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How does job loss affect federal student financial aid?

Mark Kantrowitz

August 25, 2009

When I turned in my FAFSA my parents were making a lot more money than they are now. Both my parents were working full time, but now my mom is the only one working for minimum wage, with my dad jobless. Is there anything I can do at this time to change my FAFSA? — Sam W.

Call or write the college financial aid office and ask about the procedures for a professional judgment review. (Some colleges call this a special circumstances review or financial aid appeal.) Colleges have the authority to make adjustments to the data elements on the Free Application for Federal Student Aid (FAFSA) on a case-by-case basis when justified by special circumstances. Special circumstances can include any financial circumstances that changed from last year to this year. Job loss and salary or work hour reductions are good examples, since this year’s income will be much lower than last year. Even if the job loss occured before the FAFSA was filed it might still qualify for an adjustment.

A similar situation occurs when last year’s income was artificially inflated by a lump sum severance. That’s a one-time event that is not reflective of the ability to pay during the award year.

The college financial aid administrator will want to see documentation of the job loss or salary reduction, such as a copy of the layoff notice. (Give them photocopies, not originals.) They will also want information about any severance packages and unemployment benefits. If they decide that your situation merits an adjustment, the adjustment will be based on the difference between last year’s income and estimated award year income.

The US Department of Education recently sent letters to college financial aid offices encouraging them to make adjustments in response to the current economic downturn.

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