New Guidelines for Higher Education Institutions with HEERF III Funding

June 16, 2021 | Article

By Rachel Green, CPA

The American Rescue Plan Act, signed into law by President Biden on March 11, 2021, has appropriated approximately $39.6 billion to higher education institutions through the Higher Education Emergency Relief Fund III (HEERF III). This is the third round of relief funds for higher education institutions. Here’s what you need to know about the HEERF III program.

Two New Required Uses for HEERF III Funding

New requirements for HEERF III Institutional Portion grant funds for public and private nonprofit institutions state that, if the Institutional Portion is not used entirely for emergency financial grants to students, a portion of funds must be used to both:

  • Implement evidence-based practices to monitor and suppress coronavirus in accordance with public health guidelines.
  • Conduct direct outreach to financial aid applicants about the opportunity to receive a financial aid adjustment due to the recent unemployment of a family member or independent student, or other circumstances, described in section 479A of the Higher Education Act.

Institutions should document how they implemented these two required activities consistent with 2 CFR § 200.334. Specifically, institutions should document (1) the strategies used to monitor and suppress COVID-19, (2) the evidence to support those strategies, (3) how those strategies were in accordance with public health guidelines, (4) the manner and extent of the direct outreach the institution conducted to financial aid applicants, and (5) how the amount of the HEERF grant spent on these two required activities was reasonable and necessary given the unique needs and circumstances of the institution.

How Can I Use HEERF III Funds?

Allowable uses for institutional funds remain mostly the same under HEERF III as in HEERF II.

HEERF grant funds must not be used for any of the following:

  • Funding contractors for the provision of pre-enrollment recruitment activities
  • Marketing or recruitment; endowments
  • Capital outlays associated with facilities related to athletics, sectarian instruction or religious worship
  • Senior administrator or executive salaries, benefits, bonuses, contracts, incentives, stock buybacks, shareholder dividends, capital distributions, and stock options or any other cash or other benefit for a senior administrator or executive
  • Religious worship, instruction, or proselytization or equipment or supplies to be used for religious worship, instruction or proselytization
  • Construction or purchase of real property

Minor remodeling under HEERF is allowable to the extent it is associated with the coronavirus. For example:

  • The installation or renovation of an HVAC system, to help with air filtration to prevent the spread of COVID-19.
  • The purchase or lease of temporary trailer classroom units to increase social distancing.
  • The purchase or costs of the installation of “room dividers” within a previously completed building to increase social distancing.

Institutions may discharge student debt or unpaid balances by discharging the complete balance of the debt as lost revenue and reimbursing themselves through their HEERF institutional grants or by providing additional emergency financial grants to students (with their permission). The Department strongly encourages institutions to discharge such debt. The following examples are listed to provide guidance to institutions on handling these situations:

  • Example 1: Transcript withholding: A student who was enrolled in an institution at any point on or after March 13, 2020, with a now-completed degree owes an unpaid debt to the institution and could not obtain an official transcript until the debt is paid off.
  • Example 2: Enrollment hold: A student who is enrolled at the institution at any point on or after March 13, 2020, and in progress toward a degree is blocked from enrolling in the next term because of an unpaid balance.
  • Example 3: Transfer student: A student who is enrolled at the institution at any point on or after March 13, 2020, has completed progress toward a degree is blocked from obtaining an official transcript to transfer their credits because of an unpaid balance.

In order to discharge student debt and count as lost revenue, institutions can discharge the complete balance of the debt as lost revenue and reimburse themselves through their HEERF grants, including associated fees and penalties.

Efforts to engage or reengage students who would otherwise be at risk of not completing their college degrees as a result of coronavirus is a permissible use of HEERF funds. Examples include:

  • Retention: To support additional academic or mental health support systems that will help students to overcome additional barriers that have arisen as a result of the COVID-19 pandemic that may otherwise prevent them from completing their education.
  • Reengagement: Institutions can discharge the complete balance of a student’s institutional debt as lost revenue and reimburse themselves through their HEERF institutional grants, including associated fees and penalties, so students can reenroll, continue their education, or obtain their official transcript to transfer and/or secure employment.
  • HEERF funds may not be used to pay for the costs of advertising (for example, paid media, commercial advertising, recruitment services) to students. Moreover, no portion of HEERF funds may be used to directly fund staff or contractor salaries who are engaged in marketing and recruitment.

Institutions should continue to adhere to reporting requirements under HEERF I and HEERF II. Annual reporting requirements for HEERF III will begin early 2022.

Institutions should drawdown any amount of the award under ARP within 90 days of the date of each supplemental award to ensure ED does not view the lack of drawdown as constituting voluntary nonacceptance of the award.

Period of performance requirements on all HEERF awards will be extended by one year from the date of acceptance of HEERF III supplement.

HEERF III for Students

An eligible “student” for HEERF III emergency grants is defined as a students who is or was enrolled in an institution of higher education during the COVID-19 national emergency, regardless of whether they completed a Free Application for Federal Student Aid (FAFSA) or are eligible for Title IV. Priority should still be given to students with exceptional need. Additionally, the CRRSAA and ARP explicitly state that emergency financial aid grants to students may be provided to students exclusively enrolled in distance education.

Undocumented students are also eligible for emergency grants. In addition, international students and students studying abroad may also be eligible to receive emergency grants. However, institutions must ensure that funds go to students who have exceptional need. The Department encourages institutions to prioritize domestic students, especially undergraduates, in allocating this funding. This includes citizens, permanent residents, refugees, asylum seekers, DACA recipients, other DREAMers, and similar undocumented students.

Emergency financial aid grants made by a federal agency, State, Indian tribe, higher education institution or scholarship-granting organization (including a tribal organization) to a student because of an event related to the COVID-19 national emergency are not included in the student's gross income. For more information, please see the Internal Revenue Service (IRS) bulletin: Emergency aid granted to students due to COVID is not taxable (March 30, 2021).

Maintaining Compliance with Your Higher Education Institution

This additional relief legislation provides an added benefit for higher education institutions. It’s important to understand the requirements of these provisions and how to comply with them.

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

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