Analysis of House Democrats Revised HEROES Act

By Jill Desjean, Policy and Federal Relations Staff

House Democrats on Monday unveiled a revised version of their Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act — initially introduced in May — representing a scaled-down update to the original version in an effort to reach a compromise. A notable piece missing from this iteration of the legislation is the removal of a provision that would cancel up to $10,000 in federal student loans per borrower. The legislation does, however, offer cancellation of up to $10,000 in private student loans for economically distressed borrowers.

Key provisions of the bill include:

  • Extension of campus-based aid waivers

  • Limits on the Department of Education’s (ED) authority to limit student eligibility for the Higher Education Emergency Relief Fund (HEERF)

  • Exclusion of emergency grants from Expected Family Contribution (EFC) calculation and from Estimated Financial Aid (EFA)

  • Financial aid administrator (FAA) Professional Judgment (PJ) authority for unemployed students and family members

  • New requirements and deadlines for institutional authority to offer distance education 

  • Expansion of Coronavirus Aid, Relief, and Economic Security (CARES) Act student loan relief to Federal Family Education Loan (FFEL) program, Perkins, and Health and Human Services (HHS) student loan programs

  • Extension of student loan payment and interest suspension through Sept. 30, 2021, with more qualifying loan programs included.

The campus-based aid nonfederal share waiver in CARES Act would now apply to nonprofit Federal Work-Study (FWS) employers, and would be extended under the HEROES Act beyond the 2020-21 award year to include other award years that include any portion of a qualifying emergency period. It would also extend institutional authority to reallocate unexpended FWS funds to Federal Supplemental Educational Opportunity Grants (FSEOG)— and to use FSEOG funds for emergency grants to students—to any award year that includes any portion of a qualifying emergency period. 

Authority to pay work-study students from FWS funds when they are unable to work due to COVID-19 would be extended under the bill beyond the current limit of one academic year. Students would no longer be required to have been working prior to the emergency declaration to qualify for continued payments, and students who received an FWS award could be paid for any period when the qualifying emergency was in effect, as opposed to limiting payments to periods when the qualifying emergency occurred, as was included in the CARES Act.

ED would be prohibited under the bill from imposing eligibility limits on HEERF funds, and the bill goes further to say that the Personal Responsibility and Work Opportunity Act of 1996 (PROWA), which limits federal benefits to individuals who meet certain citizenship requirements, does not apply to HEERF funds.

Emergency grants would be excluded from treatment as income, whether taxed or untaxed, and from assets in the EFC calculation, and would also not be considered EFA in the need analysis formula.

Financial aid administrators would have greater PJ authority to help students and families experiencing job loss due to the covid-19 pandemic. The bill would achieve this by codifying flexibilities similar to ED’s GEN-09-05 Electronic Announcement (EA), which is now considered by ED to be maintained for historical purposes only. The bill would permit FAAs to treat — during a covered award year — an applicant’s, parents’, or spouse’s income and unemployment benefits as $0 using recent documentation of receipt of unemployment benefits or confirmation that an application for such benefits was submitted. The covered award year would include both the award year in which there was a qualifying emergency and the first award year that began after the end of such emergency. Like GEN-09-05, the bill would also instruct ED to adjust its risk model for program reviews to account for increased use of PJ for the 2020-21 and 2020-21 award years so as not to penalize institutions for responding to student and family needs due to the pandemic and resulting economic recession.

The HEROES Act would impose end dates on the broad authority to offer distance education offered by ED in response to the widespread changes adopted by institutions to address the COVID-19 pandemic, and would require institutions that exercised those waivers to begin the process of following the standard ED distance education approval process and obtaining accreditor approval.

Student loan borrower relief extended under the CARES Act would include Perkins, non-federally held FFELP loans, and HHS student loans, and the suspension of payments and interest accrual would be extended to Sept. 30, 2021.

Total Funding, Allocation Formula, and Allowable Uses

The revised bill includes roughly $39 billion for higher education, using similar funding structures as the original HEROES Act. This total includes $27 billion for public institutions, which will be distributed by states, and another $11.9 billion that will go directly to institutions, including $3.5 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. 

States would be required to give 13%, or $27 billion, of the dollars they receive from the $208 billion State Fiscal Stabilization Fund to public colleges and universities. This public institution share must be distributed based 75% on "the relative share in the State 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% “according to the relative share in the State of 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 includes similar language to the HEROES Act that expands the allowable uses of the relief funds. While the CARES Act specified that student grants could only be used to cover expenses associated with the disruption of campus operations caused by the pandemic, the revised bill allows student emergency grants to be used for any cost of attendance component such as tuition, food, housing, technology, and child care. The bill also expands eligible uses of institutional funds from those only associated with 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."

Also similar to the HEROES Act, the bill prohibits the Secretary of Education from imposing any student eligibility restrictions on both the funding included in this bill and the CARES Act 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 gone 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.

What's Next?

House Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin spoke Tuesday morning about the proposal and will continue speaking throughout the week, according to Pelosi’s deputy chief of staff Drew Hammill, signifying that another bout of pandemic-related aid could potentially make its way through Congress before the chambers adjourn for the presidential election. 

Additionally, with several provisions included in the CARES Act set to expire at the end of the month, Congress has added pressure to make progress in striking a deal.

Pelosi said Tuesday that she was hopeful of reaching a bipartisan agreement on a deal “that will remove all doubt that the legislation will pass and be signed by the president."

Previous negotiations broke down over the cost of the package, with the White House and Senate Republicans balking at the more than $3 trillion price of the original HEROES Act.

NASFAA last week joined a coalition of higher education associations, led by the American Council on Education, in asking for $120 billion in additional funds for education in order to "partially mitigate the challenges that students and institutions are facing" as a result of the ongoing pandemic.


Publication Date: 9/30/2020

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