Consumer debt, such as mortgages, auto loans, and credit card debt, does not count as a special circumstance. The only kind of debt considered by the Federal need analysis methodology is investment debt, such as margin loans, where the debt offsets the value of the asset to yield the net asset value.

Mortgages on the family's primary residence should never be considered, as the value of the family's primary residence is excluded from Federal need analysis. If the family owns investment real estate, the value of any mortgages on the investment real estate would offset the fair market value to arrive at the net value of the investment. This should never show up as a professional judgment item, since the FAFSA asks for the net worth of the family's investments. If the family wants to minimize the impact of investment real estate on need analysis, they should use FinAid's Federal Housing Index Calculator to calculate the minimum derived value for the investment real estate.

With the exception of using investment debt as an offset when calculating the net worth of an investment (and similarly for the net worth of a family business or farm), consumer debt is deliberately ignored by the need analysis process. It is contrary to Congress's intent to make any adjustments to assets or income for the amount of the debt or the amount of monthly debt service payments. The Federal need analysis methodology does not consider consumer debt, nor does it consider the value of automobiles and other personal property. Having high levels of credit card debt and high auto loan payments is a consequence of a voluntary consumer choice to live beyond their means. It is not the purpose of need analysis to subsidize lifestyle choices by the family.

Recently, financial aid administrators have started seeing professional judgment requests from students whose parents who are still paying off their own student loans. Unfortunately, it is still inappropriate to make any kind of adjustment for consumer debt, including educational debt.

However, having high consumer debt affects the family's ability to pay for their children's education, all else being equal. Although it is inappropriate to make adjustments for consumer debt, some financial aid administrators will allow the existence of high levels of consumer debt to influence their decisions regarding other genuine special circumstances in the family's favor. In the absence of genuine special circumstances, however, almost all financial aid administrators will make no adjustments for consumer debt. They may be sympathetic to the family's plight, but consumer debt does not represent a special circumstance that merits a professional judgment adjustment.