through 12d?  D  DD  H  Y D and H Page 50

Quick Quiz 3: 8. Julio is an independent student who filed a U.S. tax return. His spouse, Natalia, filed a separate tax return with the government of Columbia for the tax year; Columbia charges a fee for a tax transcript. Assuming no conflicting information, which of the following is required to complete verification of income information?  Julio’s IRS DRT data or IRS tax transcript  Natalia’s tax transcript from the Columbian tax authority  Julio’s W-2 forms along with Natalia’s W-2-equivalent documents  A signed copy of Natalia’s tax return filed with the Columbian tax authority  A signed statement from Natalia indicating the sources and amounts of her income earned from work during the tax year Julio’s IrS DRT or tax transcript and a signed copy of Natalia’s tax return filed with Columbian tax authority. Page 50

We are not going to take time to do these. Highly recommend doing in preparation for exam or utilize as a training in your offices.

Learning Activity 2: Required Verification Documentation
Review the case studies described on pages In each case, determine what documentation must be collected to complete verification on federally selected applications, and what signatures are required, if any. Record your answers to the questions on pages Page 51

1. Karl What is the Verification Tracking Flag for this Tracking Group? _________ What documentation is federally required from Karl? V4 Copy of his high school diploma or final transcript that includes the date his diploma was awarded. Valid unexpired government-issued photo ID. Sign a Statement of Educational Purpose. Page 51

1. Karl What documentation is federally required from Rick? Which documents require Karl’s signature? Which documents require Rick’s signature? Rick does not need to provide any documentation. For 2018–19, child support paid is not included in Tracking Group V4. Karl needs to sign the Statement of Educational Purpose. Rick does not need to sign any of the documents. Page 51

2. Lizzie What is the Verification Tracking Flag for this Tracking Group? _________ What documentation is federally required from Lizzie? V1 Written statement or verification worksheet indicating: Names and ages of Lizzie, Carol, Tyreese, Mika, and Daryl, and their relationships to Lizzie. Name of the school Mika will attend during 2018–19. Page 52

   Learning Activity 2: Required Verification Documentation
2. Lizzie Who must sign all of the documentation requested?  Yes  No Lizzie’s signature  Yes  No Carol’s and Tyreese’s signatures  Yes  No Carol’s or Tyreese’s signatures You have reason to believe the number in college may be inaccurate. What must you collect from Lizzie?    Documentation from Grove College that Mika will be enrolled at least half time in a program during 2018–19. Page 52

3. Maggie What is the Verification Tracking Flag for this Tracking Group? _________ What documentation is federally required? V1 From Maggie: Written statement or verification worksheet indicating she has not and is not required to file a tax return, and the source of her 2016 income. Verification of Nonfiling Letter dated on/after 10/1/17. W-2 from her employer. Page 53

3. Maggie What is the Verification Tracking Flag for this Tracking Group? _________ What documentation is federally required? V1 From Glenn: Tax Return Transcript or unaltered IRS DRT data (IRS Data Field Flag “1”) to verify AGI, taxes paid, untaxed portions of IRA distributions or pensions, IRA deductions and payments, tax-exempt interest, and education tax credits. Page 53

   Learning Activity 2: Required Verification Documentation
3. Maggie Who must sign all of the documentation requested?  Yes  No Maggie’s signature (worksheet)  Yes  No Glenn’s signature (worksheet)  Yes  No Both signatures (tax documentation)    Page 53

3. Maggie You learn Glenn filed an amended return for What must you collect from Maggie and/or Glenn? Glenn must provide a signed copy of his IRS Form 1040X and either a copy of the IRS tax transcript (unsigned) or unaltered IRS DRT data with IRS Data Field Flag “1” for each data element that was modified on Glenn’s 1040X. Page 53

Learning Activity 3: Separating Income on Joint Tax Returns
Review the case study described on page 54, including the information from the original joint tax return. Complete the exercise by separating out Rebecca’s portions of the income and taxes paid. When calculating Rebecca’s taxes paid using the Tax Table Method, refer to the Tax Tables on pages Record your answers to the questions on page 55. Page 54

Married filing jointly
Learning Activity 3: Separating Income on Joint Tax Returns Parents’ Tax Information Original Tax Return Rebecca’s Portion Type of tax return: 1040 Exemptions: 3 2 Tax filing status: Married filing jointly Head of household Wages and business income: $82,903 ? Interest and dividend income: $466 Savings withdrawal penalty: $350 AGI: $83,019 Standard deduction: $12,600 $9,300 Exemptions deduction: $12,150 ($4,050 x 3 exemptions) $8,100 ($4,050 x 2 exemptions) Other credits or deductions: None Taxable income: $58,269 Total tax (taxes paid): $7,814 Page 54

 Learning Activity 3: Separating Income on Joint Tax Returns
1. What is the verified AGI amount for Rebecca?  $41,510  $38,185  $38,010  $37,660  Page 55

2. What is Rebecca's verified amount of taxes paid using the Tax Table Method?  $2,578  $2,431  $2,379  $2,114  Page 55

3. What is Rebecca's verified amount of taxes paid using the Proportional Method?  $1,875  $3,516  $3,907  $2,114  Page 55

4. For federal verification, what is Randall required to provide in order to verify household size and number in college?  Nothing; Randall’s household size and number in college are not required to be verified  Verification worksheet listing his mother and himself in the household, and listing his name and age, along with the college’s name  Statement signed by Rebecca listing herself and Randall in the household size, and listing Randall's name and age, along with the college’s name  Statement signed by Rebecca and Randall listing Rebecca and Randall in the household size, and listing Randall's name and age, along with the college’s name  Page 55

5. What is needed to complete verification of Randall's income information?  Signed and dated statement indicating Randall is a victim of identity theft, a copy of his W-2, and a signed copy of his tax return  Copy of his Tax Account Transcript, W-2, and Schedule C  Signed and dated statement indicating he is a victim of tax-related identity theft of which the IRS is aware, along with a copy of his IRS Information Returns Processing Transcript Request—Wages (IRPTR-W)  Signed and dated statement indicating he is a victim of tax-related identity theft of which the IRS is aware, along with a copy of his Tax Return DataBase View transcript  Page 55

Changing Applicant Data
Lesson 2 Changing Applicant Data Lesson 1 was dedicated to verification. Now we will discuss corrections, updates and PJ adjustments.

Corrections Correction Update Adjustment
Changes to data that were incorrect when FAFSA was filed Update Changes to data correct when FAFSA was filed but later changed Adjustment Change made by aid administrator using professional judgment (PJ) Read definition.

Corrections Data Correct as Reported Required CPS Reprocessing
Disburse grants FWS employment may begin Originate and disburse loans Required CPS Reprocessing Change in a single dollar item of $25 or more Any errors in nondollar items Optional CPS Reprocessing School may choose to submit all corrections to CPS If data is correct – All incorrect data must be corrected. $25 – up or down, regardless of EFC changes – changes must be sent Non-dollar items – household size, number in college, GR student status, etc. Aid must be adjusted and overawards resolved based on the new isir!! There is an overaward tolerance of $300 for campus-based programs

Quick Quiz 1: 1. What is a correction?
2. What makes a SAR or ISIR valid? 3. A school must submit corrections to the CPS for changes in a single dollar item of $25 or more.  True  False 4. How are overawards treated differently for the campus-based programs, compared to others such as the Federal Pell Grant Program? Corrections are changes to data elements that were incorrect at the time the FAFSA was filed All of the information used to calculate the applicant’s EFC is accurate and complete. True There is an overaward tolerance of $300 for campus-based programs. Page 126

 Learning Activity 1: Corrections
1. Damaris is a dependent, second-year student. Before the FAFSA was filed, Damaris and her family moved. Since her FAFSA was a renewal, the old address carried over. She used the IRS Data Retrieval Tool successfully. She was selected for verification and is eligible for subsidized aid. The institution completed verification, but noticed on all of Damaris’ documentation, her address was different. She explained the circumstances. Is this correction:  Optional  Required  Page 127

 Learning Activity 1: Corrections
2. Timothy is in his last year of college. He has never been selected for verification—until now. In previous years, his EFC had been just outside of the range for the Federal Pell Grant. This year, his EFC plummeted and he is now Pell-eligible. He initially reported four people in his household, but on the verification form, he reported seven. His family had been supporting his aunt and her two children since December of the prior year after she lost her job and her apartment building was destroyed in a fire. Is this correction:  Optional  Required  Page 127

Changes to data that were incorrect when FAFSA was filed Update Changes to data correct when FAFSA was filed but later changed Adjustment Change made by aid administrator using professional judgment (PJ) Read definition Note difference between corrections and updates

Updates Required anytime Required at verification
Dependency status, if not due to student marital status change Required at verification Household size/number in college, if not due to student marital status change Optional anytime to address inequity/ability to pay Dependency/marital status Household size Number in college Review slide. Let’s look at example: Kat

Example: Kat Earned her baccalaureate degree at end of fall semester
Knows if she takes a break, she probably will not go on to get her graduate degree Applies and is admitted for master’s in spring of same award year at same school

Example: Kat Outcome: As a graduate student, Kat is no longer dependent She must update her FAFSA to show her graduate student status and, in doing so, update her dependency status

Example: Dak Filed FAFSA as dependent student using only his widowed mother’s information After filing the FAFSA, his mother passed away

Example: Dak Outcome: Dak must update FAFSA to reflect his independent status as orphan Only Dak’s information is now used to award Title IV aid Previously awarded Title IV aid must be adjusted to reflect his new independent status for entire award year

Example: Dak What if Dak’s parents had divorced and his father had not passed away? Dak’s dependency status would not change Dak’s FAFSA would continue to reflect his mother’s information DAK would qualify for verification exclusion for his mother’s information Future FAFSAs would provide father’s data, if still dependent

Dependency status, if not due to student marital status change Required at verification Household size/number in college, if not due to student marital status change Optional anytime to address inequity/ability to pay Dependency/marital status Household size Number in college Review slide Let’s look at examples

Example: Ezekiel Married independent student At time of FAFSA filing:
3 in household and 2 in college Nephew was living with and supported by Ezekiel Wife also intended to attend graduate school At time of verification: Nephew had moved back in with Ezekiel’s sister, and she had resumed support of her child Wife had been denied admission to graduate school

Example: Ezekiel Outcome: When completing verification:
Ezekiel must list only 2 in household with 1 in college on verification documents School must submit updates to both household size and number in college to CPS for reprocessing

Dependency status, if not due to student marital status change Required at verification Household size/number in college, if not due to student marital status change Optional anytime to address inequity or ability to pay Dependency/marital status Household size Number in college This is permitted under © it is not PJ!!!

Updates Student’s marital status changes
In general, marital status is not updated after filing the FAFSA FAFSA marital status is updated only if the school deems necessary to address inequity or reflect ability to pay for educational expenses Household size/number in college and all other pertinent data must relate to current FAFSA marital status Review slide. Let’s look at example: Adam

Example: Adam 21 years old in his final year
Planned to marry after graduation Applied as a dependent student Plans changed; they married before the academic year started and after the FAFSA was filed

Example: Adam Outcome:
School may choose to allow Adam to update his dependency status, household size, and number in college Adam would be independent His and his wife’s income and asset data are used in the EFC calculation If already independent, school could choose to update his FAFSA only via verification

Updates Parents’ marital status changes prior to verification
Must update household size/number in college, but only if selected for verification by the CPS or by the school Parent marital status, income and assets are not updated Can be adjusted only using PJ, at the school’s discretion Review slide. Verification Updates Chart – page 144 of study guide

Quick Quiz 2: 1. Updates are changes to data elements that were incorrect at the time the FAFSA was filed.  True  False 2. What items can be updated on the FAFSA under certain conditions? False Dependency status, number in household, number in college and student marital status Page 131

Quick Quiz 2: 3. A school may allow an update to marital status under which of the following circumstances?  To address an inequity  To more accurately reflect the student’s ability to pay educational costs  For a student in special circumstances  For a dependent student’s parents after verification is completed in special circumstances 4. Household size and number in college may be updated only for applicants selected for verification.  True  False First three False Page 131

 Learning Activity 2: Can an Update Be Made?
1. Jasmine was selected for verification. All necessary documentation was submitted and verification was completed. The next month, Jasmine’s mother goes to the courthouse to marry her longtime love. Can an update be made to the parent’s marital status?  Yes  No Why or why not?  You cannot update the parent’s marital status after the FAFSA is filed; it can only be adjusted using PJ. Page 132

2. Desmond completed his undergraduate program at the end of the summer session in July. He is scheduled to begin his graduate program at the same institution in September. Summer marked the beginning of his institution’s academic year. Can an update be made?  Yes  No Why or why not?  As a graduate student, Desmond is no longer a dependent student and his dependency status must be updated to reflect this change. Page 132

3. Tina is an incoming freshman with four people in her household—her mother, father, and twin sister Toya. Toya was going to work for a few years first, before college. Tina only included herself in the number in college. Tina’s FAFSA was selected for verification. Toya decided to attend the same college. Tina has not yet completed verification. Can an update be made?  Yes  No Why or why not?  Since Tina’s application was selected for verification, the number in college must be updated to reflect her sister’s plans. Page 132

How does your institution handle changes in dependency status
How does your institution handle changes in dependency status? Do students self-report or do you flag changes on student ISIRs? Do you think it is fair that parental data associated with a change in marital status can only be updated if the dependent applicant is selected for verification? For what reason may you deny an update due to a change in an applicant’s marital status? Page 133

Changes to data that were incorrect when FAFSA was filed Update Changes to data correct when FAFSA was filed but later changed Adjustment Change made by aid administrator using professional judgment (PJ) Now, let’s talk about professional judgment Read definition We are not going to spend a lot of time on PJ but how it relates to verification.

Professional Judgment Adjustments
Optional Discretion granted to financial aid administrators under section 479A(a) of Higher Education Act of 1965 (HEA), as amended Verification of specified-year data and resolution of conflicting information required to be completed first Except dependency override Verification must be exercised prior to the PJ.

Divorce Unusual uncovered medical/dental expenses
Loss of employment Extraordinary dependent care Secondary school tuition Unusual uncovered medical/dental expenses Parent/spouse death Divorce Review slide. Let’s look at an example - Witten Possible Special Circumstances

Example: Witten Requested adjustment due to reduced income following the specified year 2016 information on the FAFSA 2017 income was lower

Example: Witten Outcome: Using PJ, the school may use:
Actual income from calendar year 2017 Income estimates for any other 12-month period The approach to use is at the school’s discretion Any changes must be documented, along with indication that PJ was exercised Adjustments apply one year at a time

Quick Quiz 3: 1. Financial aid administrators must use professional judgment for special circumstances.  True  False 2. If a student is selected for verification, the student must be __________ and any conflicting information __________ before professional judgment is performed. 3. Define specified year. False Verified; resolved The calendar year that immediately precedes the first year in the award year covered by FAFSA. For would be 2016 Page 136

Quick Quiz 3: 4. The specified-year data for the 2018–19 award year is __________.  2015  2016 2017 2018 5. The institution is required to maintain documentation to substantiate any PJ decisions that are made.  True False 2016 True Page 136

Quick Quiz 3: 6. The HEA identifies which of the following as examples of special circumstances for which the financial aid administrator may exercise PJ on a case-by-case basis?  Housing status that results in an individual being homeless  Unemployment of a family member or independent student  Medical expenses that are covered by insurance  Elementary and secondary school tuition expenses  Unusually high child care or dependent care costs  A student or family member who is a dislocated worker  The number of parents enrolled at least half time in a degree, certificate, or other program leading to a recognized educational credential at a Title IV-eligible institution All but medical expenses. Page 136

 Learning Activity 3: Professional Judgment and Verification
1. During the verification process, Shruti, a first-year student, reveals that her mother is also enrolled half-time at the institution. Normally, parents are not included in the number in college. Can the institution use professional judgment to include Shruti’s mother in college? Can an adjustment be made?  Yes  No  The parent may be included in the number in college if enrolled at least half-time in an eligible program at an eligible institution, if the financial aid administrator can document special circumstances warranting the adjustment. Page 137

2. Terrell, a third-year independent student, was selected for verification in the V1 verification tracking group. He used the IRS Data Retrieval Tool to transfer his 2016 income tax data. He lost his job at the local bottling plant in early 2017 and has been unable to find work since that time. Can the institution use professional judgment to account for Terrell’s loss of income? Can an adjustment be made?  Yes  No  Loss of income can be accounted for using PJ based on the special circumstances surrounding Terrell’s unemployment. Complete verification first. Page 137

3. After verification is complete, Chris speaks to his financial aid counselor regarding medical expenses his family has accumulated. The expenses were covered by insurance. Chris’ parents used a flexible spending account provided by an employer to cover the copays. Can the institution use professional judgment for their medical expenses? Can an adjustment be made?  Yes  No  This is not a special circumstance, and PJ cannot be used to include expenses which are covered by another source such as insurance. Page 137

Does your institution use PJ
Does your institution use PJ? If so, what circumstances does your institution consider for PJ? If not, why? Why do you think PJ may be a good tool to use? How do you think PJ may be used incorrectly? Why do you think there may be an increase in the use of PJ resulting from the use of PPY data? Page 138

Disbursements, Timeframes, and Policies and Procedures
Lesson 3 Disbursements, Timeframes, and Policies and Procedures We are almost done!!! Last section! Let’s look at interim disbursements first.

Interim Disbursements
Conditions Prior to verification After verification, but prior to receipt of SAR/ISIR An interim disbursement is a disbursement a school may make under certain conditions prior to verification. See 174 – Interim Disbursment Decision Tree – as shown on this slide. Review decision tree.

Program-Specific Interim Disbursement Requirements
One interim disbursement for first payment period only Federal Pell Grant and FSEOG Employ up to 60 consecutive days after student enrolls FWS Originate, but not disburse Direct Subsidized Loans Review slide for each program

Program-Specific Interim Disbursement Requirements
Not subject to interim disbursement rules Other disbursement rules apply Direct Unsubsidized Loans, PLUS, TEACH Grant, IASG Do no apply to unsubsidized Title IV programs

Student Deemed Ineligible for Interim Disbursement
Disbursement becomes an overpayment if: Verification shows student was not eligible for those funds; Verification not completed before appropriate deadline; or School does not receive valid SAR or ISIR reflecting corrections within deadline specified in regulations Three situations in which a student is not eligible for an interim disbursement. Review slide.

Attempt to resolve overpayment by: Apply $300 campus-based overaward tolerance Adjust subsequent disbursements in award year Reimburse Title IV program account by requiring student to return funds Steps to resolve overaward – review slide.

If unable to resolve overpayment, the school: Is liable for the overpayment Must return funds to Title IV program account by earlier of 60 days after last day of attendance or award year Must reimburse FWS Program and pay student’s wages from institutional funds School responsibility Review slide

Other Program-Specific Disbursement Requirements
For unsubsidized-only aid recipients: Verification exclusion does not apply to high school completion, or identity/Statement of Educational Purpose in V4 or V5 Not required to verify other data elements if selected for V5 (income, household size, number in college) **Student cannot circumvent verification by requesting or accepting only unsubsidized aid.

Other Program-Specific Disbursement Requirements
Cannot circumvent verification by requesting only unsubsidized aid If not making interim disbursements, and selected for verification: No further disbursements or FWS earnings can be paid until verification is completed Do not return previously disbursed funds while waiting to complete verification

Verification Never Completed for Tracking Group V1
Aid Program Disbursements/ FWS Earnings Pending Verification? School Returns Funds Already Disbursed? Student/Parent Returns Funds Already Disbursed? Title IV Grants No Yes FWS Direct Subsidized Loans Direct Unsubsidized Loans and PLUS Yes, if verification delayed Review chart – Know for exam

Verification Never Completed for Tracking Group V4 or V5
Aid Program Disbursements/ FWS Earnings Pending Verification? School Returns Funds Already Disbursed? Student/Parent Returns Funds Already Disbursed? Title IV Grants No Yes FWS Direct Subsidized Loans Direct Unsubsidized Loans and PLUS Review chart – Know for exam

of study guide

Quick Quiz 1: 1. Define interim disbursement.
2. A school must make interim disbursements if the student is eligible.  True  False An interim disbursement is a disbursement a school may make under certain conditions, before the verification process is complete. False. Page 158

Quick Quiz 1: 3. Which of the following Title IV programs are subject to the interim disbursement regulations and, therefore, may be disbursed or paid before verification is completed?  Federal Pell Grant  FSEOG  Direct Subsidized Loan  FWS  IASG 4. Define overpayment. 5. What options does a school have for resolving an overpayment caused by an interim disbursement? Pell, seog, fws An overpayment is any FA paid to a student in excess of the amount he or she is eligible to receive. Apply $300 campus based award tolerance, reimburse program Page 158

Quick Quiz 1: 6. Which of the following applies if the student never completes verification of high school completion, identity, and Statement of Educational Purpose in verification tracking groups V4 or V5?  The student must return all Direct Subsidized Loan and Direct Unsubsidized Loan funds, including those already disbursed before the student was selected for verification  The school must return all Direct Subsidized Loan and Direct Unsubsidized Loan funds, including those already disbursed before the student was selected for verification  The student can keep any Direct Unsubsidized Loan funds, but must return any Direct Subsidized Loan funds disbursed before the student was selected for verification  The student can keep any Direct Subsidized Loan and Direct Unsubsidized Loan funds that were disbursed before the student was selected for verification, but no further loan disbursements can be made First one. Page 159

Quick Quiz 1: 7. Which of the following applies if the student never completes verification for verification tracking group V1?  The student must return all Direct Subsidized Loan and Direct Unsubsidized Loan funds disbursed before the student was selected for verification, and no further Title IV disbursements may be made after the student is selected  The school must return all Direct Subsidized Loan and Direct Unsubsidized Loan funds disbursed before the student was selected for verification, and no further Title IV disbursements may be made after the student is selected  The student must return any Title IV grant funds disbursed before the student was selected for verification, and no further Title IV disburse-ments may be made after the student is selected  The school must return all Title IV grant and loan funds disbursed before the student was selected for verification, and no further Title IV disbursements may be made after the student is selected Third one. Page 159

Quick Quiz 1: 8. If the school cannot eliminate a Federal Pell Grant overpayment by reducing subsequent disbursements within the same award year or having the student return the funds, the institution must use its own funds to make restitution to the appropriate Title IV program account by the earlier of _____ days after the student’s last day of attendance or the last day of the award year for which the funds were disbursed.  30  60  90  120 60 Page 159

Learning Activity: Interim Disbursements
Amelia will be a first-year student at Big Sky University (BSU) in the fall of BSU’s goal is to notify incoming students of their financial aid awards by January 2. The financial aid office does not complete verification before awarding newly admitted students. Amelia’s parents separated in March 2017 and are in the middle of a contentious divorce. They both want custody of Amelia’s younger brother and disagree over how to pay for Amelia’s college education. As a result, the financial aid office was unable to complete verification before the fall semester started on September 7. Page 160

Big Sky University tentatively awarded Amelia the following aid for the 2018–19 award year: Program Award Amount Federal Pell Grant $5,920 FSEOG $500 FWS $2,000 Direct Subsidized Loan $3,500 Presidential Scholarship $5,000 Page 160

1. Under what conditions could BSU make interim disbursements to Amelia? 2. If BSU makes interim disbursements to Amelia, which Title IV funds could it disburse? BSU could make interim disbursements to Amelia if it has no conflicting information and has no reason to believe her application information is inaccurate. BSU could make interim disbursements of Federal Pell Grant, FSEOG, and FWS funds. Page 160

3. Amelia is anxious about earning some money to help cover personal expenses, so the financial aid office places her in a FWS position at the library. On what date will Amelia have to stop working through the FWS Program if BSU does not complete verification? If verification is not completed, Amelia will have to stop working through the FWS Program after the 60th day of enrollment. Page 161

4. On September 22, Amelia sees her financial aid counselor. Amelia tells her counselor that she has decided to decline her Direct Subsidized Loan and would like to borrow a Direct Unsubsidized Loan instead, in case it takes her longer than anticipated to complete her bachelor’s degree. BSU has yet to complete verification. May Amelia borrow a Direct Unsubsidized Loan now? Amelia is not eligible to borrow a Direct Unsubsidized Loan. Because she potentially is eligible to receive need-based aid, Amelia cannot not circumvent the verification requirements by requesting to borrow only a Direct Unsubsidized Loan. Page 161

Do you think interim disbursements are a good idea
Do you think interim disbursements are a good idea? What issues should a school consider before making interim disbursements? Do you agree with the regulatory provision allowing schools to originate—but not disburse—a Direct Subsidized Loan before completing verification? Page 162

Verification and the Award Cycle
Upon receipt of ISIR Before making tentative award After making tentative award, but before award confirmation After student accepts award, but before disbursement After interim disbursement, but before second disbursement Verification may occur at any of the points shown in the slide.

Verification Deadlines
Federal Pell Grant deadline Institutional deadline Campus-Based and Direct Loan deadlines Schools have the ability to establish a verification deadline and may exercise flexibility in how deadline is applied. Publish Document Pell deadline is determined by ED Camp and DL are based on the earlier of school or ED

Quick Quiz 2: 1. Define award cycle.
2. All schools must complete verification at the same point in the award process, as determined by ED each year.  True  False 3. Schools can complete verification:  When a student applies for admission  When a student’s application (SAR or ISIR) is received  At a time selected by the student  Before making a tentative award offer  After making a first—but before making a second—disbursement Series of steps to determine eligibility False Second one. Page 165

Quick Quiz 2: 4. What happens if a student fails to submit required verification documents by an institution’s established deadline? 5. What documentation must the school have in its possession before the final ED-established award year processing deadline in order for a student to avoid forfeiting a Federal Pell Grant award due to verification being incomplete? School may not disburse All required verification documentation as well as a valid ISIR or SAR Page 165

Learning Activity: Interview
1. What is your institution’s deadline for submitting verification documentation? Are there different deadlines for different students? 2. Will your school award aid to an otherwise eligible student if he or she submits verification documentation after your school’s deadline? 3. How does your school publicize verification deadlines to students? Are these methods effective? Page 166

Verification Policies and Procedures
Selection Procedures How are students selected Information Shared Documentation requirements Student responsibilities Document Submission Deadlines Consequences for noncompliance Post-Verification Process to correct data Outcome notification to student My favorite!! Policy is a statement of how and institution will administer process procedure is the step See flow chart on page 175 of study guide – show chart REQUIRED by regulations Audit experience

Verification Status Codes
Verified Without documentation Selected/Not verified Not verified V W S CPS will have a V or S Institution selected will have a V Blank

Reporting Verification Results
Report When Value = 1 Verification of both identity and high school completion status were satisfactorily completed by the applicant in person, and no issues were found. Value = 2 Verification of both identity and high school completion status were satisfactorily completed remotely by use of a notary, and no issues were found. Value = 3 Verification was attempted, and no issues were found with high school completion, but issues were found with identity. Value = 4 Verification was attempted, and no issues were found with identity, but issues were found with high school completion. Value = 5 The applicant did not respond to the request for documentation or the applicant could not be located. Value = 6 Verification was attempted, and issues were found with both high school completion and identity. For identity and HS completion for tracking V4 and V5

Reporting Verification Results
School must report verification results via FAA Access to CPS Online: Within 60 days after first request for documents to verify identity and high school completion For any student for whom school: Received an ISIR with Verification Tracking Flag V4 or V5; and Requested verification documentation Only for applications selected by the CPS If verification results later change I do this reporting. First of every month.

Quick Quiz 3: 1. Define policy and procedure.
2. The verification regulations give schools some flexibility when establishing policies and procedures.  True  False 3. Schools are required to have verification policies and procedures addressing:  When documentation requirements may be waived  Selection procedures  Information shared with selected applicants  Applicant verification document submission  Post-verification procedures Policy is a statement of how and institution will administer process procedure is the step True All but first one. Page 171

Quick Quiz 3: 4. What information must an institution share with applicants selected for verification? 5. The school must send a written notification of the results of verification to applicants in a timely manner.  True  False 6. The school may take up to how many days to report the verification results for identity and high school completion?  30 60 90 120 Documentation needed, responsibilities, deadlines and consequences. True 60 Page 171

Quick Quiz 3: 7. Match the Verification Status Code to the description. 7 Page 172

Do you agree that institutions should have written verification policies and procedures? How does your financial aid office notify an applicant of the results of verification and any change to his or her EFC? How does your school define “a timely manner” for providing this notification? What additional policies and procedures should schools have for verification? Page 173

Thank you – if you have additional questions, please don’t hesitate to contact us.
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2018–19 Verification A NASFAA Authorized Event Presented by Shannon Crossland, SWASFAA President LASFAA Conference – New Orleans, LA October 17,

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2018–19 Verification A NASFAA Authorized Event Presented by Shannon Crossland, SWASFAA President LASFAA Conference – New Orleans, LA October 17,

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Presentation on theme: "2018–19 Verification A NASFAA Authorized Event Presented by Shannon Crossland, SWASFAA President LASFAA Conference – New Orleans, LA October 17,"— Presentation transcript:

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