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That’s Classified!
By: Tiffany Motyka, Ed.D., FAS Senior Consultant
In the last few years, many legislative agendas have made updates to the Higher Education Act of 1965 (HEA) to improve the federal financial aid process.
These Higher Education Act updates were the result of:
- Fostering Undergraduate Talent by Unlocking Resources for Education Act (FUTURE Act) of December 2019
- FAFSA Simplification Act in December 2020
- The Consolidated Appropriations Act of 2021
- The Consolidated Appropriations Act of 2022
- FAFSA Simplification Act Technical Corrections Act (FSATCA) of March 2022
These legislative agenda items have paved the way for a better FAFSA user experience and more protection to family income data. To ensure the student application experience is safe and seamless, the federal tax information (FTI) supplied by the Internal Revenue Service (IRS) to the FAFSA was designated as Controlled Unclassified Information/Specified Tax (CUI//SP-TAX). This means all information with this designation falls under the Internal Revenue Code (IRC) confidentiality protections.
Due to this protective designation of the Federal Tax Information data an applicant would have to provide active, annual consent for the information to be used for awarding purposes. According to FSA Electronic Announcement General-23-24, “To provide approval and consent, FAFSA contributors (including parent(s) or spouse) must agree to:
- the Department’s use and disclosure of their information (e.g., name and Social Security number) to match with the IRS;
- the disclosure of their FTI by the IRS to the Department;
- the use of their FTI by a Department official to determine an applicant’s eligibility for federal student aid and the amount for which they are eligible; and
- the redisclosure of FTI by the Department to an eligible institution, state higher education agency, or a designated scholarship organization (e.g., institutional or state financial aid).”
The submitted Federal Tax Information (FTI) is held in the FTI Module (FTIM) which was created to ensure broader security for the data received. This means each eligible institution of higher education would need access to a second Student Aid Internet Gateway (SAIG) Mailbox. This mailbox is the tool that allows colleges to securely exchange batch data with FSA Application Systems, which includes FAFSA data and FTI. According to Federal Student Aid, “The new SAIG agreements will require compliance with the protection of the FTI provided to our partners by the Department, including return information obtained in support of the administration of the federal student aid programs, and an acknowledgement of the criminal and civil penalties for the unauthorized inspection or disclosure of FTI.”
For more information on FTI and how this applies to the 2024-25 Award Year financial aid processes, please refer to:
- Electronic Announcement GENERAL-23-34, APP-22-26, and GENERAL-23-09
- IRS Publication 1075 – Tax Information Security Guidelines
- Guidance on the Use of Financial Aid Information for Program Evaluation and Research
Are you facing challenges at your institution?
Contact FAS today for a quick consultation on how we can help you discover solutions tailored to your unique needs. Reach out at 770.988.9447 or via email at info@FinancialAidServices.org.We look forward to connecting with institutions ready to overcome challenges and elevate their financial aid and student business services.
About FAS
Financial Aid Services (FAS) has served higher education for over 30 years. Located in Atlanta, Georgia, FAS provides consulting, staffing, processing, and assessment services to assist institutions with improving operational efficiency, student satisfaction, and regulatory compliance in financial aid and student business services. FAS’ accomplished team averages 28 years of experience and has a combined 1,600 years of higher education experience. With clients in 49 states, FAS has successfully served over 1,800 institutions nationwide. The Company’s extensive experience combined with industry-leading expertise and focus on superior client outcomes, enables FAS to deliver lasting results to its clients and the students they serve. Visit www.FinancialAidServices.org for more information.
FISAP Corrections Due by December 15, 2023
By: Dawn Patak, Ed.D., FAS Senior Consultant
The deadline for corrections to the FISAP is fast approaching. Changes, corrections, or edits to the Fiscal Operations Report for 2022–23 and the Application to Participate for 2024–25 (FISAP) must be submitted to the Department of Education no later than 11:59 p.m. Eastern time (ET) on Friday, Dec. 15, 2023.
Important Points to Remember:
- Click “Submit”: Saving data is not the same as submitting the FISAP. Ensure all data is entered accurately and submitted by the deadline. Corrections can be made until 11:59 p.m. Eastern Time on December 15, 2023. Save and submit corrections as needed.
- Timely updates of FAA contact information are important in order for the correct individuals to receive notifications. Changes can be made while submitting the FISAP or via the COD website.
- Verify reported expenditures for the 2022–23 award year to prevent negative balances. Consistency with G5 drawdown information is crucial.
- Schools are not required to resend signature pages when changes/corrections are made to a previously submitted FISAP.
- Corrections for validation edit errors must be submitted by the December 15, 2023, deadline.
- Changes after December 15, 2023, must go through the “Change Request” process.
Failure to submit corrections may result in funding reductions. For more information and to get more timely updates: https://fsapartners.ed.gov/knowledge-center/library/fisap-form-and-instructions/2023-06-09/final-2024-25-fisap-form-instructions-and-desk-reference.
What YOU need to know about FAFSA Simplification: A Guide for Financial Aid Administrators and Leaders
By Sharon Hassan, FAS Senior Consultant
Upcoming changes represent a significant shift in financial aid, with the good-intentioned hope of streamlining the application process and making aid more accessible to students. The modifications are poised to reshape students’ eligibility for financial aid and the extent of these changes will depend on varying factors, including the student’s family financial situation, choice of institution, and the number of students concurrently enrolled in college. Let’s break down the key changes you need to know and care about as colleges and university administrators anticipate the rollout.
- Forget everything you thought you knew about the FAFSA process. New FAFSA. New Calculation. New Opportunities.
- 2024-2025 FAFSA is delayed until December 2023. Communications to incoming and returning students should emphasize the importance of completing their FAFSA by October 1st.
- Automatic Zero EFC for Some Families: Students from families with an adjusted gross income (AGI) at or below a certain threshold automatically receive an EFC of zero, making them eligible for maximum federal aid.
- Elimination of the Expected Family Contribution (EFC): The FAFSA Simplification Act replaces the Expected Family Contribution (EFC) with the Student Aid Index (SAI). The SAI is used to determine a student’s eligibility for federal financial aid programs.
- Elimination of Verification for Some Applicants: The act reduces the number of students selected for the verification process, which requires them to provide additional documentation to verify their FAFSA information.
- Simplified FAFSA Form: The FAFSA form has been simplified, making it shorter and more user-friendly. It reduces the number of questions and eliminates some redundant or complex inquiries.
- Simplified Income and Asset Reporting: There are fewer questions about assets and untaxed income on the FAFSA form, making it easier for students and parents to complete.
- Increased Pell Grant Eligibility: The FAFSA Simplification Act increases the maximum Pell Grant award and expands eligibility to more students, including those with incarcerated parents, and will link eligibility to family size and the federal poverty level.
- Revised Dependency Overrides: The FAFSA Simplification Act provides more flexibility for financial aid administrators to grant dependency overrides for students with extenuating circumstances, such as abandonment by parents or abusive family situations.
As we prepare for the FAFSA changes, administrators must stay informed and adapt to the new rules. By understanding these key changes and utilizing available resources, you can effectively assist students in navigating the FAFSA process and accessing the financial aid they need for their education.
Are you fully staffed for the federal challenges coming to your institution? Prepare for the upcoming FAFSA changes with FAS. Contact us today!
Getting Your Student Loan Discharged
By: Gary Byers, FAS Sr. Consultant
Borrower defense to repayment is a legal ground for discharging federal Direct Loans. According to the Department of Education , students and parents may have a borrower defense to repayment if your institution engaged in “certain misconduct related to the making of a federal loan or the educational services it provided which caused harm warranting a final discharge of your applicable federal Direct loans. If the U.S. Department of Education (ED) approves your application for borrower defense, it will discharge any remaining balance on the federal student loans taken out to attend the school and may also refund loan payments you already made.”
Below are six instances for which students may qualify for borrower defense:
- Substantial Misrepresentation When an educational institution engages in substantial misrepresentation, it effectively deceives or misguides individuals regarding critical aspects such as educational offerings, financial obligations, or the future employability of graduates. This misleading information plays a pivotal role in the decision-making process, whether it involves enrolling, staying enrolled, or obtaining loans.
- Substantial Omission of Fact A significant omission occurs when an educational institution withholds or conceals crucial information that any reasonable person would find essential when deciding on enrollment, continued enrollment, or loan acquisition.
- Breach of Contract A breach of contract takes place when a mutual agreement exists between a student and their school, and the school fails to fulfill its promises as outlined in that agreement. This agreement typically arises in connection with a student’s decision to attend or continue their education, secure loans, or disburse funds related to a loan.
- Aggressive and Deceptive Recruitment
Aggressive and deceptive recruitment tactics come into play when a school employs various manipulative practices, including:
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- Coercing or pressuring individuals into making swift enrollment or loan-related decisions.
- Exploiting the limited knowledge or experience of prospective students regarding postsecondary institutions, programs, or financial aid.
- Dissuading individuals from seeking advice from others before making enrollment or loan-related choices.
- Obtaining contact information through deceptive means, such as misleading websites false employment claims, or fictitious institution rankings.
- Employing threatening or abusive language towards individuals.
- Persistently contacting individuals for enrollment purposes despite their explicit request to cease such communication.
- Judgment A judgment against an educational institution signifies that a court has ruled that the institution has violated the law. This judgment typically results from the institution’s actions or omissions related to loan origination or the provision of educational services tied to loans. Settlements, however, do not qualify as judgments.
- Prior Secretarial Action Approval for a borrower defense discharge can occur when the U.S. Department of Education revokes a school’s provisional program participation agreement or denies recertification due to conduct that aligns with one of the borrower defenses outlined in points 1–4 above. This provides an avenue for relief in cases where a school’s behavior warrants such action.
Based on the 2023 Borrower Defense Regulation, your application must be “materially complete” to be considered. If your application is not materially complete, your application will be denied. Just because your application is considered materially complete does not necessarily mean it will be approved.
To be materially complete, your application must contain the following information:
- A description of one or more acts or omissions by your school
- ED can only approve your application if—after reviewing your claims, your evidence, and your school’s claims and evidence—we can determine that your claims are more likely than not to be true.
- Explain what your school did or failed to do that is covered by the kinds of misconduct that qualify for borrower defense discharge discussed above.
- The school or school representative who committed the act or omission
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- Include what school or representative of the school committed the misconduct.
- What exactly did the school say or represent to, or conceal or suppress from you?
- Who or what provided you with this information or concealed this information from you (include the person’s name and title, if known)?
- When and where did this conduct occur (the approximate date or time of year, and whether it was during a campus tour or interview, in a meeting, or over the phone)?
- How was the information communicated to you (for example via email, in person, through an advertisement)?
- How was the information deceptive or misleading, and how did you determine that the information was deceptive or misleading?
- Why was the information provided to you or concealed from you important to you when you enrolled—in what way did it influence your decision?
- How did this conduct harm you?
- Include what school or representative of the school committed the misconduct.
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- Approximately when the act or omission occurred Include when you experienced the misconduct that you allege.
- How did the act or omission impact your decision to attend the school, to continue attending the school, or to take out the loan for which you are asserting a defense to repayment How did the alleged misconduct affect your decision to enroll or to continue your enrollment at the school.
- A description of the detriment you suffered because of the school’s act or omission Explain what the result of the school’s misconduct was, specifically what harm you experienced because of the misconduct.
For more information and to obtain a form, go to: https://studentaid.gov/manage-loans/forgiveness-cancellation/borrower-defense
Resumption of Student Loan Repayment
By: Sean Hudson, Sr. Consultant FAS
In March 2020, the Federal Government suspended Federal Student Loan payments to help borrowers struggling with the impact of the COVID-19 Pandemic. This provided relief to over forty million borrowers experiencing a reduction in income or even job loss due to the Pandemic. It also helped families overcome the sudden increase in the cost of basic needs, such as food, fuel, and housing. Now that the Pandemic has waned, borrowers must prepare for Federal Student Loan repayments to begin again. Are borrowers prepared? Colleagues at Default Prevention Companies and Loan Servicers all state that borrowers are confused about what resumption means as repayment looms.
When Does Repayment Begin?
The first question for borrowers is when does repayment really begin? Borrowers are unsure if it is August, September, or October. The current administration previously announced the student loan payment pause—which has been extended eight times—would finally end 60 days (about 2 months) after the Supreme Court ruled that the administration’s student loan forgiveness program would not be allowed (June 30, 2023). To add to the confusion the administration is offering a 12-month grace period on reporting missed student loan payments to the three credit agencies. Some students see this as another deferment, which it is not. Then, will they need to reapply for the payment plan they were on prior to the pandemic? If they had auto-debt set-up, will they need to re-elect that option? The Federal Government also changed some of the loan services during the pandemic, meaning some borrowers are now working with different companies.
One of the other major concerns is the re-incorporation of student loan payments into borrower’s monthly budgets. Will borrowers be able to afford their payments when they have become accustomed to not having this debit each month? Borrowers changed their lifestyles and spending habits. How many borrowers will struggle with payments? How many will go into default? How will this impact the US economy when borrowers have less money to spend on other things?
Understanding the Repayment Plan
Even for Financial Aid Administrators, the changes will be disorienting. What income-based repayment options do students have? Prior to the pandemic, we had the Income-Contingent Repayment Plan (ICR), Income-based Repayment Plan (IBR), Pay As You Earn (PAYE) Repayment Plan, and REPAYE. Now the Administration has introduced the Saving on Valuable Education (SAVE) Plan. Which one best fits borrowers/which ones do they qualify for? The Administration will replace REPAYE with the new SAVE Plan, automatically enrolling REPAYE borrowers. SAVE offers the lowest repayment amount and is accessible to all borrowers, eliminating the need for loan consolidation to join specific IBR Plans.
What will be the impact?
How does the loan payment pause impact borrowers previously on income-based repayment plans that had loans forgiven after a set number of payments? Do borrowers need to pay for an extra three years? The current Administration confirms that the COVID pause will be included in the repayment period, so no extra three years of payments are required.
To help borrowers, default management companies and the Federal Loan Servicers started contacting students months ago informing them of the restart of payments. I was told that extra staff will be brought on to help with the influx of questions that borrowers will have as the restart nears. Borrowers are being warned that it may take multiple attempts to speak with a representative at their service, so they should start early. Do not wait until October to start looking at repayment options. Borrowers are encouraged to log into the StudentAid.gov site or their Servicer’s website to utilize online tools as much as possible.
Guarding against fraud
There is a concern that borrowers will be defrauded by debt relief companies and criminals posing as servicers. I even received a letter from a fraud company offering to help me with the repayment of my loans. The letter had a seal in the corner that made it look like a legitimate Federal document. I was told that these frauds have steadily increased over the summer as we near the payment restart. Borrowers need to know who their Federal Servicers are and only discuss their information with people they can trust. I have been reaching out to my friends and family warning them of the scams.
Simplifying Loan Repayment
Finally, I wish the government would have used this opportunity to simplify loan repayment and follow other countries in the world like Australia that have an easy-to-understand income-based plan as the standard repayment plan. Since IBR seems to be the future, let us move in that direction and avoid the multiple repayment plans that just cause more confusion. I hope the early and ongoing efforts of the Federal Government, Federal Loan Servicers, Loan Default Management Companies, organizations such as NASFAA (National Association of Student Financial Aid Administrators), and colleges/universities make for a positive transition back to repayment for the millions of borrowers!
Guidance on 1098-T and Pandemic Relief (HEERF) Funds
By: Christy Blakney, Student Business Services (SBS) Consultant
First, The Good News
Collecting and reporting correct information on IRS Form 1098-T seems to continually cause challenges. The good news is that there are no substantive changes to reporting for the 2022 tax year and past year challenges for properly reporting pandemic relief (HEERF) funds have been firmly answered. The Internal Revenue Service previously clarified that the emergency relief funds paid directly to students, or for which the student directed to be applied to their account balance, should be treated the same as any personal payment.
Treatment of Various Fund Types
Note that the IRS guidance only applies to funds under Section 3504 (additional Federal Supplemental Educational Opportunity Grant funds), Section 18004 (HEERF), Section 18008 (Howard University, Gallaudet University), Section 314 of the COVID Relief Act, and Section 2003 of the American Rescue Plan (ARP). It may not apply to funds that came through the states under the Governor’s Emergency Education Relief (GEER) Fund under Section 18002(c)(2) of the CARES Act. Institutions that received those funds from their states could use them to fund institutional grants to students. Absent guidance to the contrary, those grants to students should likely be reported on the 1098-T in the same manner as other institutional aid, especially for state tax reporting purposes. Additionally, funds received by the institution and used to “write off” delinquent student account balances may need to be reported to the student on a 1099-C as a cancellation of debt. Be sure to consult your tax office for applicability.
Inform Your Students
While school officials want to be very clear that we will never provide tax advice, you should provide information that lets them know how each amount reported on the 1098-T was calculated. The IRS allows institutions a wide range of flexibility in reporting to allow for differences in policy and timing but that is exactly what makes a 1098-T confusing to some taxpayers. Many taxpayers expect the form to report “plug and play” amounts similar to a W-2 or 1099 but unfortunately, that is simply not true. Providing a detailed supplement of the calculations is not always feasible so it is important to clearly state your school’s policies with regard to items such as treatment of deposits, exemptions, waivers, contracts, and also the school’s choice of reporting spring charges (Box 7 option). These helpful tips can be reported on your own 1098-T FAQ site or as a communication that accompanies your 1098-T form.
At a minimum, sharing the link to the IRS FAQs may help reduce questions directed to your office and will support your calculation method for reporting amounts on the 1098-T.
Remember to Solicit Students’ TINs
And, finally, make sure you continue to follow IRS guidance to send a written solicitation (e-mail and other electronic communications are considered “written”) to any student who has not provided their taxpayer identification number (TIN), e.g., Social Security number. Best practices suggest sending this solicitation at least twice before sending your file to the IRS. Rules require schools to file 1098-Ts even if the student fails to provide his/her TIN. Proof of an annual request protects the institution from being assessed penalties for filing a 1098-T without a TIN. Also, consider working with your Registrar’s Office to coordinate this information-gathering function. Also, be sure you “check the box” on the IRS copy of your 1098-T file indicating you have complied with this solicitation requirement during 2022.
If a student fails to provide you with their TIN prior to the institution submitting their 1098-T file to the IRS, the IRS indicates that you should not issue a corrected form simply to add or correct personal information. Corrected forms are only necessary if reported amounts were calculated incorrectly and are being changed.
Still Have Questions
Student Business Services can help your institution review its existing business practices related to 1098-T and other reporting requirements. Together, we can develop a comprehensive managerial reporting plan that is easy to execute and ensures you will meet regulatory deadlines. Contact us today for a no-obligation consultation.
A FAS-Track to New Academic Year Setup
By: Lisa Seals, Senior Consultant
Ready for the New Academic Year?
Getting ready for a new academic year can be a time of reflection or pulling your hair out. It’s a time to determine what has worked well, what could be improved, and what must totally be re-evaluated or reinvented.
Where to Start?
All Student Services, or Enrollment Management, departments are crucial to the new academic year setup. Using the right information from each area in the setup process not only streamlines operations but also maintains compliance measures and ultimately gives students a better experience. Each department has specific requests and requirements of the Financial Aid Office. Mapping out everything that is needed, why it is needed, and the timelines to be met is a great starting point.
What’s Needed and From Whom?
Gathering data, from certain departments, helps to set reasonable timelines to get these steps set up in your ERP systems and to produce actual or estimated offers to all students, but specifically the first-time, first-year incoming students.
Admissions
- Admissions Requirements
- Admissions application acceptance
- Admissions approval timelines/codes
- Merit scholarship model and award amounts
- Need based grant (scholarship) model for incoming students
- When are students given school email and portal access?
Registrar
- Academic calendar (Start/End dates)
- Official break of 5 or more days
- Term and Module census dates
- Is the calendar approved and are all dates in the registrar module?
Business Office
- Tuition and Fee rates
- Billing statement dates
- Will estimated aid be listed on the bill?
Housing
- Will actual housing costs be available or will estimates be used?
Information Technology
- When will the new academic year release of the software be installed?
- Will there be an opportunity for testing the new release in a development (i.e., sandbox) environment?
What would you ask for?
Reasonable Timelines?
What is a reasonable timeline? Meeting with the various student services departments will be helpful during this process. Generally, the Admissions Office and Senior Leadership have a target date for first-year, incoming students to receive offers from the institution. With that in mind, make sure that you have the new academic calendar as well as updated tuition and fee rates, and housing costs. Also, confirm the IT Department’s timeframe for importing the new award year’s data into your ERP system.
We know that we can use estimated data for this information. Most institutions want to now use actual tuition and fee rates while establishing a cost of attendance. The goal is to have finalized information to complete the setup processes, and not have to redo anything. What do you use?
What’s Next?
Let’s set up the system! We’ll get into that soon!
CFPB Weighs In on Withholding Academic Transcripts
Withholding academic transcripts for outstanding student account or loan balances has been a primary debt collection tool for many years. Though recently under fire as harming many students (see our March 2022 Tip), this issue is drawing attention both from state regulators and legislators and, now, from the federal Consumer Financial Protection Bureau (CFPB). While 16 states have enacted laws or are proposing legislation to halt or reduce the campus practice, which is seen as inhibiting students’ academic careers or employment opportunities, the federal agency’s recent Supervisory Highlights report cites the “blanket” usage of the transcript sanction as unlawful.
The recent report came on the heels of an announcement earlier this year that the agency would examine operations of colleges that act as lenders. In this case, the CFPB has interpreted student accounts as a form of lending or credit offered to students by schools. While definitions may be subtle or subject to various interpretations, the CFPB report links transcript withholding to provisions under the Dodd-Frank Act, which prohibits unfair, deceptive or abusive acts and practices (UDAAP) because of potential financial injury to consumers.
Though the CFPB cannot enact laws, it has rulemaking and enforcement authority to deal with any consumer financial product or service. The agency also partners with other federal departments on many financial initiatives, and could work with the U.S. Department of Education to potentially promulgate new rules or guidelines.
Senior leadership at colleges and universities should have this issue on their radar from both a service delivery and compliance perspective. Presidents, chief financial officers, registrars and enrollment management leaders need to understand and weigh their existing policies and procedures on withholding academic transcripts and other services. A joint statement signed this month by 22 higher education associations urges college leaders to “have a clear understanding of institutional policies regarding transcript and enrollment holds, and be prepared to explain how they determined these policies to be effective and fair.”
In states where no restrictions currently exist, government relations staff should be monitoring legislative activities since constituent complaints have often led to proposed laws. In other cases, complaints to state attorneys general may trigger new rules or legislation.
Institutions also should engage their general counsel or an outside attorney to help interpret these laws and requirements and adjust their business practices and policies to become and/or remain in compliance. Bringing institutional resources together to review and update policies and procedures can have a positive outcome for students and finances with minimal impact on institutional resources. The National Association of College and University Business Officers (NACUBO) and the American Association of Collegiate Registrars and Admissions Officers (AACRAO) provided guidelines for schools to consider in an April 2022 statement.
Welcome to FAS’ Consulting Corner
Welcome to FAS’ Consulting Corner! In conjunction with launching our new website, we want to use this space to share relevant information with financial aid and student business services practitioners. It’s a safe and reliable place to get the latest news on what’s happening in financial aid and student finance all around the country. We’ll tackle issues from maintaining rigorous compliance standards and leveraging technology, to giving your students the best possible experience. Our consultants are thought leaders with a combined 1,600 years of experience in their respective fields. Higher Education is an industry that’s always in motion. There is always something new to talk about, so check back often. We’re adding fresh content all the time. Whether you’re considering services, need guidance or resources, or just want to connect with FAS, we’ve got something for you.