Over $21 Billion in Emergency Grant Aid Available to Higher Education Institutions and Students through HEERF II Funding Under the Coronavirus Response and Relief Supplemental Appropriations Act

On December 27, 2020, the president signed into law the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA), which provides more than $81 billion in emergency support to elementary, secondary and postsecondary education. Over $21 billion of that total is allocated to higher education, including public, private nonprofit, and proprietary institutions and their students. Building on the structure of the Higher Education Emergency Relief Fund (HEERF) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act of March 2020, the U.S. Department of Education (ED) has designated these additional higher education support funds under the CRRSAA as “HEERF II.”

The CRRSAA requires ED to distribute HEERF II funding to public and nonprofit postsecondary institutions (under Section 314(a)(1)) and to proprietary institutions (under Section 314(a)(4)) on the following basis:

• 37.5% on FTE enrollment of Pell Grant recipients who were not enrolled exclusively in distance education prior to the COVID-19 national emergency declared March 13, 2020 (the “qualifying emergency”).
• 37.5% on total headcount enrollment of Pell recipients who were not enrolled exclusively in distance education prior to the qualifying emergency.
• 11.5% on FTE enrollment of non-Pell recipients who were not enrolled exclusively in distance education prior to the qualifying emergency.
• 11.5% on total headcount enrollment of non-Pell recipients who were not enrolled exclusively in distance education prior to the qualifying emergency.
• 1% based on FTE enrollment of Pell recipients who were exclusively enrolled in distance education prior to the qualifying emergency.
• 1% based on total headcount enrollment of Pell recipients who were exclusively enrolled in distance education prior to the qualifying emergency.

This apportionment formula reflects several notable departures from the original HEERF formulation under the CARES Act. For example, by providing for both FTE and total headcount elements, this HEERF II apportionment formula does not disadvantage institutions that have a significant part-time student body. This formula also thereby recognizes the higher administrative costs inherent in providing multiple emergency aid grants and related educational services to several part-time students rather than administering a single grant to one full-time student. Finally, the apportionment formula explicitly provides for allocations to institutions based on their provision of purely distance education programs to students at the time of the qualifying emergency.

On January 14, 2021, ED announced the availability of HEERF II funds, as well as the application process and permitted uses for these grant awards. Although HEERF II is similar in general structure and purpose to the original HEERF funding under the CARES Act, it also has some important differences, including by providing additional flexibilities for the use of certain institutional funds, by mandating the priorities under which student grant amounts are determined, and by permitting the application of student grant awards to an outstanding balance under specific conditions. Key provisions of HEERF II are summarized below, with significant additional information available on the ED website dedicated to HEERF II, including a fact sheet comparing the original HEERF and HEERF II.

HEERF II for Public and Nonprofit Postsecondary Institutions and Students

As was true under the original HEERF, public and private nonprofit institutions will receive funding for both student and institutional shares under HEERF II. ED has published those allocations here, with the allocations reflecting the CRRSAA requirement that public and nonprofit institutions expend at least as much (in dollars) on emergency student aid as they were required to award to students under the original CARES Act HEERF. However, HEERF II permits broader uses of those funds for both students and schools. For instance, student grants under HEERF II may be used for any element of a student’s cost of attendance, or for emergency costs relating to the COVID-19 pandemic, including housing costs, food costs, or health care or childcare expenses. When disbursing emergency grants to students, institutions are charged with prioritizing the students with the most “exceptional need” per ED guidance (for instance, although not limited to, Pell-eligible students and others with previously established financial hardships). Additionally, students receiving emergency grants under HEERF II do not need to be eligible for Title IV student financial aid under Section 484 of the Higher Education Act, as ED’s previous guidance under the CARES Act had determined, but it remains the case that students must not be generally ineligible for the receipt of federal public benefits. Students enrolled in exclusively distance education programs are also eligible for HEERF II emergency grants.

The institutional portion of HEERF II funding may be used for any purpose permitted under the CARES Act HEERF, but it may also be used to train faculty and staff, to supplement lost revenue, to reimburse for expenses already incurred, to meet payroll, or to cover costs associated with transitioning to remote learning. Whereas the CARES Act provided institution funds to support “significant changes in the delivery of instruction” due to the COVID-19 pandemic, to which ED interpreted and applied a “clear nexus” standard, per ED guidance the CRRSAA permits the institutional portion of HEERF II funds to be used more broadly “to defray expenses associated with coronavirus” or to “carry out student support activities authorized by the HEA that address needs related to the coronavirus.” In addition, if an institution has any unexpended institutional-portion CARES Act HEERF funds as of December 27, 2020, those funds may be spent with the greater flexibilities provided under HEERF II. (However, those earlier HEERF funds must still be spent within a year of being awarded.)

If a public or private non-profit institution applied for original HEERF funding under the CARES Act, no additional application is needed to receive HEERF II funds. However, for public and private nonprofit institutions that did not draw down their allocated HEERF funding under the CARES Act, a completed application must be submitted by April 15, 2021. Completed applications will consist of SF-424 and SF-424 supplemental forms; a Certification and Agreement (for either the student aid or institutional portions, or both, as applicable); and the required notification of endowment excise tax paid, where applicable. (Per the CRRSSA, for institutions that paid or will be required to pay an endowment excise tax for tax year 2019, their HEERF II allocation under the otherwise applicable formula has been reduced by 50%. The remaining funds “must be expended on financial aid grants to students or for sanitation, personal protective equipment (PPE), or other expenses associated with the general health and safety of the campus environment related to the coronavirus emergency,” but institutions paying the excise tax may also seek to obtain a waiver of these limitations.)

Institutions should minimize the amount of time between drawing down funds from their federal G5 account and making the emergency aid payments for which those funds were drawn. Institutions are therefore encouraged to have completed their plans to provide grants to students, or for other allowable institutional uses, as soon as possible, and ideally in advance of drawdown. Student grants not made within 15 days after the corresponding drawdown, and institutional payments not made within three days, may be subject to ED compliance auditing. Institutions continue to have one year from the date of receipt to spend funds under both the original HEERF and HEERF II.

HEERF II for Students of Proprietary Institutions

The CRRSAA separately appropriated $681 million in HEERF II funds to proprietary institutions, for which ED has published specific allocations here. Unlike the original HEERF allocations under the CARES Act, proprietary institutions may use their HEERF II allocations solely to provide emergency financial grants to students. Consequently, there is no institutional portion of HEERF II funds for proprietary institutions. In addition, regardless of whether a proprietary institution participated in HEERF funding through the CARES Act, it must submit an application by April 15, 2021 in order to receive its allocation under HEERF II. Proprietary institutions that have not yet complied with the reporting requirements under the original HEERF also may not be able to draw down their funds until such reporting is complete. As explained by ED’s FAQ specific to proprietary institutions, the completed application must include a Certification and Agreement, SF-424, and SF-424 supplemental form in order to receive their allocation under Section 314(a)(4). Due to staffing levels at ED, institutions may wish to submit their completed applications as soon as possible, in order to receive HEERF II awards at the earliest possible date.

When making emergency financial aid grants to students, proprietary institutions are also charged with prioritizing the students with the most “exceptional need,” as are public and non-profit institutions. Whether public, private non-profit, or proprietary, no institution may condition a student’s receipt of an emergency grant on continued enrollment, nor may the grant be applied directly to a student’s outstanding balance unless the student has affirmatively opted in to such application.

Additional HEERF II for HBCUs, MSIs, Tribal Colleges and Universities, and FIPSE Beneficiaries

As was true under the original HEERF, the CRRSAA appropriates additional HEERF II funding for these institutions, specifically under Sections 314(a)(2) and (a)(3). Many of these institutions received allocations through Section 314(a)(1) and are eligible to obtain and disburse these funds as described above. However, because the CRRSAA permits ED to take up to 60 days to allocate funds to HBCUs, MSIs, and tribal institutions, and up to 120 days to allocate FIPSE-related funds, the release of these additional allocations and related guidance remains pending from ED.

CRRSAA Education Funding Outside of HEERF II

Like the CARES Act, the CRRSAA also provides emergency funding to support K-12 schools, including over $54 billion to support safe reopening of schools, measure student progress, assist students who may have fallen behind, and provide students with technological and other resources they require to achieve at or above grade level. The CRRSAA also provides $1.3 billion in supplemental emergency relief aid to the Governor’s Emergency Education Relief Fund (GEER II), with allocations based on the original GEER funding formula found in the CARES Act. Finally, and unlike the CARES Act, the CRRSAA provides over $2.7 billion for Emergency Assistance to Non-Public Schools (EANS) awards. An additional client alert, focusing on these separate provisions, will be forthcoming.

We encourage you to review the education provisions of the CRRSAA for their potential application to any aspect of your institution or the students you serve. Should you have questions regarding this matter, or other educational regulatory matters, please do not hesitate to contact any member of our Education team or your usual contact at Faegre Drinker.