The Higher Education Act (HEA) gives financial aid administrators the ability to make adjustments to a student's cost of attendance or to the values of data items used to calculate a student's expected family contribution. However, the law requires aid administrators to use this authority only on a case-by-case basis and only when there are special circumstances that can be demonstrated by the student or family that justify those adjustments. The College Cost Reduction and Access Act (CCRAA) adds more examples of special circumstances where it may be appropriate to make adjustments. Even with the additional examples provided in legislation, aid administrators are cautioned from making across the board determinations without reviewing each case and documenting the special circumstance.

Effective July 1, 2009, the CCRAA adds three examples of special circumstances that may warrant changes to data elements used to calculate a student's EFC. Those three examples include:

• An independent student who has recently become unemployed;
• A family member who is a dislocated worker as defined in section 101 of the Workforce Investment Act of 1998;
• A change in housing status that results in an individual being homeless as defined in section 103 of the McKinney-Vento Homeless Assistance Act.

Generally, a dislocated worker is an individual who has been terminated, laid off, or who has received notice of such, is eligible for or has exhausted unemployment compensation, or would be eligible for unemployment compensation if the worker had been employed long enough. Self employed workers are also considered dislocated under the Workforce Investment Act if their unemployment is due to general economic conditions in the community in which they reside.

The McKinney-Vento Homeless Assistance Act defines a homeless person as an individual who lacks a fixed, regular, and adequate nighttime residence. That includes children who are sharing the housing of other persons due to loss of housing, economic hardship, or a similar reason; are living in motels, hotels, trailer parks, or camping grounds due to the lack of alternative adequate accommodations; are living in emergency or transitional shelters; are abandoned in hospitals; or are awaiting foster care placement. Children who have a primary nighttime residence that is a public or private place not designed for or ordinarily used as a regular sleeping accommodation for human beings or who are living in cars, parks, public spaces, abandoned buildings, substandard housing, bus or train stations, or similar settings are also included.

Case-By-Case Review Still Required

Aid administrators should remember that the examples provided in the law do not authorize across-the-board adjustments. Even if a student meets any of the examples of special circumstances described in the law, the HEA still requires a case-by-case review by the financial aid administrator and the student must still demonstrate that a special circumstance exists that can be documented and recorded by the financial aid office. The aid office must also maintain documentation of the decision made after review of the student's circumstances (i.e., whether to make any adjustment, and the nature of any adjustment made).

Although there is an effective date for the new examples to be added to the law, there is nothing that prohibits a financial aid administrator from taking those same circumstances into account now. Nothing would have prevented adjustments in the past based on those kinds of circumstances. The examples in the law are illustrative, not restrictive. The 2007-08 FSA Handbook states that "Use of professional judgment is neither limited to nor required for the situations mentioned [in the law]".

Section 479A, where the professional judgment authority in the law exists, was added to the Higher Education Act by reauthorization amendments in 1988. It was expanded in 1992, when the methodology used to calculate the expected family contribution (EFC) was simplified by eliminating certain offsets and variant formulas. Variant formulas existed for dislocated workers and displaced homemakers, and the "regular" formula allowed offsets for private elementary or secondary school tuition payments and unusually high medical expenses.

When the need analysis methodology was simplified in the 1993-94 calculations, all of those factors were listed in the law as examples of circumstances that might justify professional judgment adjustments. In fact, Congress at that time expressed its belief that "these are concerns that should not and must not be disregarded" and further stated its expectation that financial aid administrators would "take positive action for students and families whenever the need is warranted in any and all of these areas."

The key in that phrasing is "whenever the need is warranted." The law clarifies that special circumstances are "conditions that differentiate an individual student from a class of students rather than conditions that exist across a class of students." This prohibition against across-the-board adjustments does not prohibit an institution from identifying conditions that trigger a review by the financial aid administrator. That is, policies and procedures regarding professional judgment can provide a basic framework and guidelines, but within that framework students must be treated on an individual, case-by-case basis. The institution might establish a flag to identify students who fall into a certain category, but within that category each student must be individually reviewed to determine whether, in that student's particular case, special treatment is indeed warranted.

The only time the Department of Education has modified the case-by-case requirement for EFC formula adjustments is under the HEROES Act, in the case of certain individuals defined as "affected" by a war or other military operation or national emergency. Even in those situations, however, treatment of the individual is dependent on his or her personal circumstances.

These are longstanding principles which NASFAA believes are unaffected by the recent amendments.

By Joan Berkes, NASFAA Senior Associate Director for Regulatory Assistance, and Justin Draeger, NASFAA Assistant Director for Communications

Posted 10/30/07 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.