professional judgment

Use of Professional Judgment for Prior-Prior Year Income

admin Federal Student Aid Programs, Financial Aid Industry News

On February 11th, the Department of Education (DOE) released its guidance for financial aid professionals via a Dear Colleague Letter, regarding how professional judgment (PJ) cases will be handled starting in the 2017-18 award year, once “prior-prior year income” is utilized by students filling out the FAFSA.  Because a family’s income data will be collected a year earlier than what is currently the norm, there were questions coming out of the financial aid community regarding how this may impact professional judgment situations going forward.  The official new guidance is as follows:

“When making a professional judgment adjustment to student or family income, it is appropriate for the FAA to consider if the use of prior-prior year income is the best predictor of income for the upcoming award year. A professional judgment adjustment may be warranted if a family member experienced a significant change of income, either upward or downward. For example, for an individual who has lost a jobFAFSA wordpress image or has taken a significant salary cut beginning in August of 2015, the FAA may use the income for the 12-month period following the reduction in income (September 2015 through August 2016) instead of the prior-prior year income (calendar 2015) that was initially used in the EFC calculation. Alternatively, the FAA may choose to use more recent income that the FAA believes more accurately reflects the family’s current financial circumstances, i.e., the student or parent moved from part-time employment to full-time employment.”

Schools should continue to extensively document the all warranted cases including letters regarding loss of employment and projected, future year income data the family has provided.  Schools should also not lump students into a specific category and make assumptions that all income situations have changed (like those identified as being impacted by a military deployment).

Financial aid professionals are sometimes leery of using their PJ authority due the increased likelihood of a Program Review. To account for the possibility of an increased amount of PJ’s being performed by schools, the DOE announced in the letter that it will adjust the risk-based model it uses to review and analyze the use of professional judgment.  The bottom line remains true for how you should handle professional judgments in the future; collect all pertinent information, treat them on a case-by-case basis and you should have no problems with prior-prior income and the way it is handled for them.