School corrects FAFSA, wrong... in our favor

Paying for College
1

A couple of weeks ago we got notified that my son’s school wanted to check some stuff on our FAFSA and Profile. Apparently something didn’t match between the two. This puzzled me, since I’d used DRT for the FAFSA and copied the numbers from the FAFSA to the Profile where applicable. We were initially told to submit our tax returns and W2s, but then they said we didn’t need to send the returns (only the W2s) because we’d used DRT (both my son and I used it for our respective returns). We sent our W2s to the school - one for my son, and one for me. My husband (DH) has his own schedule C business with very little (gross or net) income, so he has no W2.

Then today we were notified that the school had made a change in the FAFSA, so we went in and looked to see what they’d done.

Well, they changed the figure for “amount earned by [DH] from work” (which, as many of you know, is actually used to calculate both the credit for FICA/Medicare tax paid, and also the extra credit that you get for having two working/earning parents), increasing it substantially. NO change to anything else. This resulted in a large DECREASE in our EFC, and increase in our Pell grant amount. (We had qualified for a very small Pell, now it’s much larger.)

Where did they get this fictitious number? I think they took a number from our 1040 that ACTUALLY reflects profits paid to ME from MY business, on which I DON’T pay self-employment tax (and therefore don’t report as “income warned from work” although it IS included in our AGI). Why they attributed this to DH, I have no idea. If they’d attributed it to me it might make a little sense (and wouldn’t have decreased our EFC quite so much).

As you can see, we don’t have a ‘plain vanilla’ financial situation. I have an S-corporation from which I get a salary, and also report the net profit from a K-1. DH has a Schedule C sole proprietorship from which he earns VERY little. Needless to say, this is probably confusing to the FA folks (at least a little).

So what are our legal obligations? Obviously, we have a moral obligation to report this error to the school. But LEGALLY, can my son be held responsible for a change made by the school, to his FAFSA? If the error is discovered, I am thinking he would be required to repay the overage in the Pell grant. (But might the school be actually responsible, since THEY made the change?) Does DS even have any obligation to LOOK at the revised FAFSA, and to figure out what change they made?

Your thoughts?

2

It may not be an error. Schools can manipulate the figures to enhance a financial aid package if they wish. Individuals can not.

3

I would email the FA office and ask why they made the change. See what kind of response you get before contemplating your next step. With email, you have an electronic trail so that you can prove that you made the inquiry and the school is aware of your concern.

4

They might have disallowed some of H’s business deductions, adding them back in, could that be it?

Also when the DRT brings over the numbers from the tax return, if you file married filing jointly it would bring over the combined income and AGI. You then have to attribute the income to each parent by hand.

But yes, ask them why they made the change and what they base it on. Without seeing your tax returns and all schedules they might have attributed your income to your H.

5

@kelsmom - what’s your take on this family’s legal obligations?

6

Strange - How does an increase in income decrease your EFC?

7

@mommdc - It was not from adding back business deductions; the amount was greater than his entire GROSS revenues, by quite a bit.

Also, since all the income reported on the tax return was mine, I put my salary as “income earned from work” for me (that’s what I pay self-employment tax on), and 0 as “income earned from work” for him. I did not put down my “net profit” from the business (which IS part of my AGI), since I don’t pay SE tax on it (and it is, technically, earned not “from work” but from my investment in the business; it represents the profits I earn from my independent contractors’ work).

@Madison85 - they did not increase my AGI, they only increased the figure (“income earned from work”) that is used to calculate two deductions.

And I checked, the figure they put for DH’s “income earned from work” was exactly equal to my K-1 amount, the ‘pass through’ income from my S-Corp. DH is not an owner of that company (he can’t be, he’s not an attorney.)

I think I have to tell them about their error. They probably meant to add it to a different line (though it’s already in our AGI).

8

Interesting!

9

Can I highjack and ask how you found the change? Both last year (many schools) and this year (the school D is attending) I received an email saying the FAFSA was changed but I was not able to find where/when/how…do I go back and compare every line item?

10

Yup, at least that’s my experience. You need to get the new/“corrected” SAR and go over each item to find out what changed.

11

I can’t believe that legally you’re required to bring their mistake to their attention (and who knows if it’s truly a mistake). I would think that legally, they’re considered “the experts” and you’re the lay person and not always supposed to know if their changes are right, or not.

As long as the info that YOU inputted is not fraudulent, I don’t see how you could ever be held to anything.

12

I’d leave it alone. They put your numbers through their grinder and that’s what popped out. I don’t know if you have a moral obligation to question their grinder-as long as your numbers are accurate, how they work them is their decision.

13

since families are not asked to “sign off” to their changes, I would leave it alone. I’m sure many times changes aer made and families never even notice since they’re not req’d to review and re-sign.

14

But who is liable if the school (mistakenly) reduces EFC and the family gets a (higher) Pell grant?

15

^^How would it ever be an issue? The school is responsible for issuing the money. Who else but the school is going to look for a mistake?

16

There was a case here on CC a couple years ago, where two sisters were given Pell, and then the school discovered the family had neglected to include rental properties. So, then the school came back and demanded money back for that year and previous years. I don’t remember how far they can “go back”. In this case, her sister graduated, and she was a senior.

But, that was more of a case of fraud.

17

Yes you are legally required to report this.

More because…it is considered fraud to get need based aid by knowing oy using incorrect data.

This poster thinks the data is incorrect. The honest thing to do is clarify this with the financial aid department at the school.

She doesn’t want to collect additional Pell money if she is not really entitled to it.

It is very possible this is an honest mistake at the financial aid department end. We had a few of those over the years…called, went over the issues, and they were corrected.

18

The poster thinks the conclusions are incorrect with the data given. The data is correct.

In terms of liability-who do you think is going to come after you?

I am not going to lie about numbers, but I don’t go around fixing other people’s stupidity, either. That’s on them.

19

The OP to this thread is doing the right thing. They are making sure they are getting aid for which they are actually entitled. This is the honest and right thing to do.

Like I said…the college may tell them the consul unions are correct.

And in terms of federally funded aid like the Pell…the error could be identified later if it’s an error…and the OP could be asked to pay back the amount for,which the student is NOT entitled.

And yes…this has happened.

20

Except the school can tell them it is correct and then pell looks at it later and determines it was not correct. Then what?