During recessionary economic times like these, schools face the challenge of helping families cope with the prospect or actuality of income loss more than they typically experience. Having well-considered and clear policy approaches to working with families through these situations becomes more critical than usual. Through listserve forums, e-mail conversations, and workshops/seminars, managing this challenge in the financial aid office is a hotter and hotter topic. So I decided to share some observations about what schools do that reflect best practices.
When a family enrolled in your school loses a significant income resource through job loss or other reasons (commissions or bonuses gone, investment income tanked, etc.), using 2008 income data as reported in financial aid applications quickly loses its meaning and applicability. On the Parents' Financial Statement (PFS), families do have the opportunity to project their 2009 income, but often families don't complete that portion-perhaps due to oversight, no need to anticipate change at the time, or other reasons. Furthermore, a 2009 projection can be difficult for a family to ascertain and difficult for a school to trust. So what to do? Here are two things to think about:
1. Good stewardship of the school's funds dictates (in my opinion) that you do not want to give money away without some documented reflection of reality, even if it may be a wild guess. Taking a wild guess about projected income is better than pulling a grant figure out of the air based on nothing other than goodwill. Get parents to give you an estimate of projected income, even if it's hard for them to do. They must have SOME idea based on the situation. If they've already lost the job, perhaps get some written statement of severance pay, for example, if there is any. Even just plugging in that amount as assumed 2009 income for the year will be a documented course of action. Parents will have to figure out what steps they're going to take to find employment and earn income, for far more reasons beyond the financial aid application, so getting them to actively think about that now will only benefit them later. They've got to start somewhere. In any case, you can't make the best decision using no information whatsoever.
In the absence of the family providing an income projection, the school might consider implementing a policy that would apply for all cases. For example, you might say that the default position for a parent losing a job is to recalculate financial need using projected 2009 income at 50 percent of his or her prior year's income , assuming he or she might be out of work for six months. And if that default position doesn't align with the projection a family is giving you, address the situation on a case-by-case basis.
2. Providing conditional/provisional awards is the best tactic for providing financial aid for families experiencing sudden job loss and this approach is not that difficult to implement; it just requires an additional step or two of followup. Based on whatever income projection the family can provide you (or based on a policy-driven projection of income), determine a full-year award for the parents as you might otherwise, and agree to hold the full amount for them. But, given their situation, you might apply only half of the full year award upfront to see what they would need to pay to make it to/through the first semester. Over the course of the next few weeks or months, the parent might find a job (at better, same, or worse income than before). Before "releasing" the second semester aid amount, just get verification or a statement from the family regarding its employment status/income at that time. This update could occur at least a couple of weeks or more in advance of the second-semester billing. If the situation's the same or the projection turns out to be fairly accurate, you release the other half of the grant. If it's better, recalculate using the new information and reserve the right to lower the second-semester grant amount as appropriate if the realized income is greater that what you based the conditional grant on (i.e., that's the condition). If the family's situation is worse than projected, you might be able to help even more (or you tell the family that you can only afford the initial amount promised).
Through presentations to schools and families, we often describe the financial aid process as being a partnership between the school and the family. In order for you to do your part to help, the family needs to buckle down and do its part to figure out job/income prospects for the year. Again, the parents will have to do that for other reasons anyway (like figuring out how to pay the mortgage, etc). Maybe give them a little leeway on deadlines and once they give you their assessment, try your best to make a decision as quickly as possible. Being able to manage these situations on a case-by-case basis with some standards of information-gathering is critical. I'd just caution you against deciding anything without some foundational baseline of income information, even if it's not highly reliable. The reliability of the information will just have to play itself out over time, which is why offering conditional awards per semester is a reasonable approach. And remember not to kick yourself if the actual income comes in higher than what was projected...if that happens, it's probably not a reflection of the family "gaming" the system, as much as a reflection of the worst-case scenario that didn't come to pass. Just adjust the remaining amount of aid as appropriate.
Remember that your goal is to make the best decision with the information you have at hand. Work with the family to get the best information you can and build in opportunities to verify whether the information is changing. Give yourself flexibility to adjust as the unknowns become more known. Working in partnership is the key to making the best determination of need to help the family stay enrolled.
