On March 6, Congress passed The American Rescue Plan Act of 2021, President Biden's $1.9 trillion coronavirus response package. After weeks of negotiations, the new Congress managed to enact, albeit essentially along party lines, the long-awaited relief
package through a budget process that allows legislation to pass with a lower number of votes than the standard 60.
Shortly after the Biden administration released its plans for initial action on COVID relief, NCAN wrote about the expected package and the considerable funding to be directed to K-12 and higher education. Now with the American Rescue Plan Act in law, below are the need-to-know provisions for NCAN members.
Education Funding
The bill provides $122.7 billion for the Elementary and Secondary School Emergency Relief (ESSER) Fund. Similar to past COVID relief packages, the ESSER Fund is distributed in grants to states, allocated based on a state’s share of Title I funds received
in the most recent fiscal year. States provide subgrants to local educational agencies (LEA), based again on each LEA’s share of Title I funds.
$800 million of this amount is reserved for the U.S. Department of Education (ED) to identify and assist homeless children and youth to attend school and receive wrap-around services. The bill does not specify under what structure ED will administer these
funds.
The bill would provide $39.5 billion to institutions of higher education (IHEs), through the Higher Education Emergency Relief (HEER) Fund. Public and private nonprofit IHEs receiving funds must use at least 50% to provide emergency financial aid grants
to students. For-profit IHEs must use 100% of funds to provide emergency financial aid grants to students. Further guidance is expected from ED on whether student eligibility for emergency aid will be different from prior rounds of COVID relief funding.
For more background information, please see this NCAN blog from April 2020: "DACA, Undocumented Students Not Eligible for Emergency Aid."
For those interested in how this funding compares to previous pandemic relief bills, the National Association of Student Financial Aid Administrators (NASFAA) published a comparison table of HEER funding in all COVID relief packages.
Student Loan Forgiveness Tax Change
The bill would eliminate taxation on portions of postsecondary education loans that are discharged by the federal government. This type of loan relief is typically treated as income and therefore taxable. The provision covers loans for postsecondary educational
expenses, including federal student loans and certain private education loans. This applies within the following timeframe: after Dec. 31, 2020, through Jan. 1, 2027.
Direct Payments
The bill provides for payments of up to $1,400 for individuals, $2,800 for couples, and an additional $1,400 for each dependent. This means that, unlike previous COVID-19 relief bills, taxpayers will get payments for dependents of any age, including college
students or adult parent dependents.
The IRS will administer the payments based on taxpayers’ 2019 or 2020 tax returns. The benefit is refundable (so an individual does not need to have had income to receive the payment) and eligible individuals with an adjusted gross income of $75,000 per
year ($150,000 for couples filing jointly) are eligible for the full $1,400. Individuals earning more than $80,000 and couples earning more than $160,000 are ineligible for the payments.
Professional Judgment
Institutions receiving aid from the HEER Fund are required to dedicate funds to conduct direct outreach to financial aid applicants about professional judgment – the opportunity to receive a financial aid adjustment due to factors such as recent unemployment.
The provision follows guidance from the Department of Education (ED) earlier this year encouraging the use of professional judgment and reminding institutions of their ability to use
documentation of unemployment to reduce or adjust to zero an unemployed individual’s income earned from work and adjusted gross income in the federal methodology formula.
“90/10” Rule
Congress has changed a technical rule of how for-profit institutions operate and count revenue from federal sources. Within this new law, for-profits must factor non-ED federal funds, such as educational benefits provided by the U.S. Department of Veteran
Affairs, into what is referred to as the “90/10” calculation. Now, all federal funds that are “disbursed or delivered to or on behalf of a student to be used to attend such institution” count toward the 90% maximum as revenue from federal sources
in the calculation.
This provision is subject to a federal process for regulations called negotiated rulemaking (not to begin before Oct. 1, 2021). The new 90/10 calculations should be applied to IHE fiscal years beginning on or after Jan. 1, 2023.
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