Professional Judgment Presented by Renee Pelletier Financial Aid Advisor Office of Financial Aid and...
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Transcript of Professional Judgment Presented by Renee Pelletier Financial Aid Advisor Office of Financial Aid and...
Professional Judgment
Presented by Renee PelletierFinancial Aid Advisor
Office of Financial Aid and Scholarship Services
Session Overview
• What and Why of Professional Judgment• Foundations of Need Analysis• Overview of Federal Methodology• When and How of Professional Judgment
What is Professional Judgment
Discretion used by Financial Aid Administrators in specific areas of student aid administration to decide whether the standard procedures apply to a given case.
Why Professional Judgment is Used• Gives Financial Aid Administrators the
authority to consider special circumstances on a case-by-case basis
• Enables responsiveness to student circumstances that can’t be fully anticipated in legislation or regulation
• Promotes access by targeting delivery of aid to qualified students in need
Foundation of Need Analysis
Philosophy of Need-Based Aid
• Paying for college is a partnership–Dependency status defines partnership–First responsibility of student and
family–Aid is a supplement to family resources
Family Responsibility
Need analysis measures ability to pay not willingness to pay
Goal of Need Analysis
• A reasonable family contribution–A snapshot of family financial
resources
Principles of Need Analysis
• Equity: Fairness in need analysis–Horizontal Equity• Consistent treatment of people in similar
circumstances
–Vertical Equity• Appropriately differing treatment of people in
different circumstances
Principles of Need Analysis• Basic family needs come first–Need analysis provides allowances for non-
discretionary expenses
• After measuring discretionary resources, need analysis assesses the portion available for educational costs
Overview of Federal Methodology
• Income–Major determinant of family
contribution–Taxable + Untaxed Income–Additional Financial Information items
are then subtracted to get Total Income
Overview of Federal Methodology
• Allowances–Federal Income Tax–Social Security Tax–State and other taxes–Employment Expense Allowance–Income Protection Allowance (IPA)
Overview of Federal Methodology
Total Income – Allowances = Available Income
Overview of Federal Methodology• Assets– Cash, savings, checking– Money market funds– Equity in real estate other than primary residence– Trust funds– CDs, stocks, bonds, mutual funds– Coverdell & 529 college savings plans– Business or non-family farm equity• Does not include value of small business that family
owns and controls more than 50% and the business has 100 or fewer FT or FT equivalent employees
Overview of Federal Methodology
• Assets do not include– Equity of primary residences– Value of life insurance– Retirement plans• 401k plans• Pension funds• Annuities• Non-education IRAs• Keogh plans
Overview of Federal Methodology
• Asset Protection Allowance (APA)–Protects a portion of parental assets for
retirement, postsecondary education for the student’s siblings, emergencies, and other purposes– Set using the age of the older parent and
parents’ marital status
Overview of Federal Methodology
• Discretionary Net worth = Net worth – APA• Asset Assessment Rate–Used to convert discretionary net worth into
and “income equivalent” (contribution from assets)
Overview of Federal Methodology
• Available Income + Contribution from Assets = Adjusted Available Income
• Adjusted Available Contribution (AAI) Rate– Determines the portion of AAI that parents are
expected to contribute toward the education of their dependent children
• Total parents’ contribution from AAI ÷ number in college = Expected Family Contribution (EFC)
Differences between IM and FM
• Treatment of Assets– Equity of primary residence considered– Family farm equity considered–Option to asses retirement assets–Cumulative Education Savings Allowance• Assumes family has saved a percentage of
income for college based on income and the number of children in the household
Use of Professional Judgment
When Professional Judgment is Used
• Can change data values (not data elements or allowance values)– Income data– Asset data
• Can adjust Cost of Attendance (COA)• Can change student status data – dependency
override
When Professional Judgment is Used
• Cannot adjust Federal Methodology• Cannot change the Expected Family
Contribution (EFC)• Cannot change an ineligible student to an
eligible student• Cannot make an otherwise federally
independent student dependent
Use of Professional Judgment
• With this flexibility comes responsibility and accountability on the part of the Financial Aid Administrator
• Evaluation– Appropriateness of adjustments
• Implementation– Where adjustments are made• COA vs. need analysis data values
Use of Professional Judgment• Decisions supported by data– Authority to use data that best represents current
family circumstances– Cannot be based solely on a feeling but on a
reasonable amount of data and information
• Evaluation of data– Source– Accuracy– Appropriateness
• DOCUMENTATION
Special Circumstances• Tuition expenses at an elementary or secondary school• Medical, dental, or nursing home expenses not covered
by insurance• Unusually high child care or dependent care costs• Recent unemployment of a family member or an
independent student• A student or family member who is a dislocated worker– Underemployment or displaced homemaker
• Other changes in family’s income or assets
Dependency Overrides
• Unusual circumstances– Abusive family environment– Abandonment– Unusual circumstances do not preclude a student
from answering “yes” to a homeless question, if applicable
– Unusual circumstances may lead to situations that do not warrant a dependency override by themselves
Dependency Overrides
• Circumstances that DO NOT warrant a Dependency Override– Parents refuse to contribute to educational costs– Parents unwilling to provide information on FAFSA
or for verification purposes– Parents do not claim the student as a dependent
for income tax purposes– Student demonstrates total self-sufficiency
Alternatives to Dependency Overrides• School may use professional judgment to award an
Unsubsidized Stafford Loan to a dependent student– Whose parent(s) refuses to provide parental information for
the FAFSA– Who does not receive financial support from parent(s)– Must be documented– Student must file the FAFSA and be otherwise eligible for
federal aid
• Institutional funds– Availability– Ease of processing (no FAFSA required)
Conclusions• Needs analysis is the starting point for Financial
Aid Administrators• Special Circumstances must be evaluated on a
case-by-case basis• Professional Judgment is not black and white– Decisions will vary from institution to institution and
from administrator to administrator– No right or wrong, but must be able to justify
decisions
• Documentation, documentation, documentation
Questions