Newest COVID-19 Stimulus Bill Provides Further Relief in Education Space

Pillsbury Winthrop Shaw Pittman LLP

Pillsbury Winthrop Shaw Pittman LLP

The Consolidated Appropriations Act, 2021 includes nearly $23 billion in funding to institutions of higher education.


  • Appropriates approximately $81.9 billion for education, including nearly $23 billion to institutions of higher education (IHEs)
  • Expands eligibility for Pell Grant amounts and simplifies the Free Application for Federal Student Aid (FAFSA)
  • Forgives $1.3 billion in loans to historically Black colleges and universities (HBCUs)

The Consolidated Appropriations Act, 2021 (CAA)—the latest COVID-19-related stimulus legislation signed into law on December 27, 2020—makes available almost $81.9 billion for the Education Stabilization Fund (ESF), of which $22.7 billion is set aside as relief funding to be distributed by the U.S. Department of Education (ED) to IHEs through the Higher Education Emergency Relief Fund (HEERF). Section 311(a). These funds are in addition to the relief funding allocated under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, as described here and here, and will remain available through September 30, 2022, for IHEs to prevent, prepare for, and respond to the COVID-19 on the postsecondary level.

In addition, the CAA provides $54.3 billion in further relief for K-12 education through the Elementary and Secondary School Emergency Relief Fund (ESSER) and $4.1 billion for the Governor’s Emergency Education Relief Fund (GEERF), also available through September 30, 2022, to prevent, prepare for, and respond to the COVID-19 on the state and school district levels. Like the CARES Act, the CAA establishes a reporting requirement to account for use of these funds.

Some of the CAA’s more noteworthy sections include:

Injection of Additional Funds into HEERF: Section 314 provides that the HEERF, which was implemented by the CARES Act and initially allocated $14 billion, will be topped up with an additional $22.7 billion.

  • Of this additional amount, $20.2 billion will be allocated to public and private non-profit IHEs to compensate for lost revenue, reimburse expenses, pay for technology costs associated with shifting to remote education, and make financial aid grants to students, among other qualifying purposes. Section 314(a). The remainder of the $22.7 billion is allocated to HBCUs, tribal colleges, minority serving institutions, as well as for-profit IHEs.
  • The funds will be distributed by a formula that considers both full-time equivalent (FTE) enrollment and head count—unlike the CARES Act, which considered only FTE enrollment.
  • From these new funds, IHEs must provide “at least the same amount of funding in emergency financial aid grants to students” as IHEs were required to provide under Sections 18004(a)(1) and (c) of the CARES Act. Section 314(d)(5).
  • These emergency financial aid grants may be applied to a broader range of expenses than permitted under the CARES Act, including “any component of the student’s cost of attendance or for emergency costs that arise due to COVID-19, such as tuition, food, housing, health care (including mental health care), or child care.” Section 314(c)(3).
  • Additionally, IHEs are directed to prioritize the award of grants to students “with exceptional need, such as students who receive Pell Grants.” Section 314(c)(3).

Provision of Additional Funding for ESSER: Section 313 grants an additional $54.3 billion to the ESSER, which was originally endowed with approximately $13 billion by the CARES Act.

  • Each state must allocate “not less than 90 percent” of the funds under Section 313 as “subgrants to local educational agencies” (LEAs). Section 313(c).
  • LEAs may then apply these funds to respond to the COVID-19, to provide “school leaders with the resources necessary to address the needs of their individual schools”, and a host of other qualifying purposes. Section 313(d).

Expansion of Eligibility for Maximum Amount of Pell Grants: Section 473 expands the eligibility of families to receive the maximum Pell Grant amount of $6,000 to those who earn less than 175 percent of the federal poverty level. This expansion of eligibility is projected to enable an additional 1.7 million students from lower-income families to receive the full Pell Grant amount and make 555,000 students newly eligible for Pell Grant awards.

  • The CAA also restores Pell Grant eligibility for incarcerated individuals, who, under the Violent Crime Control and Law Enforcement Act of 1994, were prohibited from receiving Pell Grants. Incarcerated individuals are eligible so long as they are enrolled in an eligible prison education program and satisfy the grant program’s other eligibility requirements.

Simplification of FAFSA: Title VII of the CAA provides for a simplification of FAFSA application procedures to make it “easier to apply for federal aid” and to make “that aid predictable.” Section 702.

  • Specifically, the CAA reduces the amount of information to be provided by applicants in their FAFSA applications for the award year 2023-2024 and subsequent years. Section 483.
  • The CAA also removes the requirement that male students must register with the Selective Service to be eligible for federal aid. Section 484.

Forgiveness of HBCU Capital Financing Loans: The CAA provides that, not later than 90 days after the effective date of the CAA, the Secretary of Education shall repay the outstanding balances of principal, interest, fees and costs on the disbursed loan amounts for each applicable loan agreement closed by HBCUs affected by the pandemic who could not repay their loans owed to the federal government. Section 706. This relief is forecast to result in the forgiveness of more than $1.3 billion in outstanding loans.

Other Noteworthy Provisions:

  • Repeal of the Direct Subsidized Loan Limit: The CAA repeals the limitation on lifetime subsidized loan eligibility, known as the Subsidized Usage Limit Applies (SULA) requirement, which bars students from receiving subsidized direct loans for more than 150% of the published length of their program. Section 705. The CAA requires ED to implement this repeal by July 1, 2023, but the Secretary of Education may do so beforehand.
  • Creation of Office of Minority Broadband Initiatives: The CAA establishes an Office of Minority Broadband Initiatives at the National Telecommunications and Information Administration that will focus on broadband access and adoption at HBCUs, Tribal Colleges, and other minority-serving institutions. Section 902(b). A related pilot program fund will have access to $285 million to award grants to these institutions to support broadband connectivity. Section 902(c).
  • No Extension of Student Debt Repayment Deferral: The CAA contains no student debt forgiveness or deferral provisions. Student debt holders must, therefore, resume payments in February 2021.

Finally, the CAA includes many other provisions within its 5,593 pages that may benefit IHEs, as summarized here, including fiscal year 2021 appropriations for ED. Notably, the CAA provides ED with $2.5 billion for higher education programs—representing an increase of $66 million over the appropriation from 2020. Leadership at IHEs should consider these other elements when assessing the overall impact of the CAA on their institution.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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