Verification

All in the Family (Verification part 3)

moneyman

Archie Bunker was a bigot. He was a loud-mouthed, closed-minded, assertively prejudiced, blue collar bigot who dreamed of a time when people who thought like him would be in charge of the country. And Archie Bunker would have hated what is going on right now, but probably not for the reasons you’re thinking.

George Jefferson and Archie Bunker, best frenemies.

George Jefferson was Archie Bunker’s equal in many ways (some might even argue his superior). While no one could call them “friends”, per se, they certainly served as perfect foils for each other: two lovable, obstinate characters, each one proving that stereotypes never holds true when confronted with individual identity. “All in the Family” meets “Moving On Up”. And these shows left lasting memories. And they always showed prejudice and bigotry as the idiocy that it is; both characters always got what they deserved.

Do these sitcoms hold up? Are they worth watching nearly (gasp) 35 to 45 years later? A recreation in 2019 on TV would argue yes (as would Kerry Washington, Jimmy Fallon, Jamie Foxx, Wanda Sykes, Woody Harrelson, among others). These shows were way ahead of their time, or — sadder to say — our times haven’t moved way ahead in the last 40 years, and nothing is more relevant today than confronting the scourge of racism and the terrible conditions faced by BIPOC (Black, Indigenous and People of Color) in our country. We all should dream of a day when shows like “The Jeffersons” and “All in the Family” are viewed as relics of a historical past, barely able to be conceived of, and not simply dated reflections of our present.

With that in mind, “all in the family” carries a different connotation for me for financial aid, and I want to turn there next.

But first, a check in. How are you doing, dear reader? I personally have not been OK. The trauma of the last few weeks has me sad, angry, anxious, depressed, and frankly traumatized. And I am a white, cis-gendered, married man in my 50s who never has been the victim of systemic racism. I know that I am privileged and am here to witness, to listen, to learn, and to act to make change. This is not a political statement, this is a human statement. And I am here to partner with each of you to make change possible.

For me, that means I do all that I can to demystify the financial aid process so that each one of you can find your way into economic opportunity through higher education (and find the best and most cost-effective way to pay for it). We talk about a lot of subjects here, but the most important one is you. I am hoping you are OK. If not, I am here to listen. Contact me by commenting below or using the comment form.

Now to our financial aid subject: “All in the family”. Part of the verification process requires you to document who is in your family. And who will be in college. If you remember back to when you completed the FAFSA, you entered these numbers on the form. If you have been selected for verification, now is the time to provide your list.

Schools will ask you to complete a list of those in your family on the verification form. You will list each person, their relationship to you (the student), their age, and (if they are in college) where they are attending school. For a dependent student, this will mean the members of your parent(s)’ household. You usually will list the parent or parents you live with, if you have step-parents living with you, your siblings or step-siblings who live at the home with you, siblings or step-siblings at college or living elsewhere if your parent(s) provide more than 1/2 of their support, and any other person for whom your custodial parent provides more than 1/2 of their support if they live with you. This might include your grandparents, for example, if they live with you, or your cousin, or aunt, or uncle (if your parents provide more than 1/2 of their financial support each year).

A common mistake people make is assuming that someone has to be listed on your parents’ tax return as a dependent in order for them to be part of your family. This couldn’t be further from the truth; there does not have to be a one-to-one relationship between them. You do want to be prepared, though, to list them on your verification form because if the financial aid officer sees a difference between the number of people in your family on the FAFSA and the number on your verification form, they will want an explanation.

For an independent student, the household size always includes you and (if married) a spouse who is living with you. You can also include your children (even if they don’t live with you) as long as they receive more than 1/2 of their support from you (and your spouse). Finally, you can also claim people who live with you who are not your children if you provide more than 1/2 of their financial support (say an elderly parent or grandparent, or a cousin, or niece / nephew). Remember to list each of these household members on your verification form.

Now we turn to the number in college. If someone in your household plans to attend post-secondary school (college or university) at least half-time, even for one semester, they count as part of your family in college, with one big exception. For dependent students, you cannot count a parent in college. The government assumes (incorrectly in many cases), that parents in college have financial support for their education and are not paying that cost. (This, by the way, is a great example for when you might want to ask for a professional judgment; provide a copy of your parents’ tuition bill for their own education and ask the financial aid office to consider this as a cost when analyzing your EFC). The number in college also does not include students attending a service academy because most of their costs are paid for by the Federal government.

Otherwise anyone who counts as a member of your family could count as part of the number in college. The number in college is important since your PC (Parent Contribution) is divided by this number. For example, if a family has a 12,000 total PC, and two in college, each student would have a 6,000 PC (granting them an additional 6,000 in need each). If there were three in college, the PC for each would be 4,000 and all three students would likely be Pell Grant eligible.

On the verification form, you will be asked to list each college / university attended for each member of the family, and occasionally a school may ask you to have your sibling’s college fill out a form documenting that they really are attending there. Just another way to “trust but verify“.

In closing, while you want to think expansively and include everyone you can in your family list on the verification, you want to make sure you can document the folks you choose. In short, you want to make sure you keep it “all in the family”.

Here’s hoping and praying for change to come soon. In the words of James Taylor (in his song Shed a Little Light):

Shed a Little Light

There is a feeling like the clenching of the fist
There is a hunger in the center of the chest
There is a passage through the darkness and the mist
Though the body sleeps the heart will never restOh let us turn our thoughts today to Martin Luther King
And recognize that there are ties between us
All men and women, living on the earth
Ties of hope and love, sister and brotherhood
That we are bound together
With a desire to see the world become
A place in which our children can grow free and strong
We are bound together by the task that ties before us
And the road that lies ahead, we are bound and we are bound

Heads up, the T(r)ails of Verification (part 2)

moneyman

Let’s face it. Verification isn’t fun. When you are selected for verification, it can feel like a burden, and it may feel like those of us who are working in financial aid are trying to “get into your business”. Trust moneyman, it isn’t our choice. If you are selected for verification it might feel like the flip of a coin at random (heads or tails?), but once you have been selected there are certain principles we need to follow.

Flip a coin… See where it lands…

One of these principles is that while financial aid officers are not accountants, we do need to know some basic tax information. Federal Student Aid publishes an annual Application and Verification Guide for financial aid administrators (which is very technical, feel free to read it if you have nothing better to do) which perhaps says it best:

Financial aid administrators do not need to be tax experts, yet there are some issues that even a layperson with basic tax law information can evaluate. Because conflicting data often involve such information, FAAs must have a fundamental understanding of relevant tax issues that can considerably affect the need analysis. You are obligated to know (1) whether a person was required to file a tax return and (2) what the correct filing status for a person should be.

Page 132 of the 2020-21 AVG

So here we go. Let’s start with Heads… In this case, Heads of Household.

If moneyman sees one common mistake that holds up families from completing verification, it is both parents filing their tax returns as head of household even though they are married and living together. The rules for filing Head of Household (as published by the IRS) say:

“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 of 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 doesn’t have to live with you. See Special rule for parent, later, under Qualifying Person.”

If two parents file as married on the FAFSA as their marital status and then provide separate tax returns with one or both filing as Head of Household, this is usually a problem. To correct this, the family either needs to prove that they meet the qualifications above, or they need to file an Amended Tax Return. Otherwise we cannot complete verification.

Why would a family want to file as Head of Household? Usually tax rates are lower, so amending a return may mean that the family needs to pay more in taxes, but to qualify for aid it is necessary to resolve this discrepancy. There could be a possible reason for a parent to file Head of Household on a tax return (say for the 2018 tax return), but file the FAFSA as “married” for 2020-21, but the situation is unlikely. Lots of examples (and much more detail) can be found at this link.

More T(r)ials (or trials) of verification:

The quote above also mentions that financial aid administrators should kow if a parent or student should have filed a tax return (if they earned enough income to be required to do so).

How does this work? The same IRS publication lists the minimum income thresholds which require a taxpayer to file a Federal income tax return.

According to the chart, if a regularly employed (not self-employed) individual earns above 12,000 (and they are single and under 65), they must file a tax return. Of course, a taxpayer might choose to file anyway so that they can get their tax refund, but the above chart represents the numbers of income at which you must file a return. Note (by the way) that spouses who file separately have a very low income threshold – only $5.

Self-employed individuals have even a lower threshold. If you are self-employed and your net earnings are greater than $400, you need to complete a tax return.

Sometimes we hear from students whose parents do not file a tax return because they don’t believe they have to. In these cases, we are required to collect copies of W-2s, and “non-filer” from the IRS to show that the taxpayer did not file a tax return. But if the income is above the minimum income threshold, we must have a tax return.

Here are the trials of verification. What stories have you experienced? Where do you get hung up in verification?

NCAN (the National College Attainment Network) in 2017 published a study of the leaky FAFSA pipeline. According to their study, 22% of applications selected for verification drop out due to the difficulty of the process.

Don’t be part of the melt! Ask your verification question here and moneyman will help!! Don’t leave your financial aid unclaimed! Be “cool” (don’t be part of the summer melt) and don’t “flip”!

Trust, but verification

moneyman3 Comments

“Trust, but verify“. Or in Russian, “Doveryáy, no proveryáy.” It rhymes in Russian. Cute, huh? But where does it come from?

This expression, popularized by Ronald Reagan in the context of nuclear disarmament talks with the Russians, has become a reference to being willing to believe what someone (with qualifications – namely checking to make sure it is the truth).

You could say that the same principle exists within Financial Aid as well. Federal Student Aid trusts, but verifies. They call this process “verification.”

What is moneyman talking about? When you complete the FAFSA, you enter information used to calculate your eligibility for financial aid (your EFC) such as your income, your federal taxes, the number of members of your family, and the number in college (among other items). Remember, your income is based on the last tax year available before the application year opens (so the 2020-21 application year opens on October 1, 2019, so the last tax year available at that time is 2018). Your personal information like marital status (of you and your parents), your assets and your family size on the other hand are as of the date you fill out the FAFSA.

The FAFSA takes the information provided by you and using the formula moneyman has described on this blog, comes up with your expected family contribution which determines if you qualify for a Pell grant and is used in the awarding of other need-based financial aid. But how do we know that the information you provided on the FAFSA is accurate?

Welcome to “doveryáy, no proveryáy“. While the FAFSA trusts you to enter the information, a number of applications (generally not to exceed 30% of those who apply) are selected by the government to go through a process called verification. It is a way of proving what you answered on the FAFSA by providing additional information.

When you are completing the FAFSA you have the opportunity to link your tax information directly to the FAFSA using the IRS Data Retrieval Tool (or DRT). The DRT allows Federal taxpayers to import data directly from the IRS system and answer the associated FAFSA questions. This makes the process of completing the application much easier and faster.

As an additional benefit, if you use the IRS DRT you do not have to verify your income information from another source since you have already done so by transferring information over. If you did not link your application to the IRS DRT, and you are selected for verification, you will need to provide a copy of either your Federal Tax Return transcript (available from irs.gov) or a signed copy of your paper Federal Tax Return.

How do you verify information other than taxes and income? If you re selected, colleges and universities will provide you with a verification form which you must complete to prove the information you filed on the FAFSA. If there are differences between the two sources of information, the school may contact you and ask you to explain the difference. These forms often additionally ask for untaxed income since much of that information cannot be determined from a copy of your tax return.

There is one additional type of verification for which you may be selected, and that is when you are asked to provide your identity by providing documents including proof of citizenship and high school graduation, as well as indicating that you understand that the financial aid you are receiving is for an educational purpose. This is done through another form also provided by your financial aid office.

Some schools (especially those who have a lot of their own grant or scholarship funds to distribute) may select all of their students to go through verification. This is usually because they want to be sure that the amount of funds they provide to students (which is often much more than that provided by the Federal government) is given to those who need the funding. Remember, “trust but verify.”

Verification tends to be a stumbling block for a number of student financial aid applicants. We will explore why in some coming posts, but keep in mind this generally is a requirement of Federal Student Aid and it is just a way to confirm the information provided on your financial aid applications.