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INCREASE IN PROFESSIONAL JUDGMENT USE DUE TO COVID-19

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With unemployment insurance ending for millions of people this month, financial aid offices around the country have been inundated with requests for financial aid appeals. Earlier this year the Department released guidance encouraging financial aid administrators “use professional judgment to reflect more accurately the financial need of students and families affected by the COVID-19 pandemic. A short while later ED removed references to GEN-0904 and GEN-0905 from the 20-21 FSA Handbook and indicated that the guidance in those Dear Colleague Letters has been archived for historical purposes only and is no longer considered active. For what it is worth…they issued some reassurance that they will not view increased use of professional judgment negatively or use it as a selection criteria for a program review.

COD IMPLEMENTS CARES ACT REPORTING AND WAIVERS FOR AID CANCELLATION

On August 2, 2020, the COD system was updated to support CARES Act reporting for students who qualify for a Title IV waiver because they withdrew due to COVID-19. The implementation of these changes will be rolled out in two phases. In the first phase, FSA implemented a new Coronavirus Indicator on COD and implemented new or modified COD Edits. A second phase is expected to come later in September which will include modifications to the Return to Title IV (R2T4) calculator on COD and new reports as well as an updated COD technical reference to support the new processes and file Edits.

For students whose withdrawals were related to COVID-19, Direct Loan Funds received for the period covered under the waiver will be cancelled. As a result, the loan period will be excluded from students’ Subsidized Loan usage used to calculate the 150% Subsidized Usage Loan Limits. Pell grants received for the period will also be excluded from a student’s Lifetime Eligibility limit under Pell LEU. Schools will use the new COD functions to report student information for any students they were not required to return funds for under the waiver.

Check out this announcement from FSA for more information about the new “Coronavirus Indicator” checkbox and COD system Edits that you will begin using to report that an affected student’s aid disbursement qualifies for these exceptions under the waiver.

ALTERNATIVE ACCEPTABLE DOCUMENTATION FOR VERIFICATION OF NON-FILING

ED’s Office of Postsecondary Education (OPE) informed schools that the IRS has stopped processing transcripts by mail until further notice. Although IRS Tax Transcripts are available online, some filers have not been able to access their account. As a result, some students may have to submit alternative documentation to complete verification. According to a recent electronic announcement, schools can accept a signed statement certifying that the individual:

• Attempted to obtain the VNF from the IRS or other tax authorities and was unable to obtain the required documentation; and
• Has not filed and is not required to file an income tax return for the applicable tax year, and a listing of the sources of any income earned by the individual from work and the amount of income from each source for the applicable tax year; and
• A copy of IRS Form W–2, or an equivalent document, for each source of employment income received by the individual for the applicable tax year. During this period of national emergency, the Department is permitting institutions to accept a copy of a paystub, an employment offer letter, evidence of direct deposit from an employer, or other similar information for verification purposes. In the case of foster care youth, given the unlikelihood that such students would have earned enough to require them to file taxes, we will permit the institution to accept a signed statement from the foster care youth that he or she earned less than the amount that triggers the requirement for taxpayers to file tax returns.

If non-filing was a result of the taxpayer being granted an IRS extension beyond the automatic six-month extension for the tax year, an institution may accept the following:

• A signed statement certifying that the individual
• Attempted to obtain the VNF from the IRS or other tax authorities and was unable to obtain the required documentation; and
• Has not filed an income tax return and list the sources of any income, and the amount of income from each source for the applicable tax year. If self-employed, the signed statement must also include the amount of AGI and U.S. income tax paid for the applicable tax year;
• A copy of the IRS’s approval of an extension beyond the automatic six-month extension for the appropriate tax year; and
• A copy of IRS Form W–2 for each source of employment income received or an equivalent document for the applicable tax year.

In the event a student, parent, or spouse needs to provide a copy of their W2 but is unable to obtain a copy from the IRS, they may either request a duplicate one from the employer who issued the document, or if that’s not possible, may provide a signed statement attesting to their income that includes:
• The amount of income earned from work;
• The source of that income; and
• The reason why the IRS Form W–2, or an equivalent document, is not available in a timely manner.

2020-2021 IRS TAX RETURN AND TRANSCRIPT MATRIX FOR FAFSA VERIFICATION

GET YOUR 2020-2021 IRS TAX RETURN AND TRANSCRIPT MATRIX FOR FAFSA VERIFICATION

Be sure to grab a copy of the 2020-2021 IRS Tax Return and Transcript Matrix Although the U.S. Department of Education announced earlier this year that institutions may accept a signed copy of an individual’s tax return for verification the 2020-2021 award year, some students and families may still submit an official IRS Tax Return Transcript to your office for verification. It’s helpful to know which line items from the tax return, the tax transcript, and the FAFSA and ISIR correspond. Click the link below to download a copy.

2020-2021 IRS Tax Return And Transcript Matrix For FAFSA Verification

UPDATES ON VERIFICATION OF NON-FILING AND USE OF PROFESSIONAL JUDGMENT FOR 2020-2021

In other big news, ED quietly released two big updates for the 2020-2021 award year in the 20-21 FSA Handbook Application and Verification Guide.

In the first update, ED provided guidance for when a school can accept a signed statement from a student, spouse or parent to verify that they did not file a Federal Income Tax Return. According to the updated 20-21 Application and Verification Guide, Individuals who can’t get a VNF letter from the IRS (or other tax authority) may instead submit a signed statement as long as the school has no reason to question the student’s or family’s good-faith effort to acquire the letter. Form 4506-T states that most requests are processed within 10 business days, so at least that amount of time should elapse before schools resort to a signed statement. Also, since a VNF must be dated on or after October 1, 2019, the statement cannot be signed and used before then either. (See Chapter 4, P. AVG-98. “Individuals who can’t get a VNF letter.”)

The statement must assert that the person attempted but was unable to get the VNF. For non-tax filers, the statement must also confirm that they have not filed and are not required to file a tax return for the relevant year, and it must list the sources and amounts of income earned from work. For extension filers, the statement must also confirm that they have not yet filed a return for the tax year and must list the sources and amounts of income; if they are self-employed, it must include the amount of AGI and U.S. income tax paid. Note that in both cases—for non-tax filers and extension filers—the other required documentation (e.g., W-2 forms) must still be provided.

In the second update, ED officially rescinded guidance issued in several Dear Colleague Letters related to the Financial Aid Office’s use of Professional Judgment for students and families receiving unemployment benefits. The Department specifically rescinded guidance in GEN-09-04, GEN-0905 and GEN-11-04. In the June 12, 2020 Errata and Updates notice ED says they removed the last sentence on the page “because it referenced outdated guidance”, confirming that ED no longer considers GEN-09-04 and GEN-09-05 to be in effect for the 2020-2021 award year. See FSA HB AVG Chapter 5, Page 125.