What Higher Education Institution Need to Know About the HEERF program

February 15, 2021 | Article

The Coronavirus Response and Relief Supplemental Appropriations Act 2021 (CRRSAA) provided approximately $22.7 billion of supplemental funding to the Department of Education (the Department) through the Higher Education Emergency Relief Fund (HEERF) II program.

The CRRSAA provides more funding through the HEERF program, but it also adds more questions. Here’s what you need to know about the HEERF program.

We broke down the details of the original Higher Education Emergency Relief Fund program.

Overview of the Changes to the HEERF Program
The updates and supplemental funding made some changes to the HEERF program:

  • Provided supplemental funding of the student aid portion and institutional aid portion of funds originally provided under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
  • Expanded the allowable use of grant funds, including the use of unspent CARES Act funds.
  • Modified the share of funds that must be used for financial grants to students by requiring an institution provide the “same amount” of grants to students as they were required to provide with the CARES Act funds.
  • Added an allocation for students enrolled exclusively in distance education courses and created a separate program for proprietary institutions; however, these amounts may only be used for grants to students with no institutional portion provided.
  • Created special requirements for institutions paying the endowment excise tax.

Impact of the Changes to Higher Education Institutions

Financial Grants to Students
The CRRSAA requires an institution to provide the “same amount” of grants to students as they were required to provide under the CARES Act, making grants to students a fixed amount rather than a percentage of the total award. For example, an institution that was required to pay $300,000 in grants to students under the CARES Act is required to pay $300,000 in grants to students under the supplemental funding, regardless of whether their total allocation of HEERF II funds was greater than $600,000. The amount required to be distributed to students will be added to the institution’s Student Aid Portion (Federal Assistance Listing Number 84.425E) award.

This change is impactful to institutions because the CRRSSA has been allocated approximately $8 billion more in funding than the CARES Act, which means there is going to be more HEERF II grant funds used at the institutional level than under the CARES Act.

One significant difference between grants to students under the CRRSAA compared to the Cares Act is that institutions must now prioritize grants to students that have exceptional need, such as students who receive Pell Grants. However, a student does not need to receive a Pell Grant to be considered to have exceptional need.

Rather, institutions should develop a process for evaluating student need and determining which students have exceptional need. It is important that the institution’s evaluation process and subsequent awards of grants to students with exceptional need be thoroughly documented to ensure there are records in place to support compliance with this provision of the CRRSAA because the CRRSAA does not specifically define exceptional need.

Another significant difference is that the CRRSAA has also provided additional flexibility with how students use their grants, allowing for grants to students to be used for any component of the student’s cost of attendance or for emergency costs that arise due to coronavirus (costs such as tuition, food, housing, healthcare, or childcare). The institution is also, upon receiving written or electronic consent from the student, now allowed to apply the grant directly to the student’s account. Alternatively, they may also provide the grants to students using checks, electronic transfer payments, debit cards and payment apps that meet the Department’s existing requirements for paying credit balances to students. This change gives the student the discretion to use their grant to help pay amounts owed to the institution.  

Finally, the CRRSAA provides funding for students enrolled exclusively in distance education courses (through an allocation of funds) and for students of proprietary institutions (through the establishment of a new program). These students were not previously eligible for funding. Supplemental funds awarded for these two groups of students are required to be disbursed as grants to students with exceptional need as discussed above

Financial Grants to Institutions
Financial grants to institutions also changed under CRRSAA to provide greater flexibility to institutions regarding how their HEERF II allocations are expended. The CRRSAA allows institutions to use their grants to defray expenses associated with COVID-19, including lost revenue. Reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff training, and payroll are all types of qualifying expenses. At this time, it is not clear whether expenditures used as qualifying HEERF II expenditures need to have occurred after passing of the CRRSAA on December 27, 2020.

The most notable change is related to the inclusion of lost revenue as an allowable institutional expense. Organizations are asking:

  • What is lost revenue?
  • How should lost revenue be measured?
  • Is lost revenue applicable to auxiliary revenue, tuition revenue and event revenue, or just some of these revenue streams?
  • Does an institution have to have first collected the revenue and then refunded it, or can they claim lost revenue from only a reduction in enrollment or budgeted revenue?

Lost revenue is not a concept that is explained in the funding guidance, and the Department has provided very little information about the concept of lost revenue. As institutions evaluate how they will use the supplemental funding, questions around lost revenue will certainly continue. For now, there is little that we know about the best course of action to take when evaluating lost revenue.

The CRRSAA also allows institutions to carry out student support activities authorized by the Higher Education Act (HEA) of 1965, as amended, that address needs related to COVID-19. In general, the HEA’s six titles are the foundation of the United States educational system and include Title IV, which establishes student financial assistance. The Department has interpreted this provision of CRRSAA to allow grants to institutions to be used to support the transition to virtual activities, purchase personal protective equipment or support other innovative learning methods that would allow an institution to engage in student support activities authorized under the HEA, such as TRIO and GEAR Up.  

Finally, institutions can use the institutional portion of their grant to make additional grants to students. In light of the increased allocations to institutions from the change in the allocations to students, and the increased level of supplemental funding, the Department is strongly encouraging institutions to expand the support they are providing to students that have significant financial needs resulting from COVID-19, subject to the Public and Nonprofit Institution Grant Funds for Students Supplemental Agreement. However, the impact on Title IV aid from additional grants to students is unknown, so institutions should be sure to fully evaluate a student’s total financial aid package.

Restrictions on use of grants to institutions require that no funds can be used for pre-enrollment recruitment activities, marketing or recruitment, endowments, capital outlays for athletic facilities, sectarian instruction or religious worship, senior administrator or executive salaries, benefits, bonuses, contracts, incentives, stock buybacks, shareholder dividends, capital distributions, stock options or any other cash or benefit for a senior administrator or executive.

What to Watch Out For

  • Institutions still expending their CARES Act funding will benefit from the enhanced flexibilities; however, they should be sure their original 50% allocation between student and institutional funds is followed.
  • The June 17, 2020 Interim Final Rule limiting student eligibility to students who are or could be eligible to participate in the Department’s Title IV federal student financial aid programs is still applicable to the CARES Act funds but is not applicable to the CRRSAA funds.
  • Institutions should follow cash management rules to minimize the time between drawing down funds from G5 and paying obligations. The Department may evaluate institutions that do not expend the student portion of HEERF II within fifteen calendar days and the institutional portion within three calendar days.
  • Indirect and reasonable direct administrative costs can only be charged to the institutional portion of the grant. Institutions should maintain documentation to support the costs charged.
  • Institutions should establish policies and procedures to ensure that double dipping of federal funds does not occur, that is that federal dollars are not used to pay for the same expenditure.
  • To the greatest extent practicable, institutions must continue to pay employees and contractors during the period of any disruptions or closures.
  • Reports will be required to be submitted in a manner specified by the Department.
  • Institutions must expend funds within twelve months from the obligation of funds from the DOE. Institutions that previously received funding under the original HEERF allocation are required to begin drawing down funds within 90 days of receiving their supplemental HEERF II funding or risk having the Department reallocate the funds.

Maintaining Compliance with Your Higher Education Institution
The additional relief legislation provided added benefit for higher education institutions. It’s important to understand the requirements of these provisions and how to comply with them.


LET'S TALK

Need help understanding how HEERF funding applies to you and how to comply?

Stay current on your favorite topics

SUBSCRIBE

Learn More

See what more we can bring to organizations just like yours.

Government Nonprofit Higher Education

Take a deeper dive into this Insight’s subject matter.

Audit & Assurance