Have your students noticed lower Pell Grant awards this year? If so, they may be in families who received unemployment benefits in 2020, thus resulting in a higher Expected Family Contribution (EFC) – the number representing income and assets used to determine financial aid amounts.
Congress retroactively acted to make a portion of unemployment benefits tax-free in 2020, but the Internal Revenue Service (IRS) had already begun processing returns by that point, so many families with unemployment benefits may have artificially reported a higher income on their tax returns than necessary.
For many students, their Pell Grants and other aid could be increased, and the Department of Education’s Federal Student Aid Office (FSA) has issued guidance to financial aid administrators on how to make the correction. However, students must request this correction, so there is a need to get the word out.
Importantly, high school seniors in the class of 2022 may not realize their Pell amounts may be lower. If their family received unemployment benefits in 2020, they should be encouraged to work with their financial aid administrators.
To ensure students receive their fair share of financial aid, please consider using the hashtag #CorrectMyPell and connecting students with information and this template to write a request for a correction. For example, students may need to write a letter to their college explaining that “My parents both lost their jobs in March 2020 and received unemployment until December 2020.” Students may also need to attach documentation of unemployment received.
Increasing the student’s Pell grant doesn’t cost the school anything. However, the financial aid office may not be aware of this change, and students and families need to self-identify for this correction to be made.
$1 AGI Issue for families who received COVID benefits and filed taxes
Additionally, FAFSA filers who use the IRS Non-Filer Portal (NFP), subsequently file a 2020 tax return, and then use the IRS Data Retrieval Tool to transfer their tax information into the 2022–23 FAFSA form will unknowingly report an incorrect adjusted gross income (AGI) of $1. This may result in a lower EFC and a higher Pell Grant award for students who would not otherwise be eligible.
While the FSA notes this may be a low number of students with an incorrect $1 AGI, the FSA has encouraged Financial Aid Administrators to identify all instances of $1 AGIs and follow up with applicants to resolve this issue. Students and parents should also obtain a Record of Account from the IRS to verify if the $1 value is correct and determine if there are necessary adjustments to the student’s financial aid package.
If you or your students have further questions about this, please contact the student’s financial aid office.