Transcript Module 4 - Clemson University

National Association of Student
Financial Aid Administrators Presents…
Module 4
Verification
© NASFAA 2006
Verification
• Process of verifying accuracy of FAFSA data
• Regulations define:
– Whose application must be verified
– Data elements to be verified
– Documentation used to verify data elements
• Regardless of verification selection, also must
resolve discrepancies and conflicting
information
Slide 4 - 2
© NASFAA 2006
Verification
Conflicting information
• Accuracy of information or data called into
question because of inconsistencies
• Not limited to specific data elements on the
FAFSA
• No options; must resolve conflicting information
before awarding or disbursing Title IV aid
Slide 4 - 3
© NASFAA 2006
This Module Will Review
•
•
•
•
•
•
•
•
•
Whose application must be verified
Quality Assurance Program requirements
Which data elements must be verified
Acceptable documentation
Data element corrections
Data element updates
Interim disbursements
Verification time frames
Policies and procedures
Slide 4 - 4
© NASFAA 2006
Whose Application Must Be Verified?
• Applicants selected by Central
Processing System (CPS), either
randomly or by verification edits
• Applicants selected by institution
Slide 4 - 5
© NASFAA 2006
ISIRs for CPS-Selected Applications
• ISIR contains asterisk (*) next to EFC
• Verification flag set to:
– “Y” if selected during initial processing
– “Asterisk” if selected on a subsequent
transaction
• Comment in comments section
Slide 4 - 6
© NASFAA 2006
SARs for CPS-Selected Applications
• Asterisk next to EFC
• Comment in student section of first page
• Verification flag in “For Financial Aid
Office Use Only” section set to “Y”
Slide 4 - 7
© NASFAA 2006
Programs to Which Verification Applies
• Federal Pell Grant
• Campus-based programs
• Subsidized FFEL and Direct Loans
Slide 4 - 8
© NASFAA 2006
30% Verification Option
• 30% is cap, not minimum
• Applications making up 30% must be CPSselected
• If more than 30% selected by CPS, may choose
to verify more than 30%
• Document files of CPS-selected applicants not
verified
• 30% option does not relieve institution of
responsibility to resolve conflicting information
Slide 4 - 9
© NASFAA 2006
Calculating 30%, Step by Step
• Step 1: Define applicant
• Step 2: Determine total number of
applicants at institution
• Step 3: Calculate 30% of total
number of applicants
Slide 4 - 10
© NASFAA 2006
Selecting the 30%
• Institutions may use Verification Tracking
Flag on ISIR
– Priority number 0001 to 0999
– Higher number = greater likelihood of errors
– Verification Tracking Flag does not always
mean student selected for verification by CPS
– ED does not require, but encourages its use
– ED does not release criteria for priority
numbers
Slide 4 - 11
© NASFAA 2006
Institutionally-Selected Applications
• Institution can select additional applications
not selected by CPS
• Selection may be based on such data
elements as:
–
–
–
–
–
Estimated tax figures
Low family income levels
Large household size or number in college
Completion of certain FAFSA data elements
Other institutional criteria
Slide 4 - 12
© NASFAA 2006
Verification Exclusions
• Certain types of applicants and data elements
exempt from verification
• Reason for verification exclusion should be
documented in student’s file
• Except for applicant who dies during the award
year, if conflicting information or reason to
believe application information is inaccurate,
exclusions do not apply
Slide 4 - 13
© NASFAA 2006
Verification Exclusions
• Exclusions include or are limited to:
– Entire application—student and
parent data
– Applicant’s spousal data only
– Certain data elements
Slide 4 - 14
© NASFAA 2006
Quality Assurance Program
• Participation voluntary
• ED provides guidelines, tools, and incentives for
participation
• Participating schools exempt from prescribed
verification requirements
• School sets verification parameters
• School must reassess and self-correct verification
process on ongoing basis
Slide 4 - 15
© NASFAA 2006
Required Verification Data Elements
• Number in household
• Number of household members in
college
• Adjusted gross income (AGI)
• U.S. income tax paid
Slide 4 - 16
© NASFAA 2006
Required Verification Data Elements
• Certain untaxed income and benefits
– Social Security benefits
– Child support received
– Untaxed IRA/Keogh deductions
– Foreign income exclusion
– Earned income credit (EIC)
– Tax-exempt interest income
Slide 4 - 17
© NASFAA 2006
Required Verification Data Elements
• Other untaxed income on tax return
– Untaxed IRA distributions
– Untaxed pensions and annuities
– Additional child tax credit
– Untaxed combat pay (when reported)
Slide 4 - 18
© NASFAA 2006
Items That May Be Verified Using the
Tax Return
• Adjusted gross income
• U.S. income tax paid
• Untaxed IRA/Keogh deductions
• Earned income credit (EIC)
• Tax-exempt interest income
Slide 4 - 19
© NASFAA 2006
Items That May Be Verified Using the
Tax Return
• Foreign income exclusion
• Untaxed portions of pensions and Social
Security
• Untaxed IRA distributions
• Additional child tax credit
• Untaxed combat pay (when reported)
Slide 4 - 20
© NASFAA 2006
Acceptable Tax Return Formats
• Photocopy, facsimile, or digital image of
original paper tax return
– If original copied without signature, at least
one filer must sign copy
• Tax form completed to duplicate original
return and signed by at least one filer
• Other e-file documentation
Slide 4 - 21
© NASFAA 2006
Acceptable Tax Return Formats
• Form 8453 is a signature form for e-filers
and not acceptable
• In lieu of return with filer signature, a
return with tax preparer’s stamped,
typed, signed, or printed name, and SSN,
EIN, or PTIN
Slide 4 - 22
© NASFAA 2006
Alternative Sources of Documentation
• IRS tax transcript listing tax return
information
• Signed statement and W-2s from filer if
tax return or tax transcript unavailable
Slide 4 - 23
© NASFAA 2006
Tax Filing Extensions
• Collect W-2 and one of following:
– IRS Form 4868; or
– Copy of IRS approval of extension
beyond 4-month extension
• Collect and review tax return when filed
Slide 4 - 24
© NASFAA 2006
Separating Data on Joint Returns
• Use W-2 to identify individual’s personal income
• Assess income and losses on jointly-owned
accounts, investments, businesses, and farms
at 50%
• If AGI on joint return was adjusted, reduce
individual’s AGI by portion of adjustment
attributable to that individual
• Figure taxes paid using:
– Tax rate schedule; or
– Proportional distribution method
Slide 4 - 25
© NASFAA 2006
Social Security Benefits Documentation
• Statement from Social Security
Administration certifying amount
received; or
• Statement signed by applicant and
dependent applicant’s parent(s) certifying
that amount listed on application is
correct
Slide 4 - 26
© NASFAA 2006
Child Support Documentation
• Obtain verification worksheet or written
statement certifying amount of child
support received for all children
– Statement must be signed by applicant and
at least one parent (if dependent)
– Statement must be signed by applicant if
independent
– If support paid through government agency,
statement from that agency is acceptable
Slide 4 - 27
© NASFAA 2006
Child Support Documentation
• Request additional documentation if
information provided appears inaccurate
– Copy of separation agreement or divorce
decree
– Signed statement from parent providing
support
– Copies of canceled child support checks
or money order receipts
Slide 4 - 28
© NASFAA 2006
Number in Household & in College
• Statement or verification worksheet listing each
household member’s:
–
–
–
–
Name
Age
Relationship to applicant
Postsecondary school (if any) attending at least
half-time in program leading to recognized
educational credential
• If institution doubts statement, it should obtain
statement from each postsecondary institution
listed by applicant
Slide 4 - 29
© NASFAA 2006
Electronic Documentation
• May use electronic records and
signatures for verification
• Must obtain consent or confirmation of
consent electronically
• Must issue identity credential
electronically
• Not acceptable for tax returns
Slide 4 - 30
© NASFAA 2006
Verification Corrections
• Changes to data elements that were incorrect
at time of application
• Data correct as reported and valid ISIR/SAR:
– Pay Federal Pell Grant, FSEOG, and
Federal Perkins Loan
– Employ students under FWS
– Certify/originate and disburse/deliver
FFEL/Direct Loans
Slide 4 - 31
© NASFAA 2006
Tolerance Option
• $400 net error tolerance for all Title IV programs
FAFSA
+
+
+
–
–
Parent AGI
Student AGI
Parent Untaxed Income
Student Untaxed Income
Parent U.S. Taxes Paid
Student U.S. Taxes Paid
= FAFSA data (uncorrected sum)
Correct
+
+
+
–
–
Parent AGI
Student AGI
Parent Untaxed Income
Student Untaxed Income
Parent U.S. Taxes Paid
Student U.S. Taxes Paid
= Correct data (corrected sum)
• Net Difference:  $400
Slide 4 - 32
© NASFAA 2006
Example: Tolerance Option
Parent AGI
Parent Untaxed Income
Student AGI
Student Untaxed Income
Parent U.S. Income Taxes Paid
Student U.S. Income Taxes Paid
FAFSA Data
$15,800
+ 1,200
+ 9,200
+
0
–
500
–
200
Correct Data
$15,500
+
1,500
+
9,200
+
0
–
0
–
300
= $25,500
= $25,900
• Net difference: $25,500 – $25,900 = $400
Slide 4 - 33
© NASFAA 2006
Tolerance Option
• When calculating tolerance, must
consider data elements related to AGI,
untaxed income, and tax paid
Slide 4 - 34
© NASFAA 2006
Example: Tolerance Option
• Example: Single, independent student; $1,000
from non-FWS job mistakenly reported on
Worksheet C as excludable income
Student AGI
Excludable income
Student Untaxed Income
Student U.S. Income Taxes Paid–
FAFSA Data
+
4,200
–
1,000
+
0
0
–
Correct Data
+
4,200
+
0
+
0
0
= $ 3,200
= $ 4,200
• Net difference: $3,200 – $4,200 = $1,000
Slide 4 - 35
© NASFAA 2006
Recalculating EFC:
Federal Pell Grant Program
• If net error greater than $400 tolerance,
institution can:
– Require all corrections be reprocessed
through CPS; or
– Recalculate EFC itself (institution
liable if its calculation is incorrect)
Slide 4 - 36
© NASFAA 2006
Recalculating EFC:
Federal Pell Grant Program
• School options:
– If Scheduled Award does not change,
corrections not required to be submitted
to CPS
– If Scheduled Award decreases, must
submit corrections to CPS for
reprocessing
Slide 4 - 37
© NASFAA 2006
Recalculating EFC:
Federal Pell Grant Program
• If Scheduled Award increases:
– Pay student lower award based on original EFC
without submitting corrections to CPS; or
– Submit corrections to CPS for reprocessing and:
• Withhold payment until recalculated EFC
received; or
• Make first payment based on original EFC and
adjust subsequent payment upon receipt of
reprocessed ISIR
Slide 4 - 38
© NASFAA 2006
Recalculating EFC:
Campus-Based & Subsidized Loans
• If net error greater than $400 tolerance
and no Federal Pell Grant:
– EFC must be recalculated, but corrections
not required to be submitted to CPS
– If no overaward, may make payment
– If need increases, may increase awards
– If overaward, must be eliminated before
payment may be made
Slide 4 - 39
© NASFAA 2006
Verification Updates
• Changes to data elements that were correct
at time of application but have since changed
• Applicable only to 3 items:
– Dependency status
– Number in household
– Number of household members enrolled in
college
Slide 4 - 40
© NASFAA 2006
Verification Updates
• Dependency status
– All students must update dependency
status if it changes at any time
– Cannot be updated if it changes as result
of change in student’s marital status
Slide 4 - 41
© NASFAA 2006
Verification Updates
• Number in Household and Number in
College
– If selected, data must be accurate as of
verification
– If not selected, cannot update for changes
occurring after original application filed
– If not selected, not required to monitor data
element changes
Slide 4 - 42
© NASFAA 2006
Verification Updates
• Cannot update change in student’s
marital status
• Must update household size if
dependent student’s parent remarries
after application, before verification
Slide 4 - 43
© NASFAA 2006
Verification Status Codes
• V – Verified
• W – Without Documentation
• S – Selected/Not Verified
• Blank – Not Verified
Slide 4 - 44
© NASFAA 2006
Introduction
Conflicting
Information!
Slide 4 - 45
© NASFAA 2006
What is Conflicting Information?
• Refers to contradictory or discrepant
information
• All conflicting information must be resolved
• Resolving conflicting information ensures
all application data is accurate, in the
financial aid office, and throughout the
institution, before any Title IV monies are
disbursed
Slide 4 - 46
© NASFAA 2006
Examples of Conflicting Information
Discrepancies between the financial aid
office and other campus offices
• Resolve conflicting information, not just
in the financial aid office, but campus
wide
Slide 4 - 47
© NASFAA 2006
Examples of Conflicting Information
Examples of Title IV-related data items that
may conflict with information found in other
campus offices include:
• Receipt of other financial aid resources from
other sources
• Changes in academic status, such as grade
level or degree objective
• Changes to enrollment status
Slide 4 - 48
© NASFAA 2006
Examples of Conflicting Information
Examples of Title IV-related data items that
may conflict with information found in other
campus offices include:
• Accuracy of citizenship status
• Accuracy of the social security number
• Changes to cost of attendance components
• Elements which affect calculation of EFC
Slide 4 - 49
© NASFAA 2006
Examples of Conflicting Information
Discrepancies between the ISIR and
non-Title IV loan or scholarship application
• Data on the private application differs
from information listed on ISIR/SAR
Slide 4 - 50
© NASFAA 2006
Examples of Conflicting Information
Discrepancies between initial and
subsequent output documents which
include:
• C-flags and comment codes
• Subsequent ISIR selection for verification
when initial ISIR was not selected
• Updated NSLDS information
• Receipt of reject ISIR/SAR and subsequent
receipt of valid ISIR/SAR
Slide 4 - 51
© NASFAA 2006
Resolving Conflicting Information
• An institution must always resolve
conflicting information as soon as
discrepancy is found
• Exception is only if the student is no
longer enrolled at the time the institution
learns of conflict
Slide 4 - 52
© NASFAA 2006
Student Enrollment and Resolving
Conflicting Information
If a student is enrolled, the institution must:
• Resolve conflicting information even if
processing year has ended
• For a prior year, the institution must
investigate and resolve the conflict
• Discrepancy discovered after disbursing Title
IV funds, the conflicting information must be
reconciled; student must repay any aid for
which he or she wasn’t eligible
Slide 4 - 53
© NASFAA 2006
Student Enrollment and Resolving
Conflicting Information
If a student is enrolled, the institution must:
• Treat the aid as a resource for the
subsequent period of enrollment if the
student is intending to reenroll once the
period of enrollment has ended and the
institution was unaware of aid received
Slide 4 - 54
© NASFAA 2006
Student Enrollment and Resolving
Conflicting Information
The institution must take the following
action if the student is no longer enrolled:
• If the institution becomes aware of conflicting
information after student is no longer enrolled
but student is eligible for late or postwithdrawal disbursement, the institution must
resolve conflict before making disbursement
Slide 4 - 55
© NASFAA 2006
Student Enrollment and Resolving
Conflicting Information
If the institution knows the student is no
longer enrolled and does not intend to reenroll, resolution of conflicting information is
not required if:
• All aid for period of enrollment has been
disbursed, and
• At time of disbursement, there was no
conflicting information
Slide 4 - 56
© NASFAA 2006
Referrals to the Office of Inspector
General
Examples of referrals are:
• False claims of independent student status
• False claims of citizenship
• Use of false identities
• Forgery of signatures or certifications
• False statements of income
Slide 4 - 57
© NASFAA 2006
Professional Judgment
• If using PJ authority to adjust data
elements used to calculate EFC on
selected application, application must be
verified first
• If using projected-year income data to
recalculate EFC, projected-year data do
not need to be verified
Slide 4 - 58
© NASFAA 2006
Conflicting Information and
Professional Judgment
Professional judgment is the authority by
which a financial aid administrator has
the discretion to make a special
determination on a student’s application
based on the individual student’s unusual
circumstances
Slide 4 - 59
© NASFAA 2006
What is an Adjustment?
Simply defined, an adjustment is a
change made to the student’s application
data by a financial aid administrator
using professional judgment
Slide 4 - 60
© NASFAA 2006
Crossover Years: Projected Year
Income Versus Actual Income
• What about projected calendar year income
information from the prior award year and
actual income information reported on the
new award year’s FAFSA?
• Is this conflicting information if the projected
income and the actual income do not
match?
• In this instance, this is not considered
conflicting information
Slide 4 - 61
© NASFAA 2006
Verification Case Study—Christina Smith
• Complete NASFAA Verification Checklist
for case study using:
– SAR output document with original
application data
– 2005 U.S. tax return for Christina
– 2005 U.S. tax return for Christina’s mother,
Anna
– 2006-07 Verification Worksheet
Slide 4 - 62
© NASFAA 2006
Interim Disbursements
In the absence of conflicting information or
reason to believe information is inaccurate,
institutions have the following disbursement
options when verification still incomplete:
• Federal Pell Grant and campus-based:
–
Withhold payment
–
Make 1 disbursement for 1st payment period
–
Employ applicant up to 60 days under FWS
Slide 4 - 63
© NASFAA 2006
Interim Disbursements
• Subsidized FFEL/Direct Loans:
–
Refuse to certify or originate loan; or
–
Certify or originate loan, but not
disburse/deliver loan proceeds
Slide 4 - 64
© NASFAA 2006
Interim Disbursements
• Verification not required for:
– Unsubsidized FFEL/Direct Loans
– FFEL/Direct PLUS
– Nonfederal LEAP and SLEAP awards
– Robert C. Byrd Honors Scholarships
Slide 4 - 65
© NASFAA 2006
Interim Disbursements
• If school makes interim disbursement and
student later determined ineligible, or if
verification not completed, award for which
student is ineligible is an overpayment
• Student with overpayment is ineligible for
Title IV funds
• $300 overpayment tolerance for campusbased programs
• School liable if overpayment not resolved
Slide 4 - 66
© NASFAA 2006
Verification Time Frames
• Verification and award cycle
– Institution determines based on:
• Institution’s resources and procedures
• When verification process would be least
disruptive to office and least problematic
for students
Slide 4 - 67
© NASFAA 2006
Verification Time Frames
• Verification Deadlines
– Campus-based and FFEL/Direct Loans:
• Institutionally-established deadline
– Federal Pell Grant:
• Institutionally-established deadline
• Institution must have verification documents and
valid SAR/ISIR by earlier of 120 days after last day
of enrollment or deadline published annually by ED
in Federal Register
Slide 4 - 68
© NASFAA 2006
Verification Policies and Procedures
• Must:
– Be written
– Address school options where flexibility exists
– Be made clear to all students
– Be consistently applied
Slide 4 - 69
© NASFAA 2006
Verification Policies and Procedures
• Must include:
– Procedures for identifying and processing
selected applications
– Deadline for applicant to provide
documentation
– Consequences of failure to meet deadline
Slide 4 - 70
© NASFAA 2006
Verification Policies and Procedures
• Must include:
– Procedures applicant must follow to correct
application information
– Method for notifying applicant of verification
results and change in EFC and/or award
– Procedures for referring overpayments to ED
– Procedures for referring cases of suspected
fraud or other criminal misconduct to ED
Office of Inspector General
Slide 4 - 71
© NASFAA 2006
IRS Publications
IRS Web site at
http://www.irs.gov/formspubs/index.html
contains online copies of:
• IRS Publication 17
• IRS Publication 501
• IRS Publication 570
Slide 4 - 72
© NASFAA 2006
Verification Policies and Procedures
http://www.nasfaa.org/Annualpubs/PPManual/index.htm
Slide 4 - 73
© NASFAA 2006
Slide 4 - 74
© NASFAA 2006