(GEN-21-02) Update on the use of “Professional Judgment” by Financial Aid Administrators (Updated Aug. 16, 2021)

Publication Date
January 29, 2021
DCL ID
GEN-21-02
Subject
Update on the use of “Professional Judgment” by Financial Aid Administrators (Updated Aug. 16, 2021)
Summary
This letter reminds financial aid administrators of their ability to exercise documented professional judgment when determining eligibility of students for federal student aid and encourages aid administrators to consider the special circumstances that may arise for students and families during the ongoing COVID-19 pandemic, especially as they relate to unemployment or reduction in work. Other than statutory and regulatory requirements included in the document, the contents of this guidance do not have the force and effect of law and are not meant to bind the public. This document is intended only to provide clarity to the public regarding existing requirements under the law or agency policies.

Note

On Aug. 16, 2021, we updated this Dear Colleague Letter by adding a new section titled “Aug. 16, 2021 Update” at the end of the letter immediately above the signature block.

Dear Colleague:

We write today to remind financial aid administrators (FAAs) that they have the ability to adjust financial aid eligibility based on a student’s special circumstances, including for recently unemployed individuals who may not know that their changed circumstances could make them eligible for Federal Pell Grants and other need-based student aid.  We also note that whether institutions are using this ability will not be considered when selecting institutions for program reviews for the 2019-20 through the 2021-22 award year.

This reminder builds upon guidance issued on April 3, 2020, reminding FAAs of the statutory authority they have to exercise professional judgment and encouraging the use of that authority to reflect more accurately the financial need of students and families affected by the COVID-19 pandemic.

Section 479A of the HEA gives an institution’s FAA the authority to use professional judgment to adjust, on a case-by-case basis, the cost of attendance or the values of the items used in calculating the EFC to reflect a student’s special circumstances.  In making case-by-case determinations, the FAA must obtain and retain in the affected student’s file documents supporting and substantiating the reasons for any adjustment.  The HEA does not provide a framework for the FAA to calculate the expected student or parent contribution or for the adjusted aid amounts. 

At all times, but particularly during this period of economic hardship, you may use documentation of unemployment—including, but not limited to, receipt of unemployment benefits—to reduce or adjust to zero the income earned from work for a student and/or parent as well as make corresponding adjustments to Adjusted Gross Income (AGI).  A letter from the state unemployment agency or other evidence that a student or parent is receiving unemployment benefits is sufficient to adjust the calculated expected student or parent contribution to account for the loss of employment on the family’s ability to contribute to educational expenses.  Institutions making these adjustments should retain these letters in your student records to support the adjustments to student or parent income.  We understand that some financial aid administrators have been reluctant to use professional judgment because the percentage of students for whom an institution makes professional judgment determinations has been a factor the Department uses to select institutions for program reviews.  In consideration of the continued economic hardship resulting from the COVID-19 pandemic affecting students and their families, the Department will not negatively view increased use of professional judgment or use it as a selection criterion for a program compliance review for the 2021-22 award year.  This extends the modification we had announced for the 2019-20 and 2020-21 award years in a July 9, 2020, electronic announcement.

We will continue to monitor and enforce requirements for appropriate use of professional judgment but recognize that appropriate use of professional judgment by a school is likely to increase in the current economic environment.

Thank you in advance for your cooperation as together we provide opportunities to ensure that all Americans may participate in our country’s outstanding postsecondary education system.

Aug. 16, 2021 Update

Despite improvements in the labor market over the past six months, millions of Americans remain unemployed or underemployed. Unfortunately, they are often not aware of the thousands of dollars in educational funding that may be available to them under the Higher Education Act, including through financial aid administrators’ use of professional judgment authority under Sec. 479A.

In an effort to support the economic recovery and provide real educational and economic opportunity, the Departments of Education and Labor are partnering with states to ensure Unemployment Insurance recipients are aware of their potential eligibility for Pell Grants and other funding and to encourage them to enroll in postsecondary education.

As this Dear Colleague Letter notes, we encourage financial aid administrators to use documentation of unemployment, such as an unemployment verification letter, online unemployment insurance account records from the state unemployment agency, or other supporting records, to set to zero the income earned from work for a student and/or parent and to make other needed adjustments to Adjusted Gross Income. This will ensure that these students and families receive the maximum funding to which they are entitled under the law. A copy of that documentation will satisfy the requirements that financial aid officers retain adequate documentation of their professional judgment adjustments.

Sincerely,

Annmarie Weisman
Senior Director, Policy Development, Analysis, and Accreditation Services
Delegated the duties of the Deputy Assistant Secretary
for Policy, Planning, and Innovation
Office of Postsecondary Education

Last Modified: 08/16/2021