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The Department of Education (ED) recently released guidance to colleges and universities on the third and largest round of funding from the federal government to mitigate the impact of the coronavirus pandemic on students and institutions. The American Rescue Plan Act of 2021 (ARP) provides almost $40 billion to the Higher Education Emergency Relief Fund (HEERF). This infusion is known as HEERF III, following earlier aid provided by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), referred to as HEERF I, and the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) or HEERF II.

ED published allocation tables and a 28-page FAQ on May 11 and also updated its HEERF III resource page with links to these and other relevant information.

ED also announced an important change in policy on which students are eligible to receive HEERF student grant funds. Under the new final rule, published May 14, any individual “who is or was enrolled at an eligible institution on or after the date the national emergency was declared for COVID-19 may qualify for assistance under the HEERF programs.” ED stressed that Congress intended to give schools maximum flexibility in providing aid to those who were negatively impacted by the pandemic. Interim guidance issued last summer had determined that only students eligible for Title IV aid qualified. Schools may now provide emergency relief to any students (including noncitizens) with exceptional need regardless of whether they completed a FAFSA or are otherwise eligible for Title IV aid, though ED is encouraging schools to prioritize domestic students, particularly undergraduates. (See Section B of the ARP FAQ.)

Changes in American Rescue Plan

Required Uses. The ARP introduced two new activities that institutions must undertake with the institutional portion of their HEERF III funds:

  • Implement evidence-based practices to monitor and suppress COVID-19. Such activities might address testing, prevention measures ranging from setting up vaccination sites to enhanced cleaning and disinfection, and student support services.
  • Conduct direct outreach to financial aid applicants about the opportunity for a financial aid adjustment due to recent unemployment of a family member or the student or other circumstances. Although in-person interaction is not required, communications could include email, mail, telephone, or meetings. Simply posting a notification on the institution’s website does not meet the requirement, according to ED.

The ARP does not dictate how much schools must spend on these activities. Institutions should follow the Office of Management and Budget’s Cost Principles that require them to spend the amount necessary to successfully implement the activities, according to the Department. Make sure to document the strategies used and funds expended for these purposes as ED is likely to add new reporting requirements to the HEERF III annual report covering these activities. (Section D of the ARP FAQ.)

No Reduction for High Endowment Institutions. The second coronavirus relief bill enacted in December 2020 cut in half the total funding allocated to wealthier colleges and universities which needed to pay the endowment excise tax for 2019. The ARP does not, so these institutions will receive their total allocation.

Opportunity to Decline Funds. Institutions that have sufficient resources or support from other sources may decline all or a portion of their HEERF III award so that ED may reallocate the funds to schools with more need. The deadline to do so, using the form ED has posted on its resource page, is August 11.

Other Highlights

Determining Exceptional Need. Emergency aid to students must be focused on students with exceptional need. ED calls out Pell Grant recipients or those eligible for other need-based state or federal aid and undergraduates with extraordinary financial circumstances as illustrations. Students facing unexpected expenses or reduced income are also eligible.

Institutions may not condition HEERF aid on student actions or commitments, such as continued enrollment, academic performance, or paying off student account balances. Students must be allowed to determine how they will spend the funds.

Colleges and universities should document how student need was prioritized and keep good records of all HEERF awards. Enhanced reporting requirements are being considered by ED.

Discharging Student Debt. Students who face unanticipated changes to their finances are often left with outstanding balances on their student accounts and no means to pay them. Under existing (and reasonable) policies at most schools, they will be subject to ongoing collection attempts and restrictions on campus services, such as registering for the next term, obtaining a copy of their transcript, or getting clearance to graduate. In a widespread emergency such as the COVID-19 pandemic, colleges and universities are likely to be left with much larger than normal accounts receivable and dubious prospects of recovery.

Institutions can use HEERF funds to reduce or eliminate the debt for these distressed students in one of two ways:

  • Provide an emergency financial aid grant to the current or former student in the amount of the outstanding balance, including associated fees and penalties. The school must have the student’s written permission before applying the funds to the student’s account and cannot condition the award on such consent or the student’s continued enrollment. The student may use the funds for any allowable expense at their discretion.
  • Discharge the balance of the debt and reimburse it as lost revenue using the institutional portion of the school’s HEERF funds. Again, such discharge cannot be conditioned on students’ future commitments. (See Q. 26 of the ARP FAQ; see also Lost Revenue FAQ, 3/19/20.)

Drawing Down Funds. Colleges and universities that have received funding under HEERF I (CARES Act) and/or HEERF II (CRRSAA) do not need to sign a new agreement with ED. Institutions need, however, to draw down some of the HEERF III (ARP) funds within 90 days of the date of the supplemental award since drawing down funds affirms acceptance of the terms and conditions of the Supplemental Agreement. Remember that the usual rules on paying grants to students within 15 days, or for institutional funds paying obligations within 3 days, of drawing down funds are still in place.

Reporting Requirements. Institutions receiving HEERF III funds need to continue preparing two reports each quarter, one detailing how the institutional portion of funding was used and one for the student aid portion. The reports must be conspicuously posted on the institution’s website no later than 10 days after the end of each quarter. Since ED did not make the requirements clear in a timely manner, institutions that expended HEERF funds during the first quarter of 2021 have until July 10 to post that report. ED also asks institutions to email copies of their quarterly reports due July 10 to them to This email address is being protected from spambots. You need JavaScript enabled to view it..

An annual report will also be required, as it was for 2020. ED intends to make changes to the form before the end of the year to include reporting on the new required activities under ARP. (See Reporting and Data Collection resource page.)