On April 29, 2022, the Department of Education (ED) announced it would extend the temporary guidance regarding Professional Judgement (PJ) by Financial Aid Administrators originally issued in April 2020 and updated several times since. For those new to the Financial Aid Office, the use of Professional Judgement allows a Financial Aid Administrator, in extenuating circumstances and with appropriate documentation, to change a component of the needs analysis in order to re-calculate a student’s eligibility. You can read about the details in our March 2021 blog.
A number of changes were instituted as part of the CARES Act to give institutions more flexibility to help students remain enrolled despite the hardships of the COVID-19 pandemic. The most important one for institutions is that a large number of PJ decisions will not trigger a Program Review through the 2022-2023 award year. ED made this change to ensure Financial Aid Administrators would not shy away from using PJ to assist students experiencing hardship as a result of the pandemic.
The guidance also particularly mentions the treatment for students, their spouses or their parents, as applicable, when it comes to periods of unemployment. With appropriate documentation, income from work included in the calculation can be reduced or adjusted to zero depending on the situation. However, remember that the related components of Adjusted Gross Income and Taxes Paid should be recalculated as well to be consistent. This and any other changes made using PJ need to be reported through the Central Processing System as a correction, with a PJ indicator in cases where the change affects Pell Grant eligibility.
Speaking of unemployment benefits, you may recall the American Rescue Plan (ARP) exempted the first $10,400 received for individual filers with incomes less than $150,000 for the 2020 tax year. For financial aid application purposes, the untaxed portion does not need to be reported as income of any kind on the Free Application for Federal Student Aid (FAFSA). Aid Administrators need to be sure to remove any unemployment benefits improperly reported on the FAFSA. Such a change will be treated as a correction rather than a PJ adjustment.
Understanding when to use PJ (and when not to!) can be challenging. Contact the Higher Education Assistance Group at firstname.lastname@example.org to request training or other support services from our compliance experts.