Home Features Financial Aid Verification and Other Traps for the Unwary
Verification and Other Traps for the Unwary

Verification and Other Traps for the Unwary


By Glenn Bogart, J.D.

As is my habit when a new award year begins, recently I perused the Application and Verification Guide chapter in the Federal Student Aid Handbook, 2015-2016. Nearly every year, the Department of Education puts some new foolishness in there, and this year is no exception.

You probably know by now that verification is no longer the same thing for all students. Rather, the Department of Education has established “verification groups,” and what the school has to collect for a student selected depends on whether the student is in Group V-1, V-3, on up to V-6. For some reason, there is no V-2 group for the time being. (Wow, they could have had a V-8, but they stopped at V-6, for now.)

Verification has always been a hazard for schools. Every year or two, it seems to get a little more complicated.

Verification Group V-6

Verification Group V-6 is one where the Department has set a new snare for us.

For a Group V-6 student and parent, the school has to collect W-2 forms, even if the student and parent used the IRS Data Retrieval Tool to fill in the FAFSA, or even if the student and parent have provided IRS tax return transcripts.

You’d think that if the IRS DRT was used, or a tax return transcript from the IRS has been provided, that would be the end of it, as far as verification of income for income tax filers goes (other than a few items that don’t appear on the tax return, all of them untaxable). But you would be wrong.

Under the DRT system, the Department obtains the adjusted gross income, income tax paid, education credits taken, etc., directly from the IRS’s computer system. DRT is offered as an easy way for students and parents to import fully accurate income and tax information to the FAFSA on the Web, and I’m all for it. If the student and parents don’t use DRT, but provide tax return transcripts, you still have everything you really need in order to ensure the accuracy of the AGI and tax paid information for the student and family. So why would you need W-2 forms on top of that?

Listen to what the FSA Handbook 2015-2016 says about why the burden of collecting W-2 forms in these cases has been imposed:

You must get a copy of the W-2(s) for all persons in the Household Resources Group (V6), including tax filers who used the IRS DRT or acquired a tax transcript. Get W-2s for those in the household whose financial information appears on the FAFSA. Tax filers could have other untaxed income that was not transferred via the DRT or that did not appear on a tax transcript, and W-2s are used to verify whether there was such income that should have been reported on the FAFSA and if it was reported correctly. (Federal Student Aid Handbook, 2015-2016, Application and Verification Guide, sidebar, p. AVG-84.)


Is there any untaxed income that’s reported on a W-2 form? I suppose I may be wrong, but as far as I know, untaxed income never appears on W-2 forms, which are used by employers to report taxable wages, salaries, and tips (and taxes withheld) to the IRS. So you can collect every W-2 form ever issued to anybody whose income is reported on the FAFSA, and that will never help you find untaxed income that went unreported on the FAFSA. I predict that this requirement will be dropped in three to five years, which is how long it generally takes for ED to understand that it’s made a mistake.

Is there anything else weird in verification these days? Why, yes.

Verification Groups V-4 and -5

For some verification groups, we’re required to get the student to sign a Statement of Educational Purpose (as well as proof of high school graduation or GED), either before a notary or before one of the school’s financial aid administrators. A stack of Bibles is optional. Why?

When the applicant signs the FAFSA, he or she is signing a Statement of Educational purpose that’s built into the form. Does the Department of Education really suppose that making students jump through this extra hoop will cause even one single student, when he cashes his $200 living expense check, to spend one nano-second worrying about spending the money only on educational purposes? If not – what’s the purpose of the extra Statement of Educational Purpose? If the government wants to prosecute somebody for perjury on the Statement of Educational Purpose (a legitimate goal, I think), the signature on the FAFSA is sufficient to enable them to do that. Looks to me like this is just another unnecessary hoop through which your students and financial aid people must jump, for no reason.

Verification Groups V-1 and V-4: Sign this, and make it SNAPpy!

Also, some students subjected to verification (Verification Groups V-1 and V-4) have to “verify,” that somebody in their family received SNAP benefits (food stamps) in the preceding two years. Interestingly, the FAFSA on the Web is designed so that that question isn’t even asked of most students when they fill out the form. And the ISIR need not be “corrected” if the student is in the “Automatic Zero EFC” or “Simplified Needs Test” categories – and most of them are.

This kind of verification does ensure that some few answers on Verification Worksheets will conflict with how students answered the same question on the FAFSA, and maybe you won’t catch it, thus enabling Department of Education personnel to do their “gotcha” thing in a program review.

Whether an applicant answers yes or no to the SNAP question it has no impact on the Expected Family Contribution in the great majority of cases.

In a few cases, an incorrect “yes” answer on the SNAP question on the FAFSA will lower the EFC (thus increasing the Pell Grant), and those few cases are the ones the Feds are after here, I suppose. Is that worth putting tens or hundreds of thousands of students through the hassle of having to fill out yet another form and bringing it to the financial aid office, just to answer a question that was grayed out when they filled out the FAFSA?

I’ll tell you the truth. I don’t understand why all this is necessary. If the SNAP question is so all-fired important, why aren’t all applicants required to answer it when they fill out the FAFSA? Better yet, why doesn’t ED institute a system whereby they do a data match with HHS or the states in order to nail down whether the applicant or family has received SNAP?

Verification Groups V-4 and V-5 are extra-special

For these two verification groups, you have to report the verification results to the Department of Education. I guess they don’t care to know about the results for other verification groups. But really, they don’t seem to care about the V-4 and V-5 results very much, either. The Application and Verification Guide cautions schools that they need to keep proof that they performed the notification, because “the FAA Access website does not store a list of these verification results for you to retrieve.” Why the hell not? Who’s lacking in administrative capability now? You, the school, have to make this report, and you have to be able to prove you did it, because the government can’t be bothered to keep a record of it.

We used to have a saying when I was in the Army – PPP=PPP. If you don’t know what that means, call me, and I’ll tell you. Obviously, the Department of Education is a little short on veterans.

Oh, and another thing on Group V-6

At the same time as the Department of Education has imposed these mostly unnecessary verification steps, which will uncover very little in the way of application inaccuracy, the Department still has not bothered to inform schools that veterans and in-service personnel who were on active duty during the base year almost invariably have Basic Allowance for Subsistence (BAS) money that needs to be reported on the FAFSA. That’s real untaxed income – often enough to change the EFC and amount of Pell the student should receive. And you can collect W-2 forms until you’re blue in the face before you will ever see a W-2 form that shows this income. Yes, the V-6 Verification Worksheet does ask about “allowances for military or clergy,” but lots of veterans don’t even know they received BAS in the base year (or ever), because they never studied their Leave and Earnings Statements. They’ll blast right past that question without a second thought. And most financial aid administrators don’t know enough about the military or BAS to know they should follow up.

If ED can make a deal with the IRS so the people’s AGI and other tax information can be imported to the FAFSA, why can’t they do the same thing with the Department of Defense, for military applicants and recently-released veterans?

Maybe about Group V-6, but probably about every applicant

Here’s something else I noticed in the Handbook for this year:

If you determine that the total of the other untaxed income and all other sources of income does not appear to be sufficient to support the number of household members reported, the student and, if appropriate, the parents or spouse, must explain how the family was financially supported during the 2014 calendar year. (Id. at AVG-84.)

This is something ED has been enforcing for years in program reviews, without putting the “requirement” in the FSA Handbook. Interestingly, the paragraph where the above excerpt appears seems to have to do only with the V-6 Verification Group. Don’t be fooled by that. They really expect you do to this for every applicant with low-income, whether selected for verification or not.

Of course ED will not publish a table that you could consult in order to find out who needs to provide low-income documentation and who doesn’t. They would need to have a negotiated rulemaking routine, and actually publish a Notice of Proposed Rulemaking, read your comments, and then publish a final rule, in order to do that. Way too much trouble! Instead, they just enforce expectations that they have never even put in writing, except as above. You have to devise your own benchmarks on this, and pray that the program reviewers will find it “reasonable.”

As a practical matter, I advise clients, in the absence of further enlightenment from the Department of Education, to use the federal poverty guidelines, which can be found at http://aspe.hhs.gov/2014-poverty-guidelines#guidelines.

I can’t see how the Department could reasonably say you’re wrong, if you use these guidelines to determine which students need to demonstrate how they were able to survive on low-income. If the guidelines say that a student or family is below the poverty level for that household size, get some kind of documentation as to how they survived in the base year. (For 2015-16, the base year is 2014.)

Some schools have devised very extensive forms for the purpose of getting students to list every conceivable source of income – and requiring them to list their expenses, too, in an effort to prove that each low-income student brought in more, in income and charity, than what they spent. I don’t think you necessarily have to go that far, although it’s fine if you do. I think a statement from the student that says something like, “I lived on food stamps, which paid $4,500, and lived with my aunt, who paid all other bills” would be good enough to satisfy most program reviewers. The key is to have the financial aid advisor look at the situation as a taxpayer. Get a statement that will satisfy a reasonable taxpayer as to how the student survived on low-income, and you should be ok, without having to burden the student with a three-page form. You shouldn’t have to fool with this at all – but if you want to have a program review with no problems, it’s wise to do something along these lines.

Just be sure to review what the student says, to see if any of the various kinds of income are reportable on the FAFSA, and correct the ISIR if any of them are reportable. For example, if the student, when questioned about how he survived, says he got VA disability compensation, you need to make sure it was reported on the ISIR under “Veteran’s non-educational benefits.” If she says, “My boyfriend paid all my rent and utilities,” that needs to be reported under “money received or paid on my behalf.” You get the idea. Some thinking is required, in order to make sure any conflicting information you’re collecting here gets resolved, or you may be no better off at program review time than if you hadn’t done this extra step at all.

Administrative judges and the Secretary himself (is it all right if I don’t capitalize “himself”?) have already ruled that you are required to obtain low-income documentation, despite the lack of a genuine regulatory requirement. They’re wrong, but nobody has survived long enough to bring them to Federal District Court on this issue. And even if you had the wherewithal to get to that point, you really can’t count on getting justice these days. So, if you don’t have a lot of money to spare, in order to get this matter before a District Court, after they have cut off your money, it is probably best to comply with their diktats.

Sometimes I think all this complication of the verification requirements, and the demanding of low-income documentation, is designed not to detect errors on the part of applicants, but rather, to give the Department of Education a hammer with which they can nail almost any given school at will. Sure, I’m a cynic. If you have been toiling in these fields as long as I have, probably you are, too. If not – if you like to think of the Department of Education as your partner and friend – be advised that this is not the case. They would like nothing better than to put you out of business, if you run a proprietary school. And you must conduct your business accordingly.

Sen. Lamar Alexander (R-Tenn.), a former Secretary of Education, has proposed simplifying the FAFSA such that it would have only two questions – household income and household size. I’m not sure two questions would do it – but certainly something could be done to simplify this process so that financial aid administrators would not have to spend half their time collecting, analyzing, and scanning documents – especially in cases, such as those mentioned above, where all this work is very unlikely to catch errors on the FAFSA.

ED’s motive is not to catch cheating students. It is to catch you, in violation of their regulations or even just in violation of their unwritten policies. Beware.

Glenn Bogart

GLENN BOGART, J.D. is a Title IV compliance consultant who specializes in school compliance reviews and Department of Education program review responses and appeals. A former ED program review officer, he holds a bachelor’s degree in government from Southern Illinois University, and earned the Juris Doctor degree at Western New England College in 1986. He resides in Birmingham, Alabama, but travels all over the U.S.
Mr. Bogart started his consulting business in 1992, after having served briefly as director of internal audit and compliance at Phillips Colleges, Inc., and prior to that as corporate vice president for financial aid for another large group of proprietary schools. Over the years, he has contributed frequently to these pages.

Contact Information: Glenn Bogart, J.D. // 3259 Dell Road Birmingham, AL 35223 // 205-249-5453 // glennbogart@aol.com // www.glennbogart.com


Your email address will not be published. Required fields are marked *