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 (HEERF) 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.)

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.

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 are to spend HEERF base funds within one calendar year from the date they receive their last award. 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 HEERF—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 Is to Receive Over $5 Billion in Base Funds. The new legislation requires ED to determine base allocations according to the same six-part formula used in the second round. The department announced the new allocations on May 11. As Figure 4 shows, higher education institutions in California are to receive $5 billion in base funds—slightly more than the total amount of HEERF funds provided across the first two rounds ($4.9 billion). At a minimum, public and private nonprofit institutions are required to spend slightly more than half of their base funds on student aid, with the remaining funds available 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. Institutions are to spend these funds, as well as any remaining first- and second-round base funds, within one calendar year from the date they receive their third-round base award.

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.” Federal guidance provides many examples of allowable evidence-based activities, such as diagnostic testing, contact tracing, setting up vaccination sites, providing personal protective equipment, and implementing physical distancing. Institutions have flexibility to decide which specific practices to implement. Second, the ARP legislation 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.

New Federal Guidance Extends Aid to Undocumented Students. In spring 2020, the previous federal administration had issued guidance limiting eligibility for HEERF student aid to students eligible for traditional financial aid under Title IV of the federal Higher Education Act. As a result, undocumented students were initially ineligible for HEERF aid. When announcing third-round allocations, the new federal administration changed course. New ED guidance indicates that all students enrolled during the COVID-19 national emergency are eligible for HEERF aid. This new rule allows students of various citizenship statuses, including undocumented students, to receive HEERF aid.