House Democrats’ Latest COVID-19 Relief Package Would Direct $37 Billion More to Higher Ed

By Owen Daugherty and Hugh T. Ferguson, NASFAA Staff Reporters 

House Democrats on Tuesday released another sweeping COVID-19 relief package with plans to consider and advance the measure as soon as Friday. The $3 trillion package would, among other things, direct more than $37 billion to higher education institutions and prevents, retroactively, the Department of Education (ED) from imposing student eligibility restrictions on higher education emergency relief funds allocated in the Coronavirus Aid, Relief, and Economic Security (CARES) Act — a point for which Education Secretary Betsy DeVos has recently come under fire.

This latest package — dubbed the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act — builds off of the CARES Act, which was signed into law in March and allocated roughly $14 billion for higher education, though many groups, including NASFAA, said it was far from enough to offset the disruptions caused by the pandemic.

The HEROES Act sets aside $90 billion for a State Fiscal Stabilization Fund, 30% of which (or $27 billion) must go to public institutions of higher education and will be distributed by governors. Another $10.15 billion will go directly to institutions, including $1.7 billion for Minority-Serving Institutions, $7 billion for private nonprofit institutions, and $1.4 billion for public and nonprofit institutions with unmet need, including those that operate entirely online. 

Notably, the bill adjusts the funding formula for how most of the money earmarked for higher education will be distributed to institutions. The CARES Act allocated $12.5 billion in higher education funding through a formula based on full-time equivalent student enrollment, which critics argued caused certain institutions, such as community colleges, to be shortchanged due to their larger part-time student enrollment.

The new relief package adjusts the formula used to distribute the $27 billion that will go to public institutions through governors and the $7 billion that will go directly to private nonprofit institutions to focus more on total headcount and Pell Grant enrollment, although the details of how the formula will be structured remain unclear.

The $27 billion that would go to public colleges and universities would be distributed based 75% on "the relative share of students who received Pell Grants who are not exclusively enrolled in distance education courses prior to the coronavirus emergency at the institution in the previous award year" and 25% on the total enrollment of students at the institution "who are not exclusively enrolled in distance education courses prior to the coronavirus emergency at the institution in the previous award year."

The bill also addresses several CARES Act provisions, including prohibiting the Secretary of Education from imposing any student eligibility restrictions on the Higher Education Emergency Relief Fund (HEERF). The prohibition is retroactive to the date of the original CARES Act passage, March 27, and would therefore provide a safe harbor for any institution that awarded HEERF funds to non-Title IV eligible students. The bill also clarifies that the 1996 welfare reform law, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, does not apply to the HEERF funds. NASFAA has been on the record opposing the Title IV eligibility restrictions placed on the HEERF fund by ED, and joined the community in encouraging the Congress to clarify that there are to be no eligibility restrictions.

The HEROES Act also expands the eligible use of the institutional HEERF funds from those only associated to significant changes to the delivery of instruction to being used "to defray expenses (including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, payroll) incurred by institutions of higher education."

The package also calls for the cancellation of the lesser of the borrower's total federal student loan balance, or $10,000 within 30 days of the bill's passage, though it did not appropriate money for this proposal. Notably, it calls for pausing student loan payments and interest accrual through September 30, 2021 — a full year longer than was included in the last relief package. It also retroactively extends the CARES Act borrower relief provisions, including the suspension of monthly payments and halt on interest accrual, to borrowers with Perkins loans, commercially-held Federal Family Education Loans (FFEL) and health professions student loans offered by the Department of Health and Human Services, a recommendation previously requested by NASFAA. In addition to the more than $100 billion it provides to education, the bill allocates $45 billion for the Department of Treasury to pay monthly payments for borrowers with private student loans until the end of September 2021, with a maximum cap of $10,000 in loan forgiveness. 

In order to receive funds, a state must ensure that for fiscal years (FY) 2020, 2021, and 2022,  its support for higher education remains at or above its average level of support in the three fiscal years preceding the date of enactment. State support includes state and local government funding to institutions of higher education and state need-based financial aid, and excludes support for capital projects, research and development, or tuition and fees paid by students. States must also spend the same amount per public higher education full-time equivalent (FTE) student in FY 2022 as they spent in FY 2019.

Essentially, this provision would aim to prevent states from making massive cuts to public higher education through their annual appropriations processes, and assist states in getting back to their pre-recession level of funding, which has continued to trend below the level it was prior to the last recession.  

The package also addresses concerns several higher education groups, including NASFAA, had regarding the taxability of the emergency aid grants to students following the passage and implementation of the CARES Act. The new bill makes clear that all forms of grants — including state, institutional, and private grants — will not be treated as taxable income. 

The stipulation comes after the IRS issued guidance last week that emergency funds in the CARES Act provided to students will not count as taxable income, citing the fact that they are considered qualified disaster relief not federal student aid. The higher education community had previously asked the IRS to ensure the CARES Act student grants were not taxable.

The HEROES Act also includes several other proposals for which NASFAA advocated, including a provision to waive the non-federal share requirements for non-profit Federal Work-Study employers for FY 2019-20 and 2020-21. The bill would also ensure emergency financial aid grants received by students are not treated as estimated financial assistance (EFA) and are not included as income or assets (including untaxed income and benefits) in the calculation of expected family contribution (EFC). This provision would codify some of the exemptions previously addressed by ED in an April 3 Electronic Announcement (EA), which stated that any aid received by victims of an emergency from either a federal or state entity would not be counted as income for the calculation of EFC or EFA. The EA did not provide the same exemption for institutional emergency funds that is included in the HEROES Act, which defines "emergency financial aid grants" as emergency Federal Supplemental Educational Opportunity Grants, grants awarded from HEERF student or institutional funds, and any other emergency financial aid grant received from a federal agency, state, Indian tribe, institution, or scholarship-granting organization for the purpose of providing financial relief to students amid the COVID-19 emergency.

The bill codifies the guidance in Dear Colleague Letter GEN-09-05, which addresses allowable documentation and procedures for professional judgment (PJ) decisions concerning individuals receiving unemployment insurance benefits. GEN-09-05 also stipulates that ED will adjust its risk-based model for selection of institutions for program reviews to account for higher rates of PJ adjustments.

During a press conference Tuesday, Speaker of the House Nancy Pelosi (D-Calif.) said Congress could not pause in administering aid while the pandemic continues to inflict its economic and health related toll on families. 

"We must act boldly to support state and local entities to address coronavirus-related outlays and lost revenue due to the coronavirus," Pelosi said. "Not acting is the most expensive course. We are presenting a plan to do what is necessary to deal with the coronavirus crisis and make sure we can get the country back to work and school safely."

The measure is unlikely to garner any Republican votes, with leadership largely panning proposals put forward by Democrats in crafting the package.

"Speaker Pelosi wants Christmas to come early this year. Instead of assessing what is already working, she's choosing to advance a new stimulus package with more irresponsible socialist stocking stuffers," Rep. Virginia Foxx (R-N.C.) Education and Labor tweeted May 11. 

While the bill could pass the House solely with Democrat votes, it is unlikely to be taken up in its current form by the Senate.

Senate Majority Leader Mitch McConnell (R-Ky.) has indicated that the chamber is still assessing what implications previous aid will have on the deficit before considering additional coronavirus related aid.

"We now have a debt the size of our economy," McConnell said earlier this month during a livestream event for President Donald Trump's reelection campaign. "So I have said, and the president has said as well, that we need to take a pause here."

The Democratic proposal will instead serve as an opening marker for the House as negotiations continue on additional relief efforts in combating the economic turmoil caused by COVID-19.

For more information and resources on how the spread of the novel coronavirus is impacting student financial aid, please refer to NASFAA's COVID-19 Web Center.


Publication Date: 5/12/2020

David S | 5/13/2020 1:24:48 PM

"We now have a debt the size of our economy," said the Senate majority leader who helped lead the fight for a trillion dollar-plus tax cut that overwhelmingly benefited those who needed no help. "Socialism!" cries a fellow Republican who likewise votes for taxpayer handouts for rich people at every opportunity.

Then you wonder why they say we don't have the money to invest in higher education. Because would-be emergency aid and Pell Grants get used to help purchase yachts and so corporations can help themselves to multi-billion dollar stock buybacks.

Anna K | 5/13/2020 9:39:50 AM

Great looking out for private, for-profit institutions! So unfair to our students!

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