The Effective Education Award

"Sec. 12601. Establishment of the National Service Trust(a) Establishment

There is established in the Treasury of the United States an account to be known as theNational Service Trust…"

Brandon RogersCorporation for National Service

National Service Fellowship ProgramJuly 2001

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Corporation for National ServiceCreated in 1993, the corporation for National Service oversees three national serviceinitiatives-AmeriCorps, which includes AmeriCorps * VISTA, AmeriCorps *NationalCivilian Community Corps, and hundreds of local and national nonprofits; Learn andServe America, which provides models and assistance to help teachers integrate serviceand learning from kindergarten through college; and the National Senior Service Corps,which includes the Foster Grandparent Program, the Senior Companion Program, and theRetired and Senior Volunteer Program.

National Service Fellowship ProgramThe National Service Fellowship Program, launched by the Corporation for NationalService in September 1997, involves a team of individual researchers who develop andpromote models of quality service responsive to the needs of communities. The goal ofthe program is to strengthen national service through continuous learning, new models,strong networks, and professional growth.

July 2000Corporation for National Service1201 New York Avenue, N.W.

Washington DC 20525(202)606-5000

www.nationalservice.org

This material is based upon work supported by the Corporation for National Serviceunder a National Service Fellowship. Opinions and points of view expressed in thisdocument are those of the author and do not necessarily reflect the official position of theCorporation for National Service.

About the AuthorBrandon Rogers is the VISTA Project Coordinator for the Northwest RegionalEducational Laboratory, Portland, Oregon. During the Fellowship, Mr. Rogers served asan Admissions and Financial Aid Counselor at The Evergreen State College, Olympia,WA. A former AmeriCorps Program Director and AmeriCorps*VISTA, Mr. Rogersearned his Master in Education at the University of South Carolina.

Alternative Format Request:Upon request, this material will be made available in alternative formats for people withdisabilities.

AcknowledgmentsMuch of the work within this product could not have been accomplished without the helpof the Western Association of Financial Aid Administrators, my Admissions andFinancial Aid colleagues at The Evergreen State College, AmeriCorps Alums, and a hostof National Service Volunteers who gave freely of their time to provide me with theirinput and ideas. Tom Flemming, Robin Dean, Jeff Gale, Deena Johnson, the otherFellows and Patrick: For your support and humor, please accept this open invitation toride in my fire engine any time you’re in the Bald Hills. Four years ago this month anonprofit director asked me if I wanted to be an AmeriCorps VISTA. I had no idea.

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Abstract1. Goals

The original goal of this Fellowship consisted primarily of assisting AmeriCorpsmembers increase the value of the Education Award, primarily through imparting anunderstanding of the college financial aid process. As the study progressed, however,a larger percentage of the research was devoted to clarifying the rules that govern theadministration of the Education Award within college financial aid offices, andestablishing a line of communication between AmeriCorps members, Financial AidAdministrators, the Department of Education and the National Service Trust.

2. ResultsIn surveying over 1,000 AmeriCorps members, AmeriCorps Program Directors andFinancial Aid Administrators, this research pinpointed specific difficulties that allinvolved parties have encountered with the Education Award, measured levels ofawareness of key aspects of the program, and identified several strategies foraddressing the issue. For instance, a key finding of the research illustrates that thevast majority of AmeriCorps members are under-reporting their AmeriCorps benefitsin an income exclusion category of the Free Application for Federal Student Aid(FAFSA), which has resulted in millions of dollars in lost federal and state financialaid. The presentations delivered in the State of Washington as a result of thisresearch have vastly improved the situation on a local level.

3. Conclusions/RecommendationsVarious recommendations are present throughout this report, though the commonthread among all such suggestions is communication. The Department of Educationmust communicate applicable policies to the Financial Aid community through aDear Colleague letter and to the student community through clearer wording of theFAFSA. The National Service Trust should increase its efforts to communicatecorrect procedures to the Student and Financial Aid communities through its web andtelephone operations, as well as in the mailings which include the Education Awardvoucher. In addition, AmeriCorps Program Directors would serve their members wellby offering mid-service and end-of-service training on issues related to paying forcollege.

4. BeneficiariesThe direct primary beneficiaries of this research are the AmeriCorps members, whoshould wind up with an increased financial ability to matriculate to college.Indirectly, AmeriCorps programs should benefit by being better able to work withcolleges and universities, thereby expanding their recruiting opportunities. If all ofthe recommendations are implemented, the Corporation should benefit fromimproved member morale.

5. For More InformationContact Brandon Rogers at brandon@eduscript.com, or visit the Education AwardInformation Web Site, www.eduscript.com. AmeriCorps Alums, Inc.(www.americorpsalums.org) will also distribute information regarding this issue.

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Recommendations

The following report will outline concerns that AmeriCorps members have had in redeeming theirEducation Awards. Consequently, readers may wish to consider possible remedies for theseproblems. The suggestions below are merely a starting point, with the hope that they will lead tofurther discussion of solutions that might possibly be more feasible. In examining the report, thereader may wish to refer back to these suggestions, as they may be unclear at first glance.

- Since the federal code makes a specific reference to the Education Award and the LivingAllowance as resources that must be excluded from calculating financial need, the FreeApplication for Federal Student Aid (FAFSA) must reflect this change;

- As the Draft Version of the 2002-2003 FAFSA appears to contain the same problematicwording as the current FAFSA, the Department of Education should endeavor to implement achange of wording immediately;

- Since Financial Aid Administrators are hesitant to give advice contrary to what’s written onthe FAFSA, the Department of Education must deliver an unambiguous statement verifyingthe intent of the law;

- Since the first contact for many Financial Aid Administrators with the Education Award isthe instruction letter that accompanies the voucher, the voucher must make reference to thelaws governing administration of AmeriCorps benefits;

- Since many Financial Aid Administrators supplement their information with telephone callsto the National Service Trust, the Corporation for National Service should consider a specificnumber for Financial Aid Administrators, with staff capable of answering their questions;

- Since individual training is so effective at conveying the intent of the law, CNS shouldconsider consulting with a Training and Technical Assistance Provider or other source todeliver trainings at the regional financial aid conferences;

- In an attempt to boost morale among the members, CNS might give thought to furtherdelineating the Education Award into two versions: one that can be used in any way, as it isnow, and one that can only be used for current educational expenses, in order to comply withthe interpretation of its taxability by the IRS;

- AmeriCorps programs should develop partnerships with colleges and universities,particularly with financial aid offices, as they have a mutual interest in recruiting men andwomen into their programs, and a similar philosophy in maximizing the value of theirexperiences;

- The Corporation for National Service should attempt to identify model Financial Aid Officesand AmeriCorps Program/College partnerships for further study.

- Member development must include a session dedicated solely to informing members of thecorrect procedures for applying their Education Award. For the sake of maximizing thefinancial aid opportunities for members, this training should take place in January orFebruary each year, corresponding with the financial aid deadlines for the majority ofAmerican colleges and universities.

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Table of Contents

Abstract ...........................................................................................3Recommendations ..........................................................................4The Effective Education Award: ..................................................6What Exactly is the Education Award?.......................................7Understanding College Student Financial Aid, ........................10An Overview of the FAFSA and Financial Aid Terminology .13The FAFSA Worksheets:.............................................................15Correctly Completing the FAFSA Worksheets ........................18Resources and Campus Based Financial Aid Programs..........20The Role of the Financial Aid Office..........................................23The Need for Guidance................................................................25A Final Word to National ServicePrograms and Participants .........................................................27Bibliography .................................................................................30

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The Effective Education Award:Helping Members Maximize the Value of AmeriCorps

IntroductionThe information in this report is a result ofresearch conducted through the National ServiceFellowship Program, Class of 2001. Though thecontents of this report are based on bothCorporation for National Service and Departmentof Education policies, it is intended only as aguide, and does not represent a replacement of,or addendum to, the AmeriCorps ProgramDirector’s Handbook.

The catalyst for this research consisted of a 1998Chronicle of Higher Education article, in whichauthor Jeffrey Selingo wrote:

AmeriCorps, with an annual budget of $425.5-million, hasfallen well short of President Clinton's promise to extendeducational opportunities to thousands of students, saycollege lobbyists, lawmakers, and former Administrationand Congressional aides.

Comparing the Education Award to an expensivePell Grant, and referring often to statisticsshowing that almost half of the EducationAwards had not been used, Mr. Selingo repeateda misguided criticism that the “…$4,725scholarships have, in most cases, aided thosewho would have found other ways to pay for ahigher education.”

This rather short-sighted study into the details ofthe Education Award is analogous to claimingthat the Pell Grant program itself is a failure,since most Pell Grant recipients would havefound other ways to pay for college (namelystudent loans). A deeper analysis of the topicfrom a financial aid framework provides aglimpse into the potential of the EducationAward as a means to higher education, much inthe way the program was originally envisioned.

Cont.,However, due to complex regulations, a lackof adequate guidance, and inexperience amongAmeriCorps members in applying for federalfinancial aid, usage of the Education Awardcan result in unintended consequences. In fact,AmeriCorps members have likely lost severalmillion dollars in Pell Grants, and other needbased financial aid programs, due to confusionover how to report the Education Award on theFree Application for Federal Student Aid(FAFSA), the form used by the Department ofEducation to determine how much need basedfinancial aid a student can receive.

Therefore, though this guide will offer adviceon how to help members maximize the value ofthe Education Award, its real worth is inexplaining the relationship of the EducationAward to the relevant policies that governcollege student financial aid. Being informed inthis regard, and knowing where to turn foranswers, will serve as a valuable asset inensuring that AmeriCorps lives up to ideal ofensuring educational opportunity.

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What You Don’t Know, But Are Afraid to Ask:What Exactly is the Education Award?

Background

The Education Award is the component thatdistinguishes AmeriCorps as more than thelargest national and community service programsince the Civilian Conservation Corps of the1930’s. Authorized by the National andCommunity Service Trust Act of 1993,AmeriCorps has entered the lexicon of collegeand university administrators as a financial aidprogram. Through AmeriCorps VISTA,AmeriCorps National Civilian CommunityCorps, and AmeriCorps State and National,thousands of members have earned EducationAwards that can be redeemed at institutions ofhigher education, or to repay qualified studentloans. The amounts of these awards, which maybe prorated, are $4,725 for a full-time year ofservice, and $2,362.50 for a part-time year ofservice. By 1999, 121,985 awards worth$443,291,133 had been redeemed, according tothe National Service Trust, the administrativeunit within the Corporation for National Service(CNS) that oversees the Education Awards.

Number of Education Awards and Their Values

‘94-‘95 18,788 $62,760,987‘95-‘96 18,418 $71,448,914‘96-‘97 18,197 $71,189,984‘97-‘98 26,545 $96,203,081‘98-‘99 25,519 $92,153,043‘99-‘00 14,518 $43,535,124Total 121,985 $443,291,133

Though these numbers seem substantial, as afinancial aid program the AmeriCorps EducationAward is practically unnoticeable when oneconsiders the total student financial aid undertitle IV of the Higher Education Act of 1965

Cont.

(HEA), as amended. Under this act, financial aidfor students during academic year 1994-95 was$32.7 billion. The Pell Grant program, forexample, provided 3.7 million grants totaling$5.6 billion to needy students in 1994-1995. TheEducation Award is not a student financial aidprogram under title IV. If it were, it would makeup less than 2/10 of a percent of all aid programsnationally.

This statistic becomes highly relevant toAmeriCorps members planning on using theirEducation Award at an institution of higherlearning, since it points to the reason why mostfinancial aid counselors are not adequatelyfamiliar with how to properly administer thesefunds. Because financial aid counselors processrelatively few Education Awards, they arelargely unaware of the following aspects that arefamiliar to AmeriCorps members:

! AmeriCorps members have up to 7 years touse the Education Award;

! AmeriCorps members may choose to usetheir Education Award in any of thefollowing ways:- Repay qualified student loans;- Pay towards the Cost of Attendance

(COA) at institutions of higher education;- Pay a combination of current expenses

within the Cost of Attendance and repayqualified student loans.

! The Education Award, unlike most otherforms of scholarships and fellowships, isfully taxable in the year it is redeemed.

Unfamiliarity with these details often impactsthe advice given by financial aid counselors.

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The Impact of Not Knowing:Assessing Awareness Levels of Members and Directors

Surveys conducted over the past 10 monthsillustrate that unfamiliarity with the EducationAward extends beyond the field of collegefinancial aid. Many AmeriCorps members andProgram Directors remain uninformed aboutcertain aspects of this post-service benefit. Thisis not surprising considering that the vastmajority of both program directors andAmeriCorps members report not receivingadequate training in this area.

Specifically, both AmeriCorps ProgramDirectors and AmeriCorps members reportsimilarly low levels of training on how best touse the Education Award. Approximately 70%of Program Directors (Table 1) and 68% ofAmeriCorps members (Table 2) report havingreceived Minimal or No Training at all in thisregard.

Table 1: Level of Training Among ProgramDirectors on the Education Award*

*n=75

Table 2: Level of Training Among AmeriCorpsMembers on the Education Award**

**n=271

Further survey results illustrate the significanceof these findings. When asked “How importanta factor was the Education Award in yourdecision to join AmeriCorps?,” 67% ofAmeriCorps Members claimed it was at leastmoderately important, while another 20%claimed it was the only reason they joined.

Program Directors are similarly insistent aboutthe role of the Education Award in recruitmentefforts. When asked to respond to the followingstatement: “The Education Award is one of theprimary reasons that we are able to recruitpotential AmeriCorps members.”, 85% ofProgram Directors agreed, with 15% saying thatthe Education Award is the only reason theyhave been able to attract members.

As a factor in attracting and retaining potentialmembers, it appears evident that the EducationAward has received an insufficient level ofattention in relation to its relative importance.

No Response14%

None28%

M oderate15%

M inimal 40%

Extensive 3%

None 24%

M inimal 46%

M oderate25%

No Response2%

Extensive3%

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The Impact of Not Knowing,Cont.

The Education Award as a Post-Service Benefit.

Though AmeriCorps Program Directors areaware of the Education Award’s importance inrecruiting potential members (see Table 3),less than ½ of Program Directors reported thatadministering the Education Award is aModerate or Major problem. One of the mostcommonly cited explanations for this apparentdiscrepancy is due to the fact that issues withthe Education Award generally arise only afterthe member is no longer participating in theprogram. In the past, many Program Directorshave not felt the need to obtain additionaltraining on the Education Award, therefore,because it’s not generally a concern of currentmembers. In fact, the Education Award oftenonly receives a cursory overview inAmeriCorps orientations. Said onerespondent, “We try to hide from our membersthe fact that the Ed Award is so complicated toget and understand, so as not to discouragetheir participation in the program.”

In spite of this, however, we do know thatmembers return to their Program Directors forAdvice. When asked how often formerAmeriCorps members contact past ProgramDirectors relaying difficulties that they arehaving with the Education Award, 51% said‘Occasionally’ while 26% said ‘Often’ (23%)or ‘Very Often’ (3%).

“We try to hide from our membersthe fact that the Education Awardis so complicated to get andunderstand, so as not todiscourage their participation inthe program.”

In addition, when AmeriCorps members wereasked who they contacted most often withEducation Award questions, 38% responded‘Program Directors’, meaning Program Directorsare queried about the Education Award more oftenthan the ‘National Service Trust’ (36%), ‘OtherAmeriCorps Members/Alumni’ (21%) and‘College Financial Aid Offices’ (13%). Thesefigures point towards a need for greater EducationAward training at the Program Director level.

Table 3: Top Reasons Members JoinedAmeriCorps

It is not surprising, therefore, that more ProgramDirectors are requesting additional assistance.The vast majority (86%) of Program Directorssurveyed in this study indicated that they areModerately (31%) or Very (55%) Interested inreceiving more information and/or training on howto give Education Award advice. The reasons forthis have as much to do with Program Directors’concern over the well being of their members oncethey leave AmeriCorps as it does with being ableto recruit highly capable participants.

Stipend4%

Education Award

23%

Nature of Project

16% Friends1%

To Help Community

26%Chance to

Travel6%

Other4%

Job Experience

20%

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Understanding College Student Financial Aid,The Key to Maximizing the Value of the Education Award

In addressing the challenge of ‘maximizing’the AmeriCorps Education Award, manymembers and program directors have sufferedfrom tunnel vision. In the past, their effortsfocused on locating colleges that ‘matched’ theEducation Award, not understanding thatAmeriCorps members suffer the majority ofdamage from the improper application of theEducation Award at colleges, as well as in therepayment of prior student loans. Maximizingthe Education Award, then, means first of allobtaining its full value, and then leveragingthat value with additional forms of aid ifpossible, such as ‘matching scholarships.’

Because of the myriad of ways a member canlose money in applying the Education Award,as well as the general complexity of the issue,a case study is warranted before describing theCollege Financial Aid process.

AmeriCorps Education Award Case StudyFirst time, low-income student at a state

college with a full 2-year Education Award

Michael has an Expected FamilyContribution (EFC) of $0, is a dependentstudent, state resident and is attending his local4 year State College X in Washington State.State College X has an in-state student Cost ofAttendance (COA) of $12,066, that is, thestudent's total amount of financial aid,including loans, grants, work-study,scholarships and outside aid, such as theAmeriCorps Education Award, cannot exceed$12,066. Michael has been an AmeriCorpsmember for the past two years, earning $9,450in Education Awards, and a stipend of $11,000in his most recent year of service, which endedin August, right before the start of college.

Michael makes all of the appropriate deadlines,and if he completes the Free Application for

Federal Student Aid (FAFSA) correctly,meaning he placed the amounts of hisAmeriCorps earnings in Worksheet C, hewould receive the maximum aid packagepossible for the state of Washington:

Pell Grant $3,300SEOG (Federal Grant) $300WA State Need Grant (SNG) $2,538Work Study $3,000Perkins Loan $2,928Total $12,066

Michael receives much of his aid in the form ofgrants, which do not have to be repaid, since hisNeed is $12,066. (Need is defined as a student’sCost of Attendance minus his/her ExpectedFamily Contribution). The Financial AidOffice would send an award letter to Michael inApril. The student is ineligible for additional aidbecause he has now reached his Cost ofAttendance.

However, in August, after the student finisheshis AmeriCorps term, he has his AmeriCorpsProgram Director submit his paperwork, andthe National Service Trust sends Michael avoucher request form. The student thensubmits this voucher to College X's businessoffice, which draws down the entire $9,450Education Award and applies it towards thestudent's account.

Upon seeing this action, the financial aidoffice, in keeping with Department ofEducation regulations that a student's totalfinancial aid package cannot exceed thestudent's total Cost of Attendance, marks thestudent in Overaward status. In essence, thestudent's original aid package must be reducedby $9,450, and the amount is refunded to thegranting agencies.

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Understanding College Student Financial Aid,Cont.

Now Michael is only eligible for $2,616 infinancial aid, the amount of the $9,450Education Award subtracted from the COA,$12,066. However, since the Pell Grant, as anentitlement, may not be reduced, the student'sadjusted aid package is now:

Pell Grant $3,300Education Award $9,450Total $12,750

The following aid packages are returned to thegranting agencies:

SEOG (Grant Aid) $300WA State Need Grant (SNG) $2,538Work Study $3,000Perkins Loan $2,928Total Returned $8766

However, in all likelihood Michael will neverknow that he was eligible for these funds,because based on the data collected regardingthe knowledge level of financial aid advisors,AmeriCorps Program Directors andAmeriCorps members, Michael would notknow to include both the Education Award andthe Living Allowance in Worksheet C, whichwould exclude these amounts from beingcalculated into his EFC (Expected FamilyContribution).

What this means is that in Michael's case, hisfirst year he really received:

Education Award $9,450Stafford Subsidized Loan $2,616Total $12,066

In his sophomore year, since he is still adependent student, he must again report his

parents' income. Remember, Michael comesfrom a low-income family where both parents'combined income is $24,000, which supportsboth him and a younger sister in high school.In the past year, Michael earned the majorityof his stipend, which amounted to around$7,000, and he applied $9,450 in EducationAwards. Because of these actions, he owestaxes of $2,430, and now has an EFC of$5,630.

With an EFC of $5,630, Michael would beineligible for need-based grants, Work Study orPerkins Loan. He has already used all of hisEducation Award his freshman year. He wouldtherefore only be offered the following financialaid package in his sophomore year:

Stafford Subsidized Loan $3,500PLUS Loan $9,088Total $12,588*

Had he correctly completed the FAFSA,however, by including the AmeriCorpsEducation Award and Living Allowance inWorksheet C, he would have an EFC of $0,meaning he would be eligible for all of theneed based grants available. As the Pell Granthas increased for the following year to $3,750,Michael should have received:

Pell Grant $3,750SEOG $300WA State Need Grant (SNG) $2,538Work Study $3,000Perkins Loan $3,000Total $12,588*

*(The COA has increased to $13,000 due to rises intuition)

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Understanding College Student Financial Aid,Cont.

In his sophomore year, Michael did not receive$12,588 in need based aid for which he waseligible, including $6,588 in grant aid that hewould never have had to repay.

If he had completed Worksheet C correctly thefirst year Michael would receive the grants andlow-interest loans for which he was alwayseligible over his four years of education.

However, since this did not occur, Michaelborrowed $21,204 to cover the costs ofeducation over the four years. And since heunwisely used his entire Education Award in thefirst year, he does not have any of those fundsavailable to pay off part of the loan debt.

By using the entire amount of the EducationAward his first year, and by incorrectlycompleting the FAFSA, Michael forfeited grantaid in the amount of $6,138 the first year and$6,588 the second year, which represents moneythat he would never have had to repay. Inaddition, he lost $6,000 in Work Study, and$5,928 in Perkins Loans, which has an interestrate of 5%. Plus, he was hit with a tax bill of$2,430 in his first year of college. In essence,Michael wound up paying $15,156 more forcollege than if he had never heard ofAmeriCorps in the first place.

What could this student do?In this case, Michael would be better offholding onto the Education Award until aftergraduation, borrowing $9,450 in student loans,and using the Education Award to repay thoseloans as soon as he graduated. He mightchoose to use small parts of his EducationAward during the year, instead of borrowingthrough the student loan programs, but hewould need to be careful not to take use so

much of the Education Award as to reduce hisother grant aid and Work Study.

In most cases, it is wiser to apply for federalaid before applying any portion of theEducation Award. Once a student has receivedan Award Letter from the Financial AidOffice, he/she may then decide to use part orall of the Education Award, working with afinancial aid counselor to see what the impactof using the Education Award might be.

In order to find out what an AmeriCorpsmember’s correct need and EFC is, however,he/she must first correctly complete the FreeApplication for Federal Student Aid(FAFSA).

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Defining the Problem:An Overview of the FAFSA and Financial Aid Terminology

Many of the problems AmeriCorps membersface in applying their Education Awards arisefrom incorrect or untimely completion of theFAFSA. In fact, a follow-up survey ofAmeriCorps members illustrates a key concern:only 5% of members correctly identified whereto list the amounts of their Education Award andLiving Allowance on the FAFSA, a mistake thathas cost individual members thousands ofdollars in lost financial aid.

In reviewing the comments of both membersand program directors, it is apparent that thelevel of knowledge regarding college financialaid warrants a detailed description of theprocess.

Important Terms Defined as They Relate toAmeriCorps:

- Expected Family Contribution (EFC): Theamount you (and your family, if you are aDependent student) are expected to contributetowards the costs of your education. The EFCis determined by a federally establishedformula and ranges from $0 (highest level ofneed) to $99,999.

Note that the formula is based on prior-yearincome information. The figures that will berequired for the FAFSA are the amounts thatyou and your family earned in the previous taxyear (i.e. if you plan on enrolling in college inthe 2001-2002 academic school year, the EFCwill be determined from your 2000 earnings).

Neither the Education Award nor the LivingAllowance a member earns should impact theExpected Family Contribution. These amountsare excluded from the formula used tocalculate the EFC by Section 20 U.S.C.1087vv(j) of the United States Code and the

1998 Amendments to the Higher EducationAct.

- Cost of Attendance (COA): The amount itcosts to attend a college or university.Included in the COA are tuition/fees, room andboard, books, supplies, transportation, loanfees, miscellaneous expenses and the one-timepurchase of a computer. In addition,Department of Education guidelines allowfinancial aid offices to adjust a student’s costof attendance based on documented unusual oradditional expenses (such as study abroad,dependent care expenses or costs related to adisability). These above costs are allowedprimarily for students attending college on atleast a half-time basis.

The term ‘Cost of Attendance’ is referred to inTITLE 42 - THE PUBLIC HEALTH ANDWELFARE, CHAPTER 129 - NATIONAL ANDCOMMUNITY SERVICE, Sec. 12604:Disbursement of national service educationalawards (a) In general Amounts in the Trust shall be available -

(1) to repay student loans in accordancewith subsection (b) of this section;(2) to pay all or part of the cost ofattendance at an institution of highereducation in accordance with subsection(c) of this section;

Thus, College Financial Aid Offices generallyunderstand that the Education Award may beused for all costs within the Cost ofAttendance, as long as the student is enrolledat least half-time. There has been someconfusion among AmeriCorps members andDirectors that the Education Award may onlybe used to pay for tuition, fees and books.

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For a thorough review of theFAFSA and financial aid

issues, you may wish to visit:

www.finaid.orgwww.students.gov

or call:

1-800-4-FED-AID(1-800-433-3243)

An Overview of the FAFSA and Financial Aid Terminology, Cont.

- Need: The difference between the COA and theEFC is the student's financial need. In theexample above, we saw that Michael had a needequal to his cost of attendance, since his expectedfamily contribution was $0. It is possible for astudent to have an EFC greater than his/her COA,and thus have no need. Such a student is generallyonly eligible for Unsubsidized Stafford Loansand/or Parent Loans for Undergraduate Students(PLUS Loans).

- Student Aid Report (SAR): Approximately 4-6weeks after a student completes the FAFSA,he/she will receive a report that summarizes theinformation. This report, which is sent to allcolleges listed by the student on the FAFSA,indicates the amount of Pell Grant eligibility, ifany, and the student’s Expected FamilyContribution (EFC). To request a duplicate copyof your SAR, call 1-319-337-5665.

Most AmeriCorps members incorrectly completethe FAFSA in terms of correct placement of theirliving allowance and Education Award. If anAmeriCorps member incorrectly completes theFAFSA, he/she may make corrections on theStudent Aid Report, and submit those changes tothe Federal Processor. The student may alsodeliver those changes to the College Financial AidOffice.

- Disbursement: For purposes of AmeriCorpsmembers attending college, disbursement refers tothe release of funds from the financial aid office tothe college Bursar’s or Student Accounts Office.If the total amount of financial aid, includingAmeriCorps Education Awards, exceeds thestudent’s fees, then any excess funds are paid tothe student in cash or by check. Disbursementgenerally takes place in two payments eachquarter or semester.

In addition to being familiar with financial aidterminology, there is also a great need forunderstanding the actual form involved. Inparticular, AmeriCorps members must be carefulin how they report their Living Allowance andEducation Award. Essentially, the LivingAllowance and Education Award that wasredeemed must be reported twice on the FAFSA:

(1) In the appropriate income box [in the 2001-2002 FAFSA, this box is located under StepTwo, on page 4, item #39: [What was your (andspouse’s) adjusted gross income for 2000?]

-(2) In the correct ‘Worksheet.’ In the 2001-2002 FAFSA, the correct Worksheet isWorksheet C, on page 8.

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The FAFSA Worksheets:The Power of Wording

We now know that the FAFSA is the formused by the Department of Education todetermine a student’s need. We know that inorder to determine a student’s Expected FamilyContribution, that student must provide incomeinformation from the year prior to enrollment.We intuitively understand that the mission offederal financial aid is to provide funding forcollege to those who can least afford it. Thegreater one’s income, the higher one’s ExpectedFamily Contribution is likely to be. What moststudents and parents do not generallyunderstand, however, is the role of the FAFSAWorksheets in the Federal Methodology, theformula used to determine a student’s ExpectedFamily Contribution. The Worksheets are oftenon the last page of the FAFSA, and are notgenerally mailed in to the Federal Processor.They are tables used to calculate amounts whichwill then be placed within the FAFSA (in the2001-2002 FAFSA, they are to be placed inStep Two, under questions 44-46 for thestudent, and Step Four, questions 78-80 for theparents).

The Worksheets provide additional informationabout assets and liabilities that the FederalProcessor uses to further define a student’sability to pay for college. Some of theseamounts are easily located on one’s federalincome tax return, but other items aren’tnecessarily reported, though they further reflecta student’s financial picture. Many of the itemsare counted in addition to a student’s AdjustedGross Income, and will generally increase astudent’s Expected Family Contribution. Someitems, however, are amounts that are alreadyincluded in one’s Adjusted Gross Income, butare then subtracted. In essence, the Worksheetwhich contains these figures will lower one’sEFC. This is often referred to as the ‘IncomeExclusion Worksheet.’ The reasons for

‘excluding’ these income amounts vary, but inthe case of AmeriCorps Living Allowances andEducation Awards, it is by law*.

For the 2001-2002 FAFSA, the IncomeExclusion Worksheet is Worksheet C (Note:the names of the worksheets sometimes changefrom year to year; in the 2000-2001 FAFSA, theIncome Exclusion Worksheet is Worksheet B,while in 1996 the Income Exclusion Worksheetwas Worksheet #3). The Amounts in WorksheetC, as explained above, will wind up reducing astudent’s EFC by subtracting those amountsfrom the student’s adjusted gross income. It isimportant, then, to note that a student should putno amount in Worksheet C that is not includedin the Adjusted Gross Income.

*Prior to 1998, the only AmeriCorps relatedbenefit that could be placed in the IncomeExclusion Worksheet was the living allowance.The reference in the United States Code is:

20 U.S.C. 1087vv(j)(e) Excludable income

The term ''excludable income'' means - (1) any student financial assistanceawarded based on need as determined inaccordance with the provisions of this part,including any income earned from workunder part C of subchapter I of chapter 34of title 42; (2) any living allowance received by aparticipant in a program establishedunder the National and CommunityService Act of 1990 (42 U.S.C. 12501 etseq.); (3)…

The 1998 Amendments to the HigherEducation Act, however, ensured that theEducation Award, as well, should be consideredas excludable income.

16

Dependency-Students are classified by the FAFSA as beingeither Independent’ or ‘Dependent’. ForIndependent students, parental incomeinformation is not required. In order to beconsidered Independent, the student must:- Be Married, or- Be 24 years of age by January 1st of the

Academic Year, or- Be a graduate or professional student, or- Have a legal dependent, other than

children or spouse, or- Have children for whom the student

provides more than ½ their support, or- Be an orphan or ward of the court, or- Be a veteran of the U.S. Armed Forces

The FAFSA Worksheets,Cont.

The reference to this change is:

Section 480(j) (20 U.S.C. 1087vv(j)) isamended--

(1) in paragraph (1), by inserting before theperiod at the end the following: `, andnational service educational awards orpost-service benefits under title I of theNational and Community Service Act of1990 (42 U.S.C. 12571 et seq.)'; (2)…

The ability of AmeriCorps members to excludeboth their Living Allowances and EducationAwards from the Federal Methodology is atremendous benefit. In terms of eligibility forneed-based financial aid, serving in AmeriCorpsis analogous to having no income.

For Independent (Table 4) students who servedin AmeriCorps in the year prior to collegematriculation, and whose income informationgenerally does not include parental resources,this means that they often have an extremelylow Expected Family Contribution ($0 in mostcases where they have little or no assets). Inother words, Independent AmeriCorps membersare generally eligible for thousands of dollars ingrants and other need based aid, unlike similarIndependent students who worked in traditionaljobs, and whose income is not excluded fromthe Federal Methodology. This is one of the‘hidden’ ways that AmeriCorps has increasedaccess to higher education. Program Directorswho have a basic understanding of this conceptare further adept at recruiting potentialmembers.

The number of AmeriCorps members who areIndependent (and thus, very likely to have ahigh level of need) varies from year to year butis generally quite high. In the 1999 programyear, the National Service Trust reports that of

the 27,310 members who redeemed theirEducation Awards, 13,165, or 48.2%, were 24years of age or older. In 1998, that number waseven higher, with 13,844, or 50.7%, of the27,291 members being 24 years of age or older.These figures support a 1996 study by Jucovywhich estimates the mean age of AmeriCorpsmembers to be 25.6 years.

Table 4: Independent vs. Dependent Status

Though Independent AmeriCorps membersoften wind up with more grant eligibility, it isequally important for Dependent students tounderstand the importance of the IncomeExclusion Worksheet. This is due to acharacteristic of the Federal Methodology thatallows for a greater percentage of Dependentstudent earnings to count towards the ExpectedFamily Contribution. In fact, a student is

17

The FAFSA Worksheets,Cont.

expected to contribute about 35% of his or hersavings and approximately one-half of hisearnings above $1,750. Therefore, even whenthe parental portion of the Expected FamilyContribution is $0, an AmeriCorps member whofails to record the Living Allowance andEducation Award in the Income ExclusionWorksheet will lose his/her grant eligibility.

Even when Dependent AmeriCorpsmembers have parental portions of theEFC greater than $0, they should stillcorrectly place the appropriate amount ofthe Living Allowance and/or EducationAward in the Income ExclusionWorksheet. This might mean thedifference between other forms of need-based aid, such as Work-Study orSubsidized Stafford Loans.

Instructions for Recording AmeriCorpsBenefits – Table 5 represents the draftversion of the 2002-2003 FAFSA, and theIncome Exclusion Worksheet remainsWorksheet C. In both years, the line onwhich an AmeriCorps member shouldrecord his/her benefits is line 4, whichreads:

Note that the phrase ‘AmeriCorps awards’as used in the FAFSA does not correspondto the definition as prescribed by theCorporation for National Service. In theNational Service community it is generally

understood that the ‘AmeriCorps award’ refersspecifically to the $4,725 Education Award, andnot to the Living Allowance that a memberreceives. This obviously creates a high level ofconfusion among both AmeriCorps membersand Financial Aid Counselors. The effects ofthat confusion will be discussed below.

Table 5: FAFSA Worksheets

AmeriCorps members, then, as per 20 U.S.C.1087vv(j), should include in Worksheet C not

“Student grant, scholarship andfellowship aid, including

AmeriCorps awards, that wasreported to the IRS in your adjusted

gross income”

18

Worksheet C, 2001-2002 FAFSA-It is vitally important that members realize:- When completing the 2001-2002 FAFSA,

they should enter the entire amount of theliving allowance they earned from January2000 to December 2000 in line 4 ofWorksheet C (…AmeriCorps awards…)

- If an AmeriCorps member redeemed any oftheir Education Award in tax year 2000they should put that amount as well on line4 of Worksheet C.

- All amounts entered in Worksheet C shouldcorrespond to amounts included in themember’s Adjusted Gross Income (line 39,page 4 of the FAFSA).

- The 2002-2003 FAFSA appears as thoughit will remain unchanged: AmeriCorpsmembers should therefore put intoWorksheet C of the 2002-2003 FAFSA, anyLiving Allowance earned or EducationAward redeemed in 2001

- Note- If member completes the FAFSA onthe Web, the AmeriCorps amounts will notbe recorded on line 4 of Worksheet C,

but rather on line WC4 of Worksheet C. See Table 6.

Correctly Completing theFAFSA Worksheets

only the Education Award, but also the amountof the Living Allowance they earned in the yearprior to enrollment (remember that theinformation provided on the FAFSA is from theprior year).

It is worth repeating thatamounts to be entered inthe Income ExclusionWorksheet must representactual dollars earned and,in the case of theEducation Award,redeemed in the tax yearprior to enrollment.

Therefore, AmeriCorpsmembers should onlyput in Worksheet C theamount of EducationAward which wasactually redeemed in theprior year. If a memberhas not yet redeemedhis/her EducationAward, and hastherefore not reported itto the IRS on his/her taxreturn, he/she cannotplace the amount of theEducation Award on theFAFSA.

The Corporation forNational Service will issue a Form 1099-Miscellaneous Income for the amount ofEducation Award redeemed in the year afterit is disbursed. AmeriCorps members shoulduse the 1099 they are issued to determine howmuch Education Award they should list onthe subsequent FAFSA.

With this stated, however, many AmeriCorpsmembers have and will continue to incorrectlycomplete Worksheet C of the Free Applicationfor Federal Student Aid, due largely to wording

which is unclear.

Most Financial AidAdministrators areinadequately preparedto answer questionspertaining toAmeriCorps, and willsimply advisemembers to ‘justwrite down what itasks for.’ ForAmeriCorps membersand ProgramDirectors, this usuallyimpels them to recordonly the EducationAward. If thishappens, the mistakemay be corrected, butonly if the Memberbecomes aware of theerror.

Making Changes tothe FAFSA- During

the past year inconducting AmeriCorps

Education Award workshops, the vast majorityof participants incorrectly completed theFAFSA, in particular Worksheet C. Once awareof the mistake, AmeriCorps members haveseveral ways to make corrections.Approximately 4-6 weeks after a membercompletes and submits

19

Correctly Completing theFAFSA Worksheets

the FAFSA, he/she will receive in the mail aStudent Aid Report. If the member did notadequately record AmeriCorps related amountsin Worksheet C, he/she may simply make thecorrections on the Student Aid Report itself(making copies of the entire document), signand date the form, and return it to the FederalProcessor. In addition, the member may chooseto take the corrected Student Aid Report directlyto his/her college’s financial aid office, andreport the changes to a Financial Aid Counselor.

Finally, if for some reason the member neverreceives, or loses the Student Aid Report, andsuspects that incorrect information wasprovided, he/she may simply approach thefinancial aid office with the information, andfollow the institutional procedures for makingsuch changes.

As the changes often have a substantial impacton the student’s EFC, the financial aid officemay likely select the member for a processknown as Verification. Verification is theprocess Financial Aid Offices use to ensure thatstudents are providing accurate financialinformation. The Federal Processor randomlyselects students for verification (if on theStudent Aid Report there is an asterisk next tothe EFC figure, this indicates that the file hasbeen randomly selected for verification), andmost schools verify 1/3 of all applicants. Evenif the information the AmeriCorps member hasprovided is correct, therefore, he/she may still

be asked to provide supporting documents,which usually include copies of the previousyear’s federal income tax returns.

For this reason, members should be advised toretain legible copies of their federal income taxreturns, as well as their W-2 forms, and in thecase of the Education Award, a copy of the1099-Miscellaneous form.

Table 6- FAFSA on the Web Worksheet C:Line WC4 (www.fafsa.ed.gov)

Having all these documents on hand whenrequested will help members avoid losingfinancial aid due to missing deadlines. Many ofthe federal financial aid programs, unlike thePell Grant and Stafford Loan, are limited, andare often given out on a first-come, first servebasis.

“Student grant, scholarship andfellowship aid, including

AmeriCorps awards, that wasreported to the IRS in your adjusted

gross income”

20

Special Cases:Resources and Campus Based Financial Aid Programs

As we discussed earlier, a student’s need isdetermined by subtracting his/her ExpectedFamily Contribution (EFC) from the school’s Costof Attendance (COA). The EFC, again, isdetermined by the Federal Methodology, whichuses data provided by a student and his/her familyin the Free Application for Federal Student Aid(FAFSA). A student may receive financial aidequivalent to his/her Cost of Attendance, but nomore. A student may receive need-based aid,such as Pell Grants and Subsidized StaffordLoans, only up to his/her calculated need.

Two more terms become important at this point inregards to the Education Award: resources andcampus-based programs. Campus-basedprograms are types of federal financial aid that aredistributed to colleges and universities in limitedamounts. The school administers these fundsdirectly. Generally, the demand for these fundsoutstrips the supply, and unlike the Federal PellGrant program, once an institution runs out offunding, no more campus-based awards areavailable. The campus-based financial aidprograms include the Federal SupplementalEducational Opportunity Grant (SEOG), theFederal Work-Study Program, and the FederalPerkins Loan Program. We will discuss theseprograms in detail below.

Resources, essentially funds that the student hasavailable towards the cost of attendance, areapplicable to these campus-based financial aidprograms. Resources are considered whenawarding campus-based programs, meaning thatsome students may receive reduced or no campus-based aid when they have an abundance of otherresources. Prior to October 1, 1998, theAmeriCorps Education Award was notconsidered a resource for purposes of thecampus-based aid programs. Pursuant to the1998 Higher Education Act Amendments,

however, financial aid offices must now viewthe AmeriCorps Education Award as aresource when considering students for theSEOG, Work-Study and Perkins Loan. [34CFR 673.5(c)]

In other words, before these changes took effect,AmeriCorps members could use their EducationAwards without worrying about the loss of Work-Study, SEOG or Perkins Loan, as long as the totalamounts of all awards did not exceed the Cost ofAttendance. Now, however, if an AmeriCorpsMember uses his/her Award, that Award appliestowards the Member’s Need, and thus, will reducethe amount of campus-based aid.

For example:

Adam is a first-year, independent undergraduatestudent with an EFC of 1800 (from non-AmeriCorps earnings) who is enrolled at a StateCollege with a Cost of Attendance of $9,300.His need is therefore $7,500 (COA-EFC=Need).He is eligible for $2,000 in Pell Grant, $3,000 inWork-Study, $500 in Supplemental EducationalOpportunity Grant, and $2,000 in Perkins Loan.His need-based awards, including the threecampus-based programs are:

Pell Grant $2,000Work-Study $3,000SEOG $500Perkins Loan $2,000Total $7,500Need $7,500

He could borrow up to $1,800 in UnsubsidizedStafford Loan to meet his Cost of Attendance.

However, if Adam applied his Education Awardto the above scenario, he would lose his PerkinsLoan, as well as most of his Work-Study. Why?

21

Special Cases:Resources and Campus Based Financial Aid Programs

Because the AmeriCorps Education Awardcounts as a resource towards the student’s need.Therefore, the college financial aid office wouldapply his $4,725 towards his $7,500 need. Thiswould leave him with $2,775 in remaining need-based aid eligibility. Adam’s new award wouldbe:

Pell Grant $2,000Education Award $4,725SEOG $500Work-Study $275Total $7,500Need $7,500

He could then borrow $1,800 in an UnsubsidizedStafford Loan to make up the difference betweenhis COA and his aid. However, he has lost$4,725 in other, more favorable financial aid. Infact, it is unlikely that a financial aid officewould make a Work-Study Award of only $275,as it would only allow the student to findemployment for a two- to three-week period.

In addition, if Adam received any of the othersources of aid that are considered ‘resources’, hiscampus-based programs (Work-Study, SEOGand Perkins Loan) would need to be reducedagain. These other ‘resources’ include:

• funds a student is entitled to receive from aFederal Pell Grant;• William D. Ford Federal Direct Loans(Direct Loans);• Federal Family Education Loans (FFEL’s);• scholarships, including athletic scholarshipsand ROTC scholarships;• waivers of tuition and fees;• fellowships or assistantships;• veterans educational benefits paid underChapters 30, 31, 32, and 35 of Title 38 of theU.S. Code;

• income from insurance programs that pay forthe student’s education; and• net income from need-based employment.

There are innumerable scenarios in which Adammight be able to avoid losing aid. First andforemost, he could save his AmeriCorpsEducation Award and use it to repay the Perkinsand Stafford Loans. He might also want to tryand document additional expenses that he mighthave, such as medical or child care. In essence,he would ask for an increase in his Cost ofAttendance, and if this were granted, his Needwould necessarily increase, since Need isdetermined by subtracting EFC from COA.

In addition, some members will attend collegeswhere Stafford Loans might come into play, anda more complicated scenario might develop:Under new campus-based regulations 34 CFR673.5(c)(4), financial aid offices may, at theirdiscretion, exclude as a resource the portion of asubsidized Stafford Loan up to the amount of theAmeriCorps Education Award (In other words,if Adam redeems $4,725 in Education Award,the financial aid office may choose to ignore$4,725 worth of Subsidized Stafford loan fromAdam’s resources).

Example #2:

Corrin is a first-year, independent undergraduatestudent with an EFC of $1,800, a Pell Grant of$2,000, and Education Award benefits of $4,200.She enrolls in a four-year program at a StateCollege, where her need is $7,700 ($9,500 COA- 1800 EFC). Her assistance from the Pell Grantand Education Award equals $6,200 ($2,000 +4,200). The difference between her need andassistance is $1,500 ($7,700 -6,200). Because theEducation Award benefits do not count asestimated financial assistance for subsidized

22

Special Cases:Campus Based Financial Aid Programs, Cont.

loans, Corrin is eligible for a subsidized Staffordloan in an amount that exceeds $1,500. Her COAminus her EFC and Pell Grant would leave anunmet need of $5,700 ($9,500 - 1800 - 2,000).The maximum subsidized loan amount for afirst-year student is $2,625 and is less thanCorrin’s unmet need for subsidized loanpurposes, so she may receive a subsidized loanof $2,625. The decision to take out a subsidizedloan is Corrin’s, and the school must follow thestatute. In this case, her assistance totals $8,825($2,000 + 4,200 + 2,625), which exceeds herneed.

However, under the statute and regulations thisis not considered an overaward or anoverpayment. Corrin is eligible for campus-based aid if the school chooses to exclude hersubsidized loan as a resource. (It can exclude upto the value of the Education Award benefitsfrom the loan.) Corrin’s need is $7,700, and hertotal resources, minus the loan, would be $6,200,which is $1,500 ($7,700 -6,200) under her need.Therefore the school may provide campus-basedaid up to $1,500, for example, $1,000 in FWSfunds and $500 in FSEOG funds. In this case,Penny’s assistance totals $10,325, whichexceeds her need as well as her COA.

Pell Grant $2,000GI Bill $4,200Stafford $2,625Work-Study $1,000SEOG $500Total $10,325Need $7,700COA $9,500

Though the option provided by the new campus-based regulations 34 CFR 673.5(c)(4) prove to bean obvious benefit for AmeriCorps members, the

complexity of the above case keeps manyfinancial aid offices from exercising this option.

The Role of the Financial Aid Office

At this point, the difficulties with the EducationAward reach critical mass. As shown above,AmeriCorps members and Program Directors areinadequately prepared to address how their awardswill impact their other financial aid. There areprecedents for 'outside' aid programs similar toAmeriCorps which have become institutionalizedto the point that many college financial aid officeshave resident experts on the issue, such as withVA benefits. As with any new program, there is alearning curve, and financial aid offices have beenslowly coming to the realization that AmeriCorpsmembers are growing in number. This trend islikely to continue.

I'm ashamed (and frustrated) to saythat I didn't realize all of theimplications noted above existed.

Unfortunately, the long process of accumulatinginstitutional knowledge of the AmeriCorpsEducation Award is occurring at the expense ofcurrent and past members. Said one financial aidcounselor, ' I didn't realize how much I don't knowabout the AmeriCorps program. I'm ashamed (andfrustrated) to say that I didn't realize all of theimplications noted above existed.'

In surveys and conference presentations deliveredover the past year, this sentiment proved to be therule rather than the exception.

23

Final Piece of the Puzzle:The Role of the Financial Aid Office

After assessing the level of knowledge about theAmeriCorps Education Award process amongAmeriCorps members and Program Directors,determining that same awareness among FinancialAid Offices becomes crucial. In March 2001, asurvey of 148 Financial Aid Administratorsillustrated that, unfortunately, colleges anduniversities are as ill-prepared to address the issueas the National Service community.

First and foremost, the confusion over the IncomeExclusionworksheet hasproven to bethe mostdamaging toAmeriCorpsmembers ofall the variousissues. In thesurvey, lessthan 3%(n=143) of allFinancial Aidadministratorscorrectlyanswered thatboth theAmeriCorpsLivingAllowanceand theAmeriCorpsEducationAward shouldbe reported in Worksheet B of the 2000-2001FAFSA and Worksheet C of the 2001-2002FAFSA (Table 7).

Furthermore, as it turned out, each of the 4respondents who correctly answered this questionhad either attended a conference presentation the

author delivered, or had spoken with him prior tothe survey regarding AmeriCorps policies andprocedures. Simply put, past AmeriCorpsmembers who have relied on Financial AidOffices for advice on correctly reporting theirAmeriCorps benefits on the FAFSA have almostassuredly received incorrect information, and havelikely lost eligibility for need-based financial aid.

Table 7: What Should AmeriCorps MembersRecord on Worksheets B and C?

Unfortunately, while confusion over the IncomeExclusion Worksheet results in the greatest loss ofpotential aid for AmeriCorps members, it is farfrom the only way that Members lose money.

For example, in the first case study presented,Michael lost $9,450 in need-based financial aid

24

The Role of the Financial Aid Office,Cont.

for which he was eligible because he applied theentire amount of his Education Award, unaware ofits impact. In addressing a possible solution tothis problem, we discussed the possibility ofMichael holding onto his Education Award untilafter graduation, using the money instead to repayloan debt. Unfortunately, if Michael were to ask afinancial aid counselor for this advice, he wouldmost likely be told that this is not a possibility.

From the survey of Financial Aid Administrators,when asked the following question,

"If an AmeriCorps Education Awardrecipient with an Expected FamilyContribution of $0 (who would otherwisereceive most or all of his/her budget in theform of grants and scholarships) presentedme with an Education Award voucher for$9,450, I would advise that student not touse the voucher, because of the resultingloss of other aid."

only 34% of respondents agreed. The reasons forthis response vary, but some of the underlyingissues include:

• Awareness - 44% of Financial AidAdministrators do not know that AmeriCorpsmembers may hold onto their EducationAward for up to 7 years. Therefore, theycould not advise a student such as in the aboveexample to keep the award as an option.

• Training - Only 7% of Financial AidAdministrators have received some type oftraining on how to administer the AmeriCorpsEducation Award.

• Familiarity - 62% of colleges and universitiesprocess less than 5 AmeriCorps EducationAwards annually, with 16% of these

respondents claiming to have never processedsuch an award.

• Accessibility to the National Service Trust -16% of respondents felt that it was relativelyeasy to get answers about the EducationAward from the Corporation.

• Technical Issues - Only 27% of Financial AidAdministrators are aware that the EducationAward is fully taxable. Taxability is an issuefor financial aid purposes in the sense that amember's tax burden can be significantlydecreased by spreading out disbursement ofAmeriCorps Education Award funds over thecourse of two tax years. In other words,members can request that they receive half oftheir $4,725 Education Award in the FallSemester of 2000, and the other half in theWinter Semester 2001, thereby applying theentire amount of their Education Award in oneAcademic year, though redemption of thefunds actually occurs over the course of twoTax years.

• Coordination - Less than half of the collegesand universities who responded to the surveyindicated that that the Financial Aid Office isthe primary administrator of the EducationAward. At many colleges, the Bursar's/Student Accounts Office, or a combination ofthe Bursar's and Financial Aid Office processthe Education Award. Many of the issuesregarding administration of the EducationAward are complicated by a 'right hand notknowing what the left hand is doing'phenomenon. (i.e. the Financial Aid Officewishes to comply with the member's wishes toapply the Education Award over two tax years,though the Bursar's Office requests the entireamount of the voucher at once).

25

Financial Aid Administrators:The Need for Guidance

Unfortunately, even with an abundance ofevidence that illustrates how AmeriCorpsmembers are losing financial aid, unless thisinformation comes directly from the Departmentof Education or the National Association ofStudent Financial Aid Administrators(NASFAA), improvements are not likely tooccur. The rules that govern the disbursement offederal financial aid are especially complex, andcolleges face serious consequences fornoncompliance. Therefore, AmeriCorpsmembers who share the findings of this reportdirectly with a Financial Aid Administrator arelikely to be questioned on the legitimacy of theirsource.

Case in point, in April 2001, under researchfunding through the Western Association ofFinancial Aid Administrators (WASFAA), Ipresented the findings included in this report tothe WASFAA Annual Conference in San Jose.After directly citing the appropriate regulationsand sharing a statement drafted by a Departmentof Education officer, most participants statedthat they would review their proceduresregarding the AmeriCorps Education Award.

The following week, however, I started toreceive messages such as the following:

I shared the information with our Financial AidDirector regarding reporting both the stipend &award on Worksheet C of the FAFSA. However, ourdirector asked when this information was publicizedto inform institutions that it was incorrectly beingrequested on the FAFSA, since the instructionsclearly state to report the earnings in Worksheet B &the award in Worksheet C. According to ourDirector we cannot instruct the studentsdifferently from the instructions on the FAFSAunless the institutions have been notified by theDept. of Education. Is there a web site or apublication that actually addresses this issue whereour director can verify the information?

Clearly, unless the Department of Education orNASFAA issues a statement, thousands ofAmeriCorps members will continue to lose thefinancial aid to which they are entitled.

Ironically, such a statement has already beendrafted (but not yet published) by a Departmentof Education employee. During the early stagesof this research when it became apparent thatcurrent AmeriCorps members might be helped, Iposted the statement to FINAID-L, the listservfor Financial Aid Administrators:

Summary of AmeriCorps Benefits IssuesRelated to Completing the FAFSA

Individuals working in AmeriCorps serviceprojects usually receive a living allowance. Aliving allowance is paid on a regular basis, butis not considered an hourly wage or a salary.This income is taxable by the IRS but is anexclusion from income used to calculate astudent's EFC for purposes of awarding TitleIV aid. The living allowance stipend, ifcorrectly included in the student's AGI, is tobe included on Worksheet B of the 2000-2001FAFSA (line 4 "AmeriCorps awards-livingallowances only"). For the 2001-2002FAFSA, any amount of living allowance in theAGI is included on Worksheet C (line 4"Student grant, scholarship, and fellowshipaid, including AmeriCorps awards, that wasreported to the IRS in your (or your parents')adjusted gross income").

Note that if a student is earning FederalWork-Study wages for working in anAmeriCorps service project, then there willbe NO living allowance. The FWS wages willbe reported on the appropriate worksheet andexcluded from AGI in the need analysiscalculation.

26

Financial Aid Administrators:The Need for Guidance, cont.

An AmeriCorps participant who completeshis or her service is entitled to an educationalaward. Many students use this award towardcurrent educational expenses. A student isentitled to up to $4725 per year ofAmeriCorps service. According to the IRS, inmost cases educational awards are subject toincome taxes in the calendar year in whichthey are used. That taxable amount isreported on a 1099 form. When the studentfiles a FAFSA for the following year, theamount of the AmeriCorps educational awardreceived in the base year (i.e., 2000 calendaryear for the 2001-2002 FAFSA) and includedin that year's AGI, is to be excluded from theneed analysis calculation and included on line5 of Worksheet B of the 2000-2001 FAFSA("Student grant and scholarship aid (in excessof the tuition, fees, books, and supplies) thatwas reported to the IRS in question 40 forstudents and 74 for parents"). In most cases,the entire educational award amount istaxable, so the entire amount is included inthe AGI, thus the filer is to report all of theaward, not just the amount in excess oftuition, fees, books and supplies. For the2001-2002 FAFSA, the amount of theAmeriCorps educational award included inthe AGI is to be included on line 4 ofWorksheet C.

Merely posting this statement to the FINAID-Llistserv, however, has very little effect. Whenconfronted with an unknown course of action,Financial Aid Administrators typically turn toone of two sources: the NASFAA Encyclopediaor the IFAP (Information for Financial AidProfessionals) online library administered by theDepartment of Education. Currently the abovestatement is nowhere to be found in eitherresource.

Regrettably, this statement also appears tocontradict the existing language on the FAFSAWorksheet instructions. Predictably, when facedwith this dilemma, Financial Aid Administratorswill not instruct students differently from theFAFSA.

Until the language of the Free Application forFederal Student Aid (FAFSA) accuratelyreflects the intent of the Amendments to theHigher Education Act, and the “Summary ofAmeriCorps Benefits” statement appears in theNASFAA Encyclopedia or on the IFAP website (www.ifap.ed.gov), AmeriCorps memberswill continue to lose benefits.

It is worth repeating then, for any Financial AidAdministrator who may read this report, that thesections in the United States Code that make allappropriate references to the AmeriCorpsEducation Awards are:

20 U.S.C. 1087vv(j)

Section 480(j) [20 U.S.C. 1087vv(j)] asamended by the 1998 Amendments to theHigher Education Act

Until NASFAA or the Student FinancialAssistance program of the Department ofEducation makes the needed changes, this codemay be the only ‘official’ reference available.

For an excellent online resource for reviewingthese sections of the United States Code, or anysection of the U.S. Code, you may wish to visit:

http://www4.law.cornell.edu/uscode/

27

A Final Word to National ServicePrograms and Participants

This report is a first step and a small piece of anoverall effort to improve the lives of those whoserve. Other partners in the National Servicefamily will build upon this work to providemore effective training for AmeriCorpsmembers as they enter service. As a first step,however, this report may raise more questionsthan it answers. Unfortunately, though manycompare the language of federal financial aid tohieroglyphics, there is no Rosetta Stone in thiscase to provide AmeriCorps members anddirectors with these easy answers.

As there is of yet no body of knowledgeregarding the AmeriCorps Education Award,here are some closing comments on several keyissues:

What Should AmeriCorps Programs KnowAbout the Ed Award?

First of all, nobody expects that ProgramDirectors should be financial aid experts. Thatsaid, there are some details that AmeriCorpsmembers expect to know about the EducationAward.- First and foremost, the Education Award istaxable, and these taxes are not deductedbeforehand. AmeriCorps members need toknow that if they choose to use their award, theyshould plan on budgeting a reasonable amountto cover these expenses in the event that theyowe taxes.

- The Education Award can only be used tocover cost of attendance expenses at Title IVinstitutions of higher education, which includessome proprietary/vocational schools. Thoughcost of attendance includes more than tuition,books, and fees, AmeriCorps members can onlyredeem their Education Awards if they are fullymatriculated. Matriculated means that the

student has applied for and successfully met therequirements for full admission to theinstitution. Note that this is a departure frompast practices where members could redeemtheir Education Awards for individual orextension classes that did not necessarily lead tothe completion of a degree program.

- AmeriCorps Program Directors should viewthe Education Award as a supplement, and not areplacement of, existing forms of federal studentaid. In other words, AmeriCorps ProgramDirectors should encourage their members toapply early for any other financial aid bycompleting the Free Application for FederalStudent Aid (FAFSA) in January or February ofthe year when the member plans on attendingcollege.

- AmeriCorps Program Directors and membersshould use financial aid offices as a resource formeeting the costs of college. Programs shouldendeavor to invite financial aid officerepresentatives to give presentations to memberson how to correctly complete the FAFSA andsearch for local scholarships. College financialaid offices typically do this on a pro bono basis.

- AmeriCorps Program Directors and membersshould review the sections of this report on CaseStudies and Correctly Completing theWorksheets, with the understanding that neitherthe Education Award nor the Living Allowanceshould count towards a member’s ExpectedFamily Contribution.

What Should AmeriCorps Programs KnowAbout Taxation Issues?

- Though it is beyond the scope of this report todiscuss taxation issues, Program Directorsshould know that taxation is somewhat of a

28

A Final Word to National ServicePrograms and Participants, cont.

factor in morale and to a lesser extentrecruitment/retention. The surveys conducted inthis study suggest that members feel that theyhave been short-changed by CNS regardingtaxation. Program Directors might want to beaware that the decision to tax the EducationAward does not fall within the jurisdiction ofCNS, but, rather, is a determination made by theInternal Revenue Service. Though this fact doesnot change the taxability of the EducationAward, it is worth mentioning to members sothat they understand that their voices are notbeing disregarded by the national service familyof programs.

- One simple recommendation that ProgramDirectors may wish to offer their members ismore a matter of logic than tax advice per se.Members should know that the tax yearcoincides with the calendar year, so that anyamount of money earned (or in the case of theEducation Award, redeemed) between January 1and December 31 serves as the tax base. Oneway, then, that members have avoidedsingularly large tax bills is by redeeming half oftheir Education Awards in one year, say forexample 1998, and the other half of theirEducation Awards after January 1 of thefollowing year, in this case 1999. This approachcan be applied whether paying for tuition orrepaying past student loans.

- Though neither Program Directors nor currentAmeriCorps members should engage inlobbying efforts, both may want to be aware thatthere is a growing number of former memberswho are active in promoting service andimproving the lives of those who serve.AmeriCorps Alums, for example, is active inresearching the taxation of the Education Awardand colleges that offer matching scholarships(www.americorpsalums.org).

What About ‘Matching Awards’?

Second only to questions regarding taxation areinquiries into which schools offer so-called‘matching awards’. A few thoughts:

- There is no ‘industry-wide standard’ when itcomes to matching awards. Some schools offerto match the amount of the Education Award,while some schools offer scholarships in setamounts that remain constant regardless of theamount of Education Award earned. Someinstitutions offer the scholarships on acontinuing basis, while others offer one-timeonly awards. I know of no college that offers anunlimited number of true ‘matching’scholarships to all AmeriCorps members whoattend.

- In many cases, attending a college simplybecause it offers a ‘matching scholarship’ maynot necessarily offer a financial benefit. If acollege with a tuition of $24,000 per year offersto match a member’s $4,725 Education Award,that member would still be better off financiallyby attending his/her state college, whose tuitionis only $5,000 per year. The point is this: theEducation Award is meant to be a tool to helppeople achieve the dream of a higher education,and not the means to and end in itself.Members would be better served by planningout their dreams and seeing how their EducationAwards can help them get there. If the schoolthat offers what the member wants to study alsooffers ‘matching awards’, so much the better.

- AmeriCorps programs should considerpartnering with local college admissions officesin order to double recruiting efforts. Forexample, many state colleges receive inquiriesfrom students who live in other states. Often,these students will not attend those colleges

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A Final Word to National ServicePrograms and Participants, cont.

until they gain state residency, since in-statetuition is often much cheaper. This usuallymeans that the prospective student must move toand work for at least one year in the state inquestion. AmeriCorps Program Directors mightwant to see if the admissions offices at thesecolleges would be willing to refer theseprospective students to their AmeriCorpsprogram, since they will be looking forsomething to do for one year. In exchange,AmeriCorps programs may want to inviteadmissions counselors from these schools togive presentations about their institutions to theAmeriCorps members. Such a partnership wasbegun at the Evergreen State College with localAmeriCorps programs in the Puget Sound area.

Though Evergreen offers ‘matching awards,’ offar greater financial benefit is the difference forprospective students between in-state and out-of-state tuition. The Evergreen State CollegeMatching Scholarship is $2,100, while thesavings in tuition for an Evergreen student bygaining state residency is over $7,000.

- If AmeriCorps Program Directors want toapproach a local college or university aboutcreating a ‘matching award’, they may wish todo some research into the language ofenrollment management. Many ProgramDirectors ask colleges to create scholarships fortheir members out of altruistic reasons, as anappreciation of the local community service theAmeriCorps members have performed. Whilethis service is no doubt important, a college isfar more likely to be moved into creating‘scholarships’ if that money can be used to helpthe college reach its enrollment goals. Anapproach along these lines would includeinforming the enrollment management officethat between 1994 and 2000 over $440 millionworth of Education Awards have been redeemed

by students completing their higher education.Many colleges remain unaware that within 50miles of their campuses are perhaps hundreds ofmen and women earning $4,725 to attend thecollege of their choosing.

Where Should Programs Turn When TheyHave Questions Regarding the EducationAward?

- There are several sources that AmeriCorpsprograms can turn to while CNS works toimprove the body of information availableregarding the Education Award. Many stateshave local ‘experts’ on the Education Award,and programs may want to talk with theirrespective state CNS officers to see who is outthere. AmeriCorps Alums is also dedicating asubstantial amount of effort to answering manyof the questions that members have, such aswhich colleges match the Education Award. Inaddition, as the research begun under thisfellowship is continued, programs will want toperiodically visit the CNS web site, atwww.nationalservice.org.

Brandon RogersNational Service Fellow 2000-2001AmeriCorps VISTA 1997-1998

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