Publication Date: August 3, 2016
Subject: 2017-2018 Early FAFSA - Identification and Resolution of Conflicting Information
Summary: This letter provides guidance on the identification and resolution of possible conflicting information resulting from the use of 2015 income and tax information for both the 2016-2017 and 2017-2018 FAFSAs.
Among other changes being implemented beginning with the 2017-2018 Free Application for Federal Student Aid (FAFSA®) is that the FAFSA will collect income information from one year earlier than had been collected previously -- this is sometimes called “prior-prior year” information. Thus, as we transition to the new methodology, both the 2016-2017 FAFSA and the 2017-2018 FAFSA will collect and use 2015 income and tax information. This use of 2015 information applies to both student/spouse income and tax information and, for dependent students, parental income and tax information.
Although the 2016-2017 and 2017-2018 FAFSAs should be completed using the same 2015 income and tax information, there is the possibility that there might be conflicting information between the two FAFSAs. The regulations at 34 CFR 668.16(f) address the issue of conflicting information and, of course, Federal student aid must be provided based on correct information.In an effort to limit burden on institutions and applicants, we have carefully considered how to minimize the number of instances in which institutional resolution of possible conflicting information would be required.
Use of the IRS Data Retrieval Tool
As we stated in Early FAFSA Electronic Announcement #2, the most effective way to prevent conflicting information from occurring is for financial aid administrators to urge FAFSA applicants and their parents to use the IRS Data Retrieval Tool (IRS DRT) for both FAFSA years, including, in the case of a 2016-2017 FAFSA, making corrections using the FAFSA on the Web (FOTW) process to access the IRS DRT.
Warning Edits to 2017-2018 FAFSA Applicants
For this one-year transition during which the same 2015 income and tax information should be reported on two FAFSAs, FOTW will have new edits that warn FAFSA applicants if one or more of the income or tax amounts they have input into their 2017-2018 FAFSA differs from the amount(s) that was reported on their 2016-2017 FAFSA. These new edits will pop-up while the applicant is completing their 2017-2018 FAFSA before it is submitted. These new edits will not be triggered (1) if the 2016-2017 FAFSA transaction was based on estimated income/taxes, (2) if there has been a change in the student’s dependency status between the two years, or (3) if there has been a change in either the student’s or parents’ marital status between the two years.
We hope that a FAFSA applicant who receives this warning will, if necessary, correct the 2017-2018 FAFSA before submitting it, thus reducing the likelihood of conflicting information between the two years. If the applicant does not correct the 2017-2018 information, edit and comment codes will be included on the student’s Student Aid Report (SAR) and Institutional Student Information Record (ISIR). While institutions may choose to work with a student for whom these edits apply, there is no requirement that they do so, except as discussed in the Institutionally Required Resolution section of this letter.
Conflicting Information Identification and Resolution
To reduce burden both on FAFSA applicants and on institutions, we have developed a process where our Central Processing System (CPS) will, after the applicant has submitted a 2017-2018 FAFSA, perform a comparison between the applicant’s last 2016-2017 ISIR transaction, if any, and the 2017-2018 ISIR. This review will determine if there is conflicting income and/or tax information between the two ISIRs and, more importantly, if any identified conflicting information would, once resolved, produce a significant change in the student’s expected family contribution (EFC). If so, the CPS will flag the applicant’s 2017-2018 ISIR as requiring institutional resolution of the conflicting information.
An applicant’s 2017-2018 ISIR will not be flagged for institutional resolution, even if there is a significant change in the EFC, if—
The student is not expected to be Pell Grant eligible based on the 2017-2018 ISIR;
There was a change in the student’s dependency status between the two FAFSA years;
There was a change in the student’s or parents’ marital status between the two FAFSA years; or
Professional judgment was performed in either year. We remind institutions that upon making a professional judgment determination, it is very important that the CPS “Professional Judgement Flag” be set to ‘1.’
Institutionally Required Resolution
If the CPS process described above results in the possibility of a significant change in a student’s EFC, and resultant Pell Grant eligibility, the student’s 2017-2018 SAR and ISIR will be flagged with a ‘C’ code and a special new Comment Code 399 informing the institution that it must resolve the possible conflicting information.
If the new Comment Code 399 is not included on the student’s 2017-2018 SAR and ISIR, the institution is not required to determine if there are any differences in income or tax information between the two ISIRs. However, institutions must comply with the requirements for the resolution of any other conflicting information (e.g., the student’s citizenship status or high school completion status) as provided in the regulations at 34 CFR 668.16(f), and as discussed in Chapter 5 of the Application and Verification Guide (AVG), and in Chapter 1 of Volume 1 of the Federal Student Aid Handbook. As noted, the new Comment Code 399 will only be included on a student’s 2017-2018 SAR and ISIR and not on the student’s 2016-2017 SAR and ISIR.
Applicability of ISIRs
The following table describes the conditions that require an institution to resolve the conflicting information when the institution receives a 2017-2018 ISIR with the special conflicting information Comment Code of 399. Note that for purposes of this table, receiving an ISIR means that the CPS provided an ISIR to the institution’s designated Student Aid Internet Gateway (SAIG) mailbox.
NOTE: Under all of the conditions below the institution received a 2017-2018 ISIR with Conflicting Information Comment Code 399.
Institution never received a 2016-2017 ISIR.
This can happen if, for example, the student did not include the institution on the 2016-2017 FAFSA.
The institution has no conflicting information to resolve.
Institution received a 2016-2017 ISIR but the institution did not and will not disburse Title IV aid based on either of the ISIRs.
Institution must ensure that the conflicting information is resolved before it disburses any Title IV aid for either year.
Regardless of the resolution, no incorrect Title IV aid was or will be disbursed for either year.
Institution received a 2016-2017 ISIR and disbursed, or may disburse, aid based on that 2016-2017 ISIR.
Institution must resolve the conflicting information, even if the institution will not be awarding Title IV aid based on the 2017-2018 ISIR because, for example, the student will not attend in 2017-2018.
Resolution might result in a change to the student’s 2016-2017 Title IV eligibility.
Institution received a 2016-2017 ISIR but did not review or process that ISIR.
Institution must resolve the conflicting information even if, for example, the student never attended during 2016-2017.
Resolution might result in a change to the student’s 2017-2018 Title IV eligibility.
Resolving Possible Conflicting Information and Submitting Corrections
When resolving possible conflicting information between a 2016-2017 and 2017-2018 ISIR, based on the special new Comment Code of 399 included on a student’s ISIR, the institution must comply with the following:
The institution must compare all of the 2015 income and tax related FAFSA/ISIR items from both years’ ISIRs to determine which income or tax item or items are in conflict. (See Early FAFSA Electronic Announcement #4 for a listing of those FAFSA/ISIR items).
If, for either year, the institution had verified the conflicting information item(s), or the student or parent had transferred information into the FAFSA using the IRS DRT and had not changed any of the transferred information (ISIR Fields #177- student and #178 parent with a value of ‘02’), the institution can assume that the verified or IRS DRT transferred values are correct and must, therefore, submit corrections to the other ISIRs year’s values.
Exception: If the institution is aware that, subsequent to verification or subsequent to the use of the IRS DRT, an amended 2015 tax return was filed with the IRS, the institution must ensure that both years’ EFCs were calculated using amounts from the amended tax return, regardless of whether verification was completed or the IRS DRT was used.
Conflicts must be resolved if the information, for either award year, was not verified, was not transferred using the IRS DRT or was transferred using the IRS DRT and then changed (ISIR Fields #177 student and #178 parent with a value of other than ‘02’), or if the institution is aware that an amended 2015 tax return was filed with the IRS.
In some instances the institution likely will need to contact the student to determine why information that was reported on one FAFSA differs from what was supposed to be the same (tax/calendar year 2015 information) on the other FAFSA. It is likely that corrections will need to be submitted for at least one of the years.
Until the conflicting information issue has been resolved, the institution may not disburse any 2016-2017 or 2017-2018 Title IV aid.
In cases in which the institution is unable to resolve the conflicting information, either because the student did not respond to the institution’s request for information or because the student did not adequately clarify the reasons for the conflicting information, the institution must consider the student to be in an overaward status for any need-based 2016-2017 Title IV aid (Title IV Grants, Federal Perkins Loans, and Direct Subsidized Loans) that was disbursed. While monies earned by a student employed under the Federal Work-Study (FWS) Program never need to be repaid, the institution must immediately cease paying the student with FWS funds.
Additional Disbursements and Overpayments
2017-2018 FAFSA/ISIR Record
If the required correction is to the 2017-2018 record, the institution must use the EFC from the corrected ISIR for awarding and disbursing all Title IV aid for 2017-2018.
2016-2017 FAFSA/ISIR Record
If the required correction is to the 2016-2017 record, the institution must ensure that the student’s awards and disbursements for 2016-2017 are based on the corrected 2016-2017 ISIR.
Exception: Institutions are not required to submit corrections to a 2016-2017 ISIR if the published deadline date of September 9, 2017, for making such corrections has passed. In such cases, the institution should simply document the reason why the correction was not submitted and no further action is required.
Lower EFC: When the correction results in a lower official 2016-2017 EFC, the institution must disburse any additional 2016-2017 aid that it determines the student is eligible to receive, consistent with the late disbursement rules at 34 CFR 668.164(g).
Higher EFC: When the correction results in a higher official 2016-2017 EFC, the institution must determine the student’s 2016-2017 Title IV eligibility based on the corrected EFC and may not make any additional 2016-2017 disbursements for which the student is no longer eligible.
In some instances when the new higher EFC results in the student not being eligible for some or all of the 2016-2017 subsidized aid that had been disbursed, the higher EFC could result in the student having been overawarded for 2016-2017.
Adjustments to Subsequent 2016-2017 Disbursements: If the result of the resolution of conflicting information is that the student is not eligible for the full amount of 2016-2017 Title IV aid originally awarded, the institution may need to adjust any Title IV aid that had not yet been disbursed. If no such adjustments can be made, or if any adjustments do not fully resolve the issue, there would be a Title IV overpayment in one or more of the programs, as discussed below.
Resolving Overawards and Overpayments
Title IV Grants and Perkins Loans
When the conflicting information results in a Title IV grant or Perkins Loan overaward that cannot be resolved by adjusting subsequent disbursements, as noted above, the student must repay the portion of the 2016-2017 disbursed Title IV Grant or Perkins Loan funds for which the student is no longer eligible. Although the calculation of such an overpayment may have included funds that were used to pay institutional charges as well as funds provided directly to the student, the institution is not financially liable for any repayment based upon the resolution of conflicting information.
The institution must follow the normal procedures for handling Title IV overpayments as outlined in Volume 4: Chapter 3 “Overawards and Overpayments” of the Federal Student Aid Handbook. Under those procedures, the student may establish a satisfactory repayment plan with the institution or with the Department.
Direct Subsidized Loans
Any identified overaward of Direct Subsidized Loan funds does not need to be immediately repaid by the student. Instead, much like unearned Direct Loan funds in a Return of Title IV Aid (R2T4) calculation, any overaward of a Direct Subsidized Loan will be repaid under the terms of the promissory note. Therefore, there is no action that the institution must take with regard to an overaward of a Direct Subsidized Loan, except to record its determination.Questions and Feedback
As we have previously noted, we have developed an “Early FAFSA” mailbox as a way for the community to send us any questions on the implementation of “Early FAFSA” for 2017-2018 and the use of prior-prior year information. The “Early FAFSA” mailbox may also be used for questions and comments regarding the information in this Dear Colleague Letter. The email address of the “Early FAFSA” mailbox is EarlyFAFSAFeedback@ed.gov. Although we will not be able to reply to individual messages, we will carefully review all messages received as we develop additional Early FAFSA guidance, including a set of Questions & Answers (Q&As) that we will post to IFAP.
We appreciate your patience and cooperation as we work together to implement these exciting FAFSA changes.
Lynn B. Mahaffie
Deputy Assistant Secretary for Policy, Planning, and Innovation
Office of Postsecondary Education