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2009-10 Changes to Federal Methodology What you Need to Know

2009-10 Changes to Federal Methodology What you Need to Know. Lisa Koretoff Guilford Technical Community College. Agenda. Smaller Impact Changes Untaxed Income Special Combat Pay Qualified Education Benefits Professional Judgment Larger Impact Changes

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2009-10 Changes to Federal Methodology What you Need to Know

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  1. 2009-10 Changes to Federal Methodology What you Need to Know Lisa KoretoffGuilford Technical Community College

  2. Agenda Smaller Impact Changes • Untaxed Income • Special Combat Pay • Qualified Education Benefits • Professional Judgment Larger Impact Changes • Definition of an Independent Student • Simplified Needs Test and Auto Zero EFC • Income Protection Allowance Discussion: How will this affect your school? What can we do to get the word out to students about the changes?

  3. 2009-10 Changes to FM • CCRAA – the College Cost Reduction and Access Act. Signed into law on September 27, 2007. • HEOA – The Higher Education Opportunity Act of 2008 reauthorized financial aid programs for the first time since 1998. Signed into law on August 14, 2008. • While HEOA also made changes to FM, this session will mainly concentrate on the changes to the upcoming year’s FAFSA.

  4. 2009-10 Changes to FM • CCRAA Excludes Some Sources of Untaxed Income • Welfare benefits, including TANF • Earned Income Credits • Additional Child Tax Credits • Untaxed Social Security Benefits • Special Fuel Tax Credits • Foreign Income Exclusions

  5. 2009-10 Changes to FM What are the effects? • Worksheet A disappears • Worksheets B and C incorporated into the FAFSA • Unless EFC is already zero, these changes may decrease the EFC significantly.

  6. 2009-10 Changes to FM • CCRAA Excludes Special Combat Pay • Reported in Box 12 of the W-2, Code Q • Any combat pay that is reported in the AGI will be identified in the “Additional Financial Information” section, which include the former Worksheet C questions. The amounts listed here will be subtracted from the AGI.

  7. 2009-10 Changes to FM • CCRAA affects Qualified Education Benefits • Qualified Education Benefits include 529 plans, both college saving plans and prepaid tuition plans, other state prepaid tuition plans which are not 529 plans, and Coverdell education accounts • Now, when these benefits are owned by a dependent student, they will be considered an asset of the parent.

  8. 2009-10 Changes to FM • CCRAA Effects on Professional Judgment • Added 3 specific examples: • Unemployment of independent student • Family member who is a dislocated worker • Homeless

  9. 2009-10 Changes to FM • HEOA Effects on Professional Judgment • Added 3 specific examples: • Nursing home expenses not covered by insurance • Unusually high dependent care expenses • Student who is a dislocated worker Both changes went into effect with HEOA’s enactment on August 14, 2008

  10. 2009-10 Changes to FM • Your school’s policy on professional judgment • Will these changes affect how your school handles professional judgment?

  11. 2009-10 Changes to FM • Two other professional judgment changes • HEOA allows the FAO to grant unsubsidized Stafford loan eligibility to students whose parents refuse to support the student and will not complete the FAFSA. • The details on how this process will work are still to be determined. • Potential pitfalls?

  12. 2009-10 Changes to FM • CCRAA allows school to accept a dependency override performed by another school within the same award year. If a school choose to do this, it does not need to document the student’s special circumstances. • This is left to the FAO’s discretion on whether they will accept it or not. • Potential Pitfalls?

  13. 2009-10 Changes to FM • New Additions to the Definition of an Independent Student • Students who were in foster care or were wards of the court at any time when they were 13 or older • Emancipated minors, as determined by a court in the student’s state at the time FAFSA is filed • Students who have a legal guardian, as determined by a court in the student’s state at the time FAFSA is filed • Homeless, unaccompanied youths and youths at risk for homelessness

  14. 2009-10 Changes to FM • Question 55 reads “When you were age 13 or older, were both your parents deceased, were you in foster care or were you a dependent/ward of the court? “ • Student would say “yes” even if they were later adopted or returned to their parents.

  15. 2009-10 Changes to FM • Question 56 reads “As of today, are you an emancipated minor as determined by a court in your state of legal residence?” • Emancipation is not available in 20 states, including South Carolina, Georgia and Tennessee. However, North Carolina does permit the emancipation of a minor.More info: www.jlc.org/factsheets/4/

  16. 2009-10 Changes to FM • Question 57 reads “As of today, are you in legal guardianship as determined by a court in your state of legal residence?” • What is the problem with Questions 56 and 57 in terms of future year eligibility?

  17. 2009-10 Changes to FM • HEOA fixes the problem of students reverting back to dependent after turning 18 years of age. • For 2010-11, the questions will be reworded to ask if they were emancipated minors or had legal guardians UNTIL the age of 18.

  18. 2009-10 Changes in FM • Homelessness – defined in section 725 of the McKinney-Vento Homeless Assistance Act. • Questions #58 – 60 on the FAFSA will ascertain if the student should be considered independent due to homelessness. • “Homeless”, “Unaccompanied”, and “Youth” all have separate definitions

  19. 2009-10 Changes to FM • “Homeless”: Individuals who lack a fixed, regular, and adequate nighttime residence including youth who: • Are sharing the housing of other persons due to loss of housing, economic hardship, or a similar reason; are living in motels, hotels, trailer parks or camping grounds due to the lack of alternative adequate accommodations; • Are living in emergency or transitional shelters; are abandoned in hospitals; or are awaiting foster care placement;

  20. 2009-10 Changes to FM • Homeless definition continued: • Have a primary nighttime residence that is a public or private place not designated for or ordinarily used as a regular sleeping accommodation for human beings; and • Are living in cars, parks, public spaces, abandoned buildings, substandard housing, bus or train stations, or similar settings

  21. 2009-10 Changes to FM • “Unaccompanied”: Not in the physical custody of a parent or guardian • “Youth”: 21 years of age or younger or still enrolled in high school

  22. 2009-10 Changes to FM • The following parties can determine this status: • A high school or school district homeless liaison • A director or designee of an emergency shelter program funded by HUD • A director or designee of a runaway or homeless youth basic center or transitional living program • Financial Aid Officer – however, there has been no guidance given to FAOs on how this process might work.

  23. 2009-10 Changes to FM • Question Answers to dependency status questions are NOT required verification items. However, you can if you want to do so. Students are told this in the FAFSA directions. Are you planning to verify any or all of the responses to these questions?

  24. 2009-10 Changes to FM • Simplified Needs Test (SNT) and Auto Zero EFC Quick Review: Simplified Needs Test – Assets will be excluded from the calculation of EFC if student meets the criteria. Auto Zero EFC – Student’s EFC will be set to zero automatically if student meets the criteria. CCRAA adds dislocated worker status as an alternative eligibility criterion to the tax filing status and means-tested federal benefits criteria.

  25. 2009-10 Changes to FM • Dislocated Worker • Has lost a job; • Has been laid off or has received a lay-off notice from a job; • Is receiving unemployment benefits due to being laid off or losing a job and is unlikely to return to a previous occupation; • Is self-employed but is unemployed due to economic conditions or natural disaster; or • Is a displaced homemaker, which is a person who previously provided unpaid services to the family, is no longer supported by the husband or wife, is unemployed or underemployed, and is having trouble finding or upgrading employment. If a person quits a job, then they are generally not considered a dislocated worker even if they are receiving unemployment benefits. Questions #85 (parent) and #103 (student/spouse) have been added.

  26. 2009-10 Changes in FM • To qualify for SNT or Auto Zero EFC: • Income requirement met (below $50,000 for SNT and at or below $30,000 for Auto Zero EFC (an increase from $20,000 due to CCRAA) AND • Filed or were eligible to file a 1040A/1040EZ; • Receiving means-tested federal benefits within the last 24 months (was just in the base year); or • Dislocated worker * Note: Independent students without dependents other than a spouse are not eligible for Auto Zero EFC.

  27. 2009-10 Changes in FM • Income Protective Allowance (IPA) Changes A certain amount of income is needed for basic living expenses and thereby “protected” from the calculation of the EFC. An increase in the IPA will protect more income. Less income will be available for educational expenses and the student’s EFC will decrease.

  28. 2009-10 Changes to FM • CCRAA dictates the amount of IPA, with an increase each year, between 2009 and 2013. • After the 2012-13 year, ED will revert to determining the IPA by increasing amounts by a percentage equal to the estimated percentage increase in the CPI and rounding the result to the nearest $10.

  29. 2009-10 Changes in FM • Where do we go from here? • Prepare our systems for the requirements • Revise our materials as necessary (P and P manuals, literature) • Inform students of the changes

  30. 2009-10 Changes in FM “APPLY TO SUCCEED: ENSURING COMMUNITY COLLEGE STUDENTS BENEFIT FROM NEED-BASED FINANCIAL AID” This report from the Advisory Committee of Student Financial Assistance was published in September 2008. http://www.ed.gov/about/bdscomm/list/acsfa/edlite-index.html

  31. 2009-10 Changes to FM • The report asks how we can encourage students to apply for financial aid, especially since CCRAA expands grant eligibility. • What can you do at your campuses to encourage students to apply, even if they didn’t qualify before?

  32. Thank you!

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