The Department of Education (ED) published a Dear Colleague Letter Friday afternoon reminding financial aid administrators (FAA) about their authority to perform professional judgment (PJ) adjustments in the case of a student with a change in financial circumstances, particularly recently unemployed individuals. While FAAs already have authority under current statute to do this, this reminder comes at a timely moment as the coronavirus pandemic persists and many people have been left unemployed or with reduced work hours.
The letter serves as a reminder for FAAs that they may use documentation of unemployment to reduce or adjust to zero the income earned from work for a student and/or parent to make corresponding adjustments to the adjusted gross income (AGI). Allowable sources of unemployment may include, but are not limited to, receipt of unemployment income, a letter from the state unemployment agency, or other evidence that a student or parent is receiving unemployment benefits. With sufficient evidence that the financial circumstance has changed, the FAA may adjust the student’s or parent’s income information to account for the loss of income.
ED also assured institutions that an increase in the use of PJ will not be a factor considered when selecting institutions for program reviews for the 2021-22 award year, in addition to the 2019-20 and 2020-21 award years that ED had already announced in July of last year.
While the guidance in the newest letter is similar to the rescinded 2009 GEN-09-05 language, which gives financial aid administrators authority to adopt an across-the-board PJ policy to zero out the figures for income earned from work to ultimately recalculate the expected family contribution (EFC), it doesn't include the language reminding FAAs about their authority to zero out unemployment benefits received from income. Even though not explicitly stated in this letter, as a reminder, FAAs already have authority to perform both of these tasks during a PJ review under section 479A of the Higher Education Act.
NASFAA has repeatedly called for ED to reaffirm schools’ PJ authority through guidance and to ensure that institutions are not penalized for exercising PJ. While the Consolidated Appropriations Act of 2021 reiterated this authority during a national emergency, the legislation is not effective until the 2023-24 award year. In the interim, NASFAA urged the Biden administration to renew the GEN-09-05 guidance as quickly as possible. The urgency comes as NASFAA found through a survey published in October 2020 showed that while under 50% of respondents began zeroing out income and/or unemployment benefits due to the pandemic or were considering doing so, 80% of respondents said their office would do this if Congress and/or ED explicitly permitted it, as they did with the 2009 GEN-09-05 guidance in the wake of the Great Recession.
Publication Date: 1/29/2021