In an electronic announcement posted on Friday, Federal Student Aid announced that just under 200,000 financial aid applications will be reprocessed this evening due to likely applicant error in entering income earned from work. The errors involve entering cents rather than rounding to whole dollars, causing the processing system to treat the value of the entry as two orders of magnitude higher than it should be. The electronic announcement warns schools that many of the reprocessed applications would likely result in higher EFCs due to “intricacies” of the EFC formula, making students less eligible or not eligible at all for Federal Pell Grants.
The “intricacies” mentioned in the electronic announcement refer mainly to the allowances against total income that are based on income earned from work, primarily the Social Security tax allowance. In the case of a tax filer, if an applicant’s income from work field is misrepresented by two digits (e.g., $50,000 is entered as $50000.00 and is read by the processing system as $5,000,000), but the Adjusted Gross Income (AGI) field is correct, the allowance against income would also be incorrectly large, drastically and incorrectly reducing the student or parent contribution from income. So, in the case of a tax filer, where AGI is used as the income basis for the calculation, correcting just the income earned from work would reduce the allowance and increase the contribution from income.
In the case of a non-filer, however, income earned from work would be used to calculate the total income from which allowances are subtracted, so the error would likely cause a much higher contribution from income. Correcting the error in these cases would probably significantly reduce the EFC and increase Pell eligibility.
For this initial reprocessing, it appears from the electronic announcement that most applicants will fall into the tax filer category. Non-tax filers who incorrectly entered their income earned from work and who did not have an AGI could be identified in subsequent data runs from the Department, whose initial concern appears to be updating information to schools and applicants as quickly as possible to avoid incorrect disbursements of Pell funds that would otherwise have to be recalled.
However, misinformation about low or no Pell eligibility to the currently unknown number of applicants who wrongly entered their income information and would gain or increase Pell eligibility upon correction is equally – if not more – disconcerting. Over the weekend, NASFAA encouraged the Department to turn its attention to help identify this group of applicants as soon as possible. Because it appears that ED may not yet have run data specifically designed for this group, NASFAA encourages schools that have the capability to examine their applications to see whether there are students in this scenario. It might be helpful to start with non-tax filers who appear to have extraordinarily high income earned from work reported on the ISIR.
Publication Date: 7/21/2014