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Lisa Qing

Budget and Policy Post
May 3, 2021

COVID-19


Third Round of Federal Higher Education Relief Funding


The American Rescue Plan (ARP) Act of 2021, signed by the President on March 11, 2021, provides $1.9 trillion for a broad array of efforts related to the coronavirus disease 2019 (COVID-19). This is the third piece of federal legislation that contains substantial COVID-19 relief funding for colleges and universities. In this post, we recap the key elements of the first two rounds of relief funding for colleges and universities, then describe the key elements of the third round of funding. (More detail about the earlier rounds are available in An Overview of Federal Higher Education Relief and Second Round of Federal Higher Education Relief Funding.) The Legislature has no direct control over how colleges and universities spend these particular relief funds, as ARP allocates these funds directly to campuses and specifies the allowable uses. (In contrast, the Legislature has discretion over an estimated $26 billion in flexible ARP fiscal relief funds, which the state may use for a broad array of purposes, including higher education. More detail about this flexible funding is available in Flexible Funding to California in the American Rescue Plan.)

Recap of Previous Relief Funding

Two Previous Federal Relief Packages Provided Funds for Higher Education. The federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed in March 2020, created the Higher Education Emergency Relief Fund and provided $14 billion nationally for it. The federal Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA), signed in December 2020, provided an additional $22.7 billion nationally for this purpose. As Figure 1 shows, California’s higher education institutions received a total of $1.8 billion in the first round of federal relief under the CARES Act, followed by a total of $3.1 billion in the second round under CRRSAA. Both rounds of funds were allocated directly to institutions, with public and private institutions eligible for funding. In each round, the U.S. Department of Education (ED) allocated the vast majority of the funds—which we refer to as “base funds”—according to the formulas described in Figure 2. The remaining funds in each round were reserved for supplemental awards to minority-serving institutions and institutions with unmet need. (As of this writing, the second round of funds for institutions with unmet need have not yet been allocated.)

Figure 1

First Two Rounds Provided $4.9 Billion for
Higher Education in California

(In Millions)

Funds

CCC

CSU

UC

All Other
Institutions

Total

CARES Acta

Base funds: institutional relief

$290

$263

$130

$171

$854

Base funds: student aid

290

263

130

171

854

Minority‑serving institutions

33

38

7

4

84

Institutions with unmet need

32

33

Subtotals

($613)

($564)

($267)

($379)

($1,824)

CRRSAAb

Base funds: institutional relief

$1,023

$591

$261

$188

$2,063

Base funds: student aid

290

263

130

196

879

Minority‑serving institutions

64

55

10

13

142

Subtotals

($1,377)

($908)

($401)

($397)

($3,084)

Totals

$1,991

$1,472

$668

$776

$4,908

aFigure excludes $54 million from the Coronavirus Relief Fund allocated to the California Community Colleges as part of the state’s 2020‑21 budget package. Chart also excludes any CARES Act funding that a higher education institution might have received for research or other targeted purposes.

bFigure excludes supplemental awards for institutions with unmet need. As of March 2021, recipients have not yet been announced.

CARES = Coronavirus Aid, Relief, and Economic Security and CRRSAA = Coronavirus Response and Relief Supplemental Appropriations Act.

Figure 2

Two Formulas Have Been Used to Allocate Base Funds

Component

Weight

CARES Act

CRRSAA

FTE students receiving Pell Grantsa

75.0%

37.5%

Headcount of students receiving Pell Grantsa

37.5

FTE students not receiving Pell Grantsa

25.0

11.5

Headcount of students not receiving Pell Grantsa

11.5

FTE of Pell Grant recipients enrolled fully in distance education prior to COVID‑19

1.0

Headcount of Pell Grant recipients enrolled fully in distance education prior to COVID‑19

1.0

Totals

100.0%

100.0%

aExcludes students enrolled fully in distance education prior to the COVID‑19 pandemic.

CARES = Coronavirus Aid, Relief, and Economic Security; CRRSAA = Coronavirus Response and Relief Supplemental Appropriations Act; FTE = full‑time equivalent; and COVID‑19 = coronavirus disease 2019.

Federal Funds Have Supported Student Aid and Institutional Relief. In both rounds, base funds were to be used for a specified mix of student financial aid and institutional relief. Under the first round, institutions were required to spend at least half of their base funds on student aid. Under the second round, public and private nonprofit institutions were required to spend at least the same amount on student aid as they did in the first round, while for-profit institutions were required to spend all of their base funds on student aid. Any funds not designated for student aid were available for institutional relief. Figure 3 describes the eligible uses of student aid and institutional relief funds in each round. (Once CRRSAA was enacted, institutions with unspent relief funds from the first round were allowed to repurpose those funds for uses allowable under the second round.) Under both rounds, supplemental funds for minority-serving institutions and institutions with unmet need could be used for any mix of student aid or institutional relief.

Figure 3

Federal Funds Have Supported Student Aid and Institutional Relief

Eligible Uses of Relief Funds

Funds

CARES Act

CRRSAA

Student Aid

Emergency grants to students for expenses related to campus disruptions resulting from COVID‑19. The legislation did not specify how institutions were to prioritize students for grants.

Grants to students for the regular costs of college attendance or emergency costs related to COVID‑19. Institutions must prioritize grants for students with exceptional need.

Institutional Relief

Institutional expenses associated with significant changes in instructional delivery due to COVID‑19.

Institutional expenses (including lost revenue, reimbursement for prior expenses, technology, training, and payroll) associated with COVID‑19.a

aCRRSAA also explicitly allows the use of institutional relief funds for student support activities authorized by the Higher Education Act. Federal guidance suggests this includes programs that provide early outreach and support to students from disadvantaged backgrounds.

CARES = Coronavirus Aid, Relief, and Economic Security Act; CRRSAA = Coronavirus Response and Relief Supplemental Appropriations Act; and COVID‑19 = coronavirus disease 2019.

Institutions Have Started to Receive Second Round of Funds. ED began awarding the first round of relief funds to institutions in April 2020, and it began awarding the second round of relief funds in January 2021. Based on conversations with the segments in March 2021, many, but not all, institutions had received their second round of base funds. Institutions have one calendar year from the date of their award to spend the associated funds. Federal guidance indicates that institutions may also, under certain circumstances, request an extension of up to one additional year to spend the funds.

Third Round Relief Funding

ARP Act Provides Third Round of Relief Funding for Higher Education. The new legislation provides $39.6 billion nationally for the Higher Education Emergency Relief Fund—slightly more than the amounts provided in the first two rounds combined ($36.6 billion). As in the previous two rounds, the third round of funds are allocated directly to institutions. The third round, however, designates a larger share of base funds for public and private nonprofit institutions and a smaller share for private for-profit institutions. The list below shows the amounts allocated for base and supplemental funds by institution type.

  • $36 billion (91 percent) for base funds to public and private nonprofit institutions.

  • $396 million (1 percent) for base funds to private for-profit institutions.

  • $3 billion (7.5 percent) for supplemental funds to minority-serving institutions.

  • $198 million (0.5 percent) for supplemental funds to institutions with the greatest unmet need, as determined by ED after making other funding allocations.

California Expects to Receive Over $5 Billion in Base Funds. The new legislation requires ED to determine base fund allocations according to the same six-part formula used in the second round. As of this writing, the department had not yet announced the new allocations. Figure 4 shows preliminary estimates of allocations conducted by the American Council on Education. Based on these estimates, higher education institutions in California would receive $5 billion in base funds—slightly more than the total amount of funds provided across the first two rounds ($4.9 billion). Public and private nonprofit institutions are required to spend at least half of their base funds on student aid and may use the remaining funds for institutional relief. By contrast, private for-profit institutions are required to spend their entire base funds on student aid. The allowable uses for both the student aid and institutional relief portions are largely the same as under the second round.

Figure 4

California Higher Education Expected to
Receive $5 Billion in Base Fundsa

ACE’s Preliminary Estimates for American Rescue Plan Act (In Millions)

Segment

Student
Aid

Institutional
Relief

Total

CCC

$1,157

$1,157

$2,314

CSU

744

744

1,488

UC

343

343

685

Private nonprofit

237

236

473

Private for profit

66

66

Other public

7

7

15

Totals

$2,553

$2,487

$5,040

aDoes not include supplemental awards for minority‑serving institutions and institutions with unmet need.

ACE = American Council on Education.

Certain Institutions Will Also Receive Supplemental Funds. In addition to base funds, supplemental funds will be provided to minority-serving institutions and certain institutions with unmet needs. ED has not yet announced these allocations as of this writing. Under the new legislation, the rules for supplemental allocations are largely the same as under the second round. For minority-serving institutions, the funding calculation has two main steps. First, the department allocates funds to each minority-serving program (such as the Developing Hispanic-Serving Institutions program) in proportion to its funding level in federal fiscal year 2019‑20. The funds for each program, in turn, are distributed to eligible institutions using a statutory formula—in most cases, the same formula as used for base funds. For institutions with unmet needs, the department is to award funds through an application process after all other allocations are made. As in previous rounds, institutions may use supplemental funds for any combination of student aid and institutional relief.

Institutions Must Spend a Portion of Funds on Two New Requirements. First, the ARP legislation requires institutions to “implement evidence-based practices to monitor and suppress coronavirus in accordance with public health guidelines.” Second, it also requires institutions to conduct outreach to students about the opportunity to have their financial aid packages adjusted to reflect certain circumstances, including recent unemployment. The legislation does not specify what portion of an institution’s relief funds are to be spent on each of these requirements.