What Documentation can a College Financial Aid Administrator Request?
Federal law and regulations grant college financial aid administrators the authority to request documentation from financial aid applicants.
By The Fastweb Team
September 14, 2017
I’m an independent student who filed a 1040A last year so I was not required to answer questions about assets on the FAFSA application. I had very little income last year and have a zero EFC. I reported taxes on capital gains and now my school is asking for information about my investment assets (which are about $40,000). Can they use this to lower my federal grant amount? I guess they can use whatever rules they want about their own grants, but I want to be sure that this will not impact my eligibility for Pell Grants. — Ethan G.
Federal law and regulations grant college financial aid administrators the authority to request information and documentation from financial aid applicants. Assuming that the information reported on the financial aid application is accurate and that there is no unreported income, this is unlikely to affect eligibility for federal student aid. It may affect eligibility for the college’s own grant funds, depending on the college’s policies.
The college is asking for more information as part of a process called verification. Verification is designed to detect and resolve errors and discrepancies on the Free Application for Federal Student Aid (FAFSA). Previously up to 30 percent of all FAFSAs were selected by the US Department of Education for verification. College financial aid staff can select additional FAFSAs for verification at their discretion. Some colleges even select all FAFSAs for verification. The US Department of Education is transitioning to a targeted verification system where specific data elements on the FAFSA are selected for verification based on a risk model. There will no longer be a minimum or maximum number of FAFSAs selected for verification. College financial aid administrators can continue to choose to verify additional FAFSAs, even every FAFSA.
There are several possible reasons why your FAFSA may have been selected for verification. FAFSAs are often selected for verification when there is an apparent discrepancy involving income and assets. For example, a potential discrepancy arises when capital gains, interest and dividends are reported on the federal income tax return but no assets are reported on the FAFSA. FAFSAs can also be selected for verification when the applicant appears to have insufficient income to pay for basic living expenses. These FAFSAs are selected for verification because of the likelihood of unreported assets and income.
The mismatch between capital gains on the federal income tax return and the lack of assets on the FAFSA may have been caused by the simplified needs test.
The simplified needs test causes assets to be disregarded on the FAFSA. To qualify for the simplified needs test, the income reported by the student and the student’s spouse (if the student is independent) or the student’s parents (if the student is dependent) must be less than $50,000. Income is based on adjusted gross income for tax filers and earned income for those not required to file a federal income tax return. In addition, they must each have filed or been eligible to file an IRS Form 1040A or 1040EZ (or were not required to file an income tax return), or one of them must have been a dislocated worker, or someone in the household size must have received certain federal means-tested benefits during the past two years (e.g., SSI, Food Stamps, Free and Reduced Price School Lunch, TANF, WIC).
This apparent discrepancy can be explained by the simplified needs test, since the applicant is not required to report assets. Often the models that trigger verification look for simplistic mismatches, such as an amount of assets reported that seems inconsistent with the capital gains and interest/dividend income reported on the income tax return. This also potentially explains the lack of income, since an applicant with assets can survive off of the assets and student aid funds.
Authority to Request Documentation
Regardless of the reason for selecting a FAFSA for verification, the college has the absolute authority to request such documentation as they see fit in connection with the FAFSA. If a student or parent refuses to provide this documentation, the student will be denied financial aid.
The authority to request documentation comes from multiple sources. First, the signing statement on the FAFSA provides this authority:
If you are the parent or the student, by signing this application you certify that all of the information you provided is true and complete to the best of your knowledge and you agree, if asked, to provide information that will verify the accuracy of your completed form. This information may include U.S. or state income tax forms that you filed or are required to file. Also, you certify that you understand that the Secretary of Education has the authority to verify information reported on this application with the Internal Revenue Service and other federal agencies.
Section 479A(a) of the Higher Education Act of 1965 also grants the college financial aid administrator the authority to request documentation.
In addition, nothing in this title shall be interpreted as limiting the authority of the student financial aid administrator in such cases to request and use supplementary information about the financial status or personal circumstances of eligible applicants in selecting recipients and determining the amount of awards under this title.
The regulations also grant authority to the college financial aid administrator to request documentation. For example, the regulations at 34 CFR 668.51(b) states “Applicant responsibility. If the Secretary or the institution requests documents or information from an applicant under this subpart, the applicant shall provide the specified documents or information.” The regulations at 34 CFR 668.54(a)(5) also state that “An institution or the Secretary may require an applicant to verify any data elements that the institution or the Secretary specifies.”
The college financial aid administrator is required to request documentation if he or she believes that the information reported on the FAFSA is inaccurate. For example, the regulations at 34 CFR 668.54(a)(3) state “If an institution has reason to believe that any information on an application used to calculate an EFC is inaccurate, it shall require the applicant to verify the information that it has reason to believe is inaccurate.” The regulations at 34 CFR 668.16(f) require colleges to have an adequate system for identifying and resolving discrepancies in all the information available to the college about a financial aid applicant, including discrepancies between the income tax returns and the FAFSA.
If the application fails to provide the documentation within a reasonable time period as specified by the college, the regulations at 34 CFR 668.60(b)(1) and 34 CFR 668.60(c)(2) prohibit the college from disbursing any further federal student aid to the student, including grants, loans and student employment. The student will also be required to repay any federal student aid already disbursed. The regulations at 34 CFR 668.60(d) also preclude processing any subsequent year’s FAFSAs until the applicant provides the requested documentation.
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