Gainful Employment Ruling Struck Down

English: Photo of Education Secretary (2009-)....

Just days after the Department of Education released Gainful Employment Informational Debt Measures and Gainful Employment Informational Loan Medians to institutions, GE is Dead!

On Saturday, United States District Judge Rudolph Contreras struck down Gainful Employment rules in a suit that the Association of Private Colleges and Universities brought against the Department of Education and Secretary Arne Duncan to challenge Gainful Employment rules.

Check out the full text of the legal decision here:


An unusual verification scenario

A colleague recently encountered an unusual verification scenario. When a student filed head of household on her Federal Income Tax returns and listed her spouse and child in the household size, she decided to examine the situation closer to ensure that all of the information in the file was consistent. She knew that in order to file as head of household, the student generally couldn’t be married and she set out to identify any conflicting information.

When she interviewed the student, she explained that she was married in another country and that although she was a Permanent Resident herself, her husband who was unemployed, was a nonresident alien. Since he didn’t work, he didn’t file taxes. She remarked that she and her husband were not considered married in the United   States. This didn’t sound right to the experienced financial aid administrator, so she pulled out good-old IRS Publication 17 to do some research.

She knew right where to look, and thumbed to the page on Head of Household.

It read:

Head of Household

You may be able to file as head of household if you meet all the following requirements.

  1. You are unmarried or “considered unmarried” on the last day of the year.
  2. You paid more than half the cost of keeping up a home for the year.
  3. A “qualifying person” lived with you in the home for more than half the year (except for temporary absences such as school). However, if the “qualifying person” is your dependent parent, he or she does not have to love with you.

She reread the first requirement aloud, recalling the student’s similar statement. “You are unmarried or “considered unmarried” on the last day of the year.”

What did that mean?

She read on, eventually finding her answer.

It read:

Nonresident alien spouse.  You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. However, your spouse is not a qualifying person for head of household purposes. You must have another qualifying person and meet the other tests to be eligible to file as head of household.

Much to her surprise, the student’s story checked out and she quickly phoned the student to give her the good news. She was excited to tell her all about the exciting guidance she found in IRS Publication 17. When she got around to calling me, we agreed, this was one of those stories for the infamous “book” of financial aid rarities and oddities.

Got a great financial aid related story to tell? Tell us about it below.

Draft Cohort Default Rates Delayed, but coming…

In a message addressed to the Financial Aid Community, Federal Student Aid announced the release dates of the  FY 2010 2-Year and FY 2009 3-Year Draft Cohort Default Rates. All schools, both domestic and foreign, enrolled in the Electronic Cohort Default Rate (eCDR) process will receive their FY 2010 2-Year and the FY 2009 3-Year Draft Cohort Default Rate and accompanying documentation via their Student Aid Internet Gateway (SAIG) mailbox.This year, the reports will be delivered separately and several days apart as follows:

  • FY 2010 2-Year Draft Cohort Default Rates – On February 27, 2012
  • FY 2009 3-Year Draft Cohort Default Rates – On March 5, 2012

Although sanctions from the 3 year Cohort Default Rate will not be imposed until 2014, many schools will review the student level data in the report to ensure the accuracy of the official Cohort Default Rate which will be published in September. In 2014, institutions that have three-year rates higher than 30 percent will face possible sanctions, including loss of eligibility to participate in Title IV programs. Trial rates project the following data by sector.

Public —10.8% overall 14.7% 17.9% 7.9%
Private7.6% overall 26.1% 16.7% 7.3%
Proprietary25.0% overall 27.6% 27.9% 22.7%
Foreign – 4.7% overall

During the Draft Cohort Default Rate Review period,schools have 45 days to challenge/appeal the rates by submitting an Incorrect Data Challenge appeal to the data manager via the eCDR appeals process. A good idea since benefits as well as sanctions apply to cohort default rate thresholds.

  • FY 2010 2-Year Incorrect Data Challenges are due – April 12, 2012
  • FY 2009 3-Year Incorrect Data Challenges are due –  April 19, 2012

For more information about Cohort Default Rates, check out the revised edition of the Cohort Default Rate Guide.

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2012-2013 Student Aid Eligibility Worksheet for Question 23

On January 17th, the 2012-2013 Student Aid Eligibility Worksheet for Question 23 also known as the Drug conviction worksheet was published for the 2012-2013 award year in English and Spanish. Students who answer either “Yes” to question 23 of the 2012-2013 FAFSA which asks if the student has ever been convicted for possessing or selling illegal drugs while receiving Federal Student Aid should complete the worksheet to determine if the conviction will affect their eligibility for aid.

Students who meet the following criteria are generally eligible for aid:

  • Students who never received Federal Student Aid (Federal Student Grants, Federal Student Loans, Federal Work-Study)
  • Students who have never been to college
  • Convictions that occurred before they turned age 18
  • Convictions that were removed from their record
  • Convictions other than Federal or State convictions,
  • If the offense occurred during a period on non-enrollment during which the student did not receive aid.

A copy of the worksheet is available here:



2012 Omnibus hits students hard

High school students

Image via Wikipedia

Congress reached agreement on the fiscal year (FY) 2012 budget last week after several days of disagreement and stalemate. Bills in the budget maintain maximum Pell Grant awards at $5,550 for the 2012-13 award year however there were some provisions that weren’t so great, especially for students.

Schools were surprised to see the elimination of Ability-to-benefit (ATB) options for establishing student eligibility for Title IV funds for students who first enroll on or after July 1, 2012. Under the new rules, neither ATB testing or earning six credits applicable to a degree or certificate will satisfy the academic qualifications for receiving Title IV funds. To be eligible for Title IV, students are required to have a high-school diploma or GED, or have been home schooled. While few schools would argue against the value of a high-school diploma or even a GED, proponents of Ability to Benefit Testing felt that by eliminating access to aid, more students would forgo vital services such as occupational certificate programs offered at community colleges and career focused programs offered by the proprietary sector. While schools that enroll a large percentage of students under the existing policy will have to find ways to continue to help this high need population of students access the educational programs of their choice or face a reduction in enrollment, High Schools as well as GED programs around the country are going to work harder than ever to increase Diploma and GED attainment rates or risk condemning many students to a life at the bottoms of society.

It’s not just the extremely poor that the new regulations penalize the most, but also the moderately poor. Qualifying income for the Automatic Zero EFC determination is reduced to $23,000, beginning with award year 2012-13. The law currently sets that threshold at $30,000, but directs the Department of Education to adjust it annually based on the Consumer Price Index. Auto zero applies only to EFC calculations for dependent students based on parent income) and independent students with dependents other than a spouse (based on the combined income of the student and spouse. Students can expect to see about 1000.00 less in aid on average.
They stuck it to the consumer again by eliminating the interest subsidy during the six-month grace period for new Direct Loans made on or after July 1, 2012, and before July 1, 2014. Students can expect to pay slightly more as the interest accrues on their student loans for an extra six months as interest that accrues during those six months will be payable by the student rather than be subsidized by the federal government.

Monday morning question and answer: professional judgment

An aid administrator recently asked: if a student worked for half the year before becoming unemployed, should I reduce the students income from working to zero or just reduce the unemployment compensation to zero for the number of months the student will receive unemployment compensation during the twelve month period I am using to replace the base year?

Good question!

The truth is, you can do either. While guidance in GEN 09-05 confirms that it is allowable to reduce both income from work and unemployment compensation to zero for a student, the aid administrator has the authority to make appropriate adjustments to account for unusual circumstances as long as the reason for those adjustments are backed up with supporting documentation unique to that student’s situation.

The department was careful not to prescribe any specific methodology that would limit or dictate an aid administrators thoughtful use of professional judgment.

New verification rules for 2012-2013 and beyond

Beginning with the 2012-2013 award year, schools will no longer be able to accept a copy of a student’s tax return to complete verification. Under new rules for verification official IRS tax return transcripts will be required instead.

Under certain conditions, an applicant selected for verification will need to submit to the school an official IRS Tax Return Transcript of 2011 tax year information for the applicant, his or her spouse, and his or her parents, as applicable. See DCL GEN-11-13 for a complete listing of such conditions. A transcript is not required to be signed by the tax filer since it originates from the IRS.

Under the new rules, schools will only be required to verify the data selected by CPS. Ed also removed the 30% verification limit and expects targeted verification of error prone data will reduce the burden on aid administrators while strengthening the efficacy of the FSA program. Students who complete the IRS data retrieval through FAFSA on the web will be less likely to be selected for verification as long as they don’t change any information pulled from the IRS.

According to Jeff Baker, speaking at last weeks FSA conference in Las Vegas, the department of education is having some trouble creating a verification worksheet for the up coming award year that will be comprehensive yet still allow aid administrators to verify only the data selected by CPS. He offered reassurance the Ed would ultimately provide additional guidance after the 1st of the year, but made no promises regarding the verification worksheet.

Some aid administrators voiced their frustration with the new rules citing cutbacks at their schools in addition to heavy workloads and asked Ed to move quickly to develop guidance and worksheets. While the 2012-2013 award year doesn’t officially begin until July 1, 2012, students can begin applying as early as January 1, 2012 so aid administrators will need to be ready pretty soon.

While the potential for the new rules to reduce the administrative burden associated with verification exists, aid administrators expect to see more conflicting information such as students filing as married and head of household on their tax return. Administrators are also concerned about the length of time it will take to get a copy of the tax return as Ed will no longer allow schools to make interim Pell disbursements. Unsubsidized Direct Loans and Parent PLUS disbursements will still be allowed.