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Professional Judgment
 
Job Loss or Income Reduction

If one of the parents lost his or her job, it is appropriate to make an adjustment even if the parent voluntarily quit the job and even if the parent is not the primary wage-earner for the family. It is also appropriate to make adjustments when the parent has been subjected to a pay cut. It is also appropriate to make adjustments when the student has lost his or her job or been subjected to a pay cut. It is also appropriate to make adjustments when the change in income is due to the wage-earner changing jobs (i.e., accepting a job at a lower salary), accepting early retirement or taking a sabbatical, not just when the wage-earner is faced with an involuntary job loss or pay cut.

Adjustments should be made to both the AGI and earned income.

The amount of the adjustment should be equal to the anticipated change in income. For example, if the parent received a bonus last year, and has been notified that there will be no bonuses this year, it is appropriate to subtract the amount of last year's bonus from income.

In the event of a job loss, only the income attributable to that parent's employment should be subtracted from income. If the parent was moonlighting in a second job and still has that job, only the income associated with the first job should be eliminated. Likewise, in two-income families where only one parent lost a job, the income for the parent who still has his or her job should still be counted.

Most financial aid administrators will reduce income by the full amount of the lost wages. Some, however, will include an estimate of unemployment benefits.

If the job loss means that the family will be a single income household, an adjustment should also be made to the employment expense allowance (EEA).

Financial aid administrators may also include an adjustment to exclude severance pay from income.

Although it isn't common, financial aid administrators may make adjustments for income changes and job loss that occur in the middle of the award year. Estimated income should be used only for the remainder of the award year, with actual income used for the award year so far. For example, if a student enrolled for 2003-2004 is laid off on January 1, 2004, one could use professional judgment to replace prior tax year income (2002) with actual income from July 2003 through December 2003 inclusive and estimated income from January 2004 through June 2004 inclusive.

 

 
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