In What Instances Is the PJ Flag Required For 2024-25?

This AskRegs Knowledgebase Q&A is based on guidance prior to the U.S. Department of Education's (ED's) April 1, 2024 Electronic Announcement (GENERAL-24-29). We will update this Q&A when ED provides additional guidance.

According to guidance NASFAA has received from ED for the 2024-25 award year, the financial aid administrator (FAA) will need to set the Professional Judgment Flag (PJ Flag) on the Institutional Student Information Record (ISIR) only in the following situations:

1. There are changes (corrections, updates, or PJ adjustments) to federal tax information (FTI) that is retrieved from the Internal Revenue Service (IRS) via the FUTURE Act Direct Data Exchange (FA-DDX), and the FAA determines a need to override the FTI and trigger a recalculation of the student aid index (SAI);
2. There are required corrections to FTI retrieved from the IRS via the FA-DDX when an amended tax return was filed with the IRS after the FAFSA was completed, and the FAA determines there is a need to override the FTI and trigger a recalculation of the SAI;
3. There are individuals who file both an IRS tax return and a tax return with Puerto Rico or another U.S. territory and the FTI from the IRS must be corrected to reflect the territory tax return and override the FTI from the FA-DDX, as instructed in the December 19, 2023, Electronic Announcement (GENERAL-23-118); or
4. The FAA uses their PJ discretion to make PJ adjustments to non-FTI data (such as the Foreign Earned Income Exclusion, child support received, assets, etc., but not the cost of attendance).

These are the only times setting the PJ Flag is required. Except for non-FTI PJ adjustments in #4, the FAA only sets the PJ Flag when there is a need to override FTI from the FA-DDX.

There is a difference between a correction and a PJ adjustment, as explained in AskRegs Q&A, What's the Difference Between a Correction, an Update, and a PJ Adjustment? If the school makes a correction (not a PJ adjustment) to non-FTI data such as assets, Foreign Earned Income Exclusion, taxable scholarships, etc., they do not set the PJ Flag. Likewise, do not set the PJ Flag for other changes that do not affect the student's Title IV eligibility, such as updating addresses, updating or removing school codes, etc. And, according to ED, do not set the PJ Flag when correcting or updating family size.

Remember: According to GEN-23-12, “…when federal tax information (FTI) is transferred via the FA-DDX to the FAFSA, it is considered verified, while information not transferred from the IRS may be subject to verification.” According to ED, when there is only FTI, no manually entered data, and no amended tax return, this means that the FTI fields should not be verified further, nor corrected. When changes to FTI are necessary, the FAA should set the PJ Flag to override the FTI and send the ISIR corrections with the updated fields either via the FAFSA Partner Portal (FPP) or the Electronic Data Exchange (EDE). These changes will generate a new FAFSA transaction, and a new ISIR will be sent to the school indicating any changes to the student’s Title IV aid eligibility.

Per ED, the FAA should set the PJ Flag to override the FTI and send the ISIR corrections with the updated fields either via the FAFSA Partner Portal (FPP) or the Electronic Data Exchange (EDE). These changes will generate a new FAFSA transaction, and a new ISIR will be sent to the school indicating any changes to the student’s Title IV aid eligibility.

When asked whether this excessive use of the PJ Flag for purposes beyond PJ will trigger program reviews, ED responded that program reviewers will be well-informed on ED's instruction to use the PJ Flag to trigger an SAI recalculation. What they evaluate (and do not evaluate) during reviews will reflect that.

As with past behavior when setting the PJ Flag, this means one school will not see corrections, updates, or adjustments made by another school.

See AskRegs Q&As:

• What Is Federal Tax Information (FTI)?
• What Corrections Are Required When Someone Files a Tax Return With Both the IRS and a U.S. Territory?

Advocacy Note: NASFAA is aware that this practice is not ideal and that it has tracking implications when trying to separate PJ adjustments from corrections and updates. NASFAA hopes, and will continue to advocate, that this practice will only remain in place for the 2024-25 award year.