The US Department of Education just issued a new “Dear Colleague Letter”, which in financial aid industry jargon is usually a regulatory change or a change in how regulations and laws are supposed to be interpreted. In the April 2, 2009 Dear Colleague Letter, the Department of Education has offered additional flexibility to financial aid administrators. You can read the original letter here.

Financial aid administrators are now permitted to use a 12 month window for projected future earnings and base family income, a departure from the traditional calendar year/tax year.

Example: if you lose your job in November of 2008, for financial aid appeal purposes, instead of the financial aid office using calendar year 2008 for determining your aid eligibility, they are now permitted to use December 2008-November 2009 projected earnings as the basis of how much aid you’re eligible for.

Why this is important: given the current economy, people are out of work and remaining out of work longer than average; some families are using up their entire unemployment insurance allotment, which is half a year. Being able to use a drastically reduced income estimate will qualify more students for aid and assistance.

Financial aid administrators were also urged by the Department to steer students away from private student loans unless all other federal financial aid options were exhausted, and to do more aggressive outreach to families to let them know that they can appeal for additional aid and at the very least can help connect more families to the federal Stafford loan if they’re not already taking advantage of it.

For a step by step tutorial about how to ask for more financial aid, read this article at the Financial Aid Podcast.