Jobless Benefits’ Unintended Fallout: Reduced College Financial Aid

In an “alert” updated on Feb. 24, the I.R.S. warns FAFSA filers not to use the data tool if they filed their 2020 tax return and didn’t exclude any jobless benefits from their income.

“The concern is: Are colleges looking at inflated income?” said Brendan Williams, senior director of consulting at uAspire, a nonprofit organization that seeks to reduce financial barriers to college.

It’s unclear how many students may be affected. Millions of people received jobless benefits in 2020, but data isn’t readily available to calculate how many of them are also filing a FAFSA, said Kim Cook, chief executive of the National College Attainment Network, a nonprofit group that works on behalf of low-income and minority students.

The Federal Student Aid office has instructed college financial aid administrators to fix the problem if they become aware of it. But administrators may not be able to easily identify affected applications because they don’t typically see a breakdown of a family’s income, said Karen McCarthy, vice president of public policy and federal relations at the National Association of Student Financial Aid Administrators.

Students may be unaware of the issue and won’t know to ask about it, Mr. Chany said. “No one is tapping them on the shoulder,” he added.

What should families do?

If they had unemployment income in 2020 and filed their tax return before March 11 last year, they should contact their college financial aid office to discuss their concerns and have the jobless benefits removed from income on the FAFSA, said Mark Kantrowitz, a financial aid expert. Documents like Form 1099-G, which the government uses to report unemployment income, or unemployment verification letters can help show that students or their family received jobless benefits.

Students should also know that the federal government has encouraged college financial aid offices to use their discretion — “professional judgment” in financial aid lingo — to take into account special circumstances, including the loss of a job in the pandemic, to maximize a student’s financial aid.

Article source: https://www.nytimes.com/2022/04/01/your-money/college-financial-aid-unemployment-benefits.html