FAFSA Tutorial: Dislocated Workers and Displaced Homemakers

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The Free Application for Federal Student Aid (FAFSA) asks whether the student, the student’s spouse (if the student is married) or the student’s parent(s) (if the student is a dependent student) is a dislocated worker. This question is important for those who have been laid off or who have been struggling due to a loss of income or underemployment. Answering “yes” to these questions may enable the applicant to qualify for the simplified needs test or automatic zero EFC (Expected Family Contribution).

This question is prone to error, as many applicants misinterpret it as including anybody who has lost a job. It is important to read the definition of a dislocated worker carefully. If the student, the student’s spouse or the student’s parent is incorrectly reported as a dislocated worker, it may cause the FAFSA to skip some questions. When the FAFSA is corrected later, the applicant will need to answer those questions. This can cause delays in the determination of eligibility and possible receipt of financial aid funds.

Definition of Dislocated Worker

A dislocated worker is defined in the Workforce Investment Act of 1998 (29 USC 2801) as a person who falls into one of the following categories:

  • Someone who is eligible for or receiving unemployment benefits (or who has exhausted eligibility for unemployment benefits or was ineligible because of insufficient earnings or because the type of services performed weren’t covered by the state’s unemployment compensation law) because he/she was laid off or lost a job (or has received a layoff or termination notice) and is unlikely to return to a previous occupation.
  • Someone who is terminated or laid off from employment (or received a termination or layoff notice) because of a permanent closure of, or substantial layoff at, a plant, facility or enterprise.
  • Someone who is the spouse of an active duty member of the U.S. Armed Forces and either is a displaced homemaker or has lost his or her employment because of relocating due to a permanent change of duty station.
  • Someone who is employed at a facility where the employer has announced that the facility will close within 180 days.
  • Someone who is self-employed and is unemployed because of a natural disaster or because of the general economic conditions in his or her community.
  • Someone who is a displaced homemaker.

A person who voluntarily quits his/her job or who is terminated for cause is not considered to be a dislocated worker.

If a parent answers “Yes“ to the dislocated worker question on the FAFSA, they may be asked to provide proof of their status as a dislocated worker. Documentation can include a copy of the termination notice, paperwork demonstrating the recent receipt of unemployment benefits and a letter from the employer indicating that the employee is unlikely to be recalled for at least six months.

Definition of Displaced Homemaker

A displaced homemaker is someone who satisfies all of the following criteria:

  • They provided unpaid servicers to family members in the home, such as a stay-at-home parent.
  • They were supported by income from another family member but are no longer supported by that income.
  • They are unemployed or underemployed and are having difficulty obtaining or upgrading employment.

Documenting Status as a Dislocated Worker

The applicant may be asked to provide documentation to support claims of dislocated worker status. Such documentation may include, but not be limited to, the recent receipt of unemployment benefits, copies of employer termination and layoff notices, copies of previous years’ federal income tax returns (to demonstrate a reduction in income), copies of death certificates, or copies of divorce decrees and separation agreements.

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