Congress Releases Bipartisan Year-End Spending Deal, FAFSA Simplification, COVID Relief, and Other Student Aid Provisions

By Hugh T. Ferguson, NASFAA Staff Reporter 

For an in-depth analysis of the FAFSA simplification provisions included in the spending package, see this article from NASFAA’s policy team.

Update: President Trump formally signed the measure into law on December 27.

In a marathon push before the end of the year, congressional leaders on Dec. 21, 2020,  introduced the Consolidated Appropriations Act, 2021, a massive package of legislation that would avert a government shutdown and fund the federal government for fiscal year (FY) 2021. The bill would provide additional pandemic relief to higher education, and make a number of other higher education-related policy changes, including simplifying the FAFSA, increasing the maximum Pell Grant award and expanding the program to incarcerated students, and giving financial aid offices more flexibility in professional judgment (PJ) cases during a national emergency.

The omnibus incorporates elements of outgoing Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander’s (R-Tenn.) FAFSA simplification legislation, endorsed by NASFAA, the FAFSA Simplification Act of 2019. It also includes a $150 increase to the 2021-22 maximum Pell Grant, a combined $25 million increase in Federal Work-Study (FWS) and Federal Supplemental Educational Opportunity Grant (FSEOG) funding, and nearly $23 billion in additional COVID-19 relief funds for higher education.

“The financial aid community applauds the bipartisan work in Congress to simplify the federal student aid application process and improve financial aid predictability for students,” said NASFAA President Justin Draeger. “During this time of crisis, lawmakers showed up for students by expanding Pell Grant eligibility and lengthening students’ eligibility for subsidized loans.”

“Of course, passing last-minute bills of this magnitude is not our preferred way of tackling financial aid reform, and there are several provisions in this expansive bill that require closer scrutiny. But it has been 12 years since the last reauthorization of the Higher Education Act, and we should not, and cannot wait any longer on bills that will have such an overwhelmingly positive impact on students,” he continued. “We look forward to working with our federal, state, and private partners to ensure a smooth rollout for students.”

A high-level summary of the FAFSA simplification measures included in the package and a link to NASFAA’s in-depth analysis of these provisions are provided below, along with NASFAA’s analysis of the bill’s FY 2021 spending provisions and COVID relief measures related to higher education.

FAFSA Simplification

FAFSA simplification is an issue that NASFAA has long advocated for. Back in 2015, NASFAA released a working group report on how to make the FAFSA and the overall application process more efficient for students and families. Most recently, over summer 2020, NASFAA commissioned a paper series on ways to enhance FAFSA efficiency, which served as an update to its 2015 FAFSA simplification proposal, and enlisted other subject-matter experts to both assess the current validity of previous work done on FAFSA efficiency and explore new simplification concepts.

The incorporation of Alexander’s proposal into the FY 2021 omnibus would make significant changes to the need analysis formula, allow students to preview their eligibility for the Pell Grant award using the number of parents in the household, and family income as a percentage of the federal poverty level for the applicant’s household size. The changes made to the FAFSA included in the proposal would not go into effect until the 2023–24 award year.

Additionally, the bill renames the term “Expected Family Contribution” (EFC) the “Student Aid Index (SAI).” Under the bill, the SAI would be used to calculate need for need-based aid programs — not including the maximum or minimum Pell Grant — such as the Federal Direct Subsidized Loan program, Federal Work-Study (FWS) program, the Federal Supplemental Educational Opportunity Grant (FSEOG) program, and some state and institutional aid.

Additional Higher Education Provisions

Among the bill’s additional student-aid related changes is its repeal of the limitation on lifetime subsidized loan eligibility, known as the Subsidized Usage Limit Applies (SULA) requirement, which currently bars students from receiving subsidized Direct Loans for more than 150% of the published length of their program.

The proposal also brings a number of significant changes and expansions to the Pell Grant program, including a guarantee of a minimum Pell Grant award for students whose family incomes fall below a set percentage of the poverty line, and restoration of Pell Grant eligibility for individuals with successful borrower defense to repayment claims. Notably, the package would also restore Pell Grant eligibility for incarcerated individuals and prohibit for-profit colleges from receiving or awarding Pell Grants on behalf of incarcerated students.

The package would also include a special rule regarding PJ during a disaster, emergency, or economic downturn that would allow financial aid administrators to determine that the income earned from work for an applicant is zero if the applicant can provide paper or electronic documentation of receipt of unemployment benefits or confirmation that an application for unemployment benefits was submitted.

FY 2021 Appropriations

The FY 2021 Labor, Health and Human Services, Education, and Related Agencies (Labor-H) spending plan, which funds programs housed under the Department of Education (ED), would provide a total of $73.5 billion in discretionary funds for ED, an increase of $785 million from FY 2020 and roughly $7 billion more than President Donald Trump’s budget request.

Specifically, the measure includes a $150 increase to the maximum Pell Grant award. This will boost the maximum grant amount to $6,495 for the 2021-22 award year, though it relies on a $500 million recession from the program’s reserve fund.

The bill includes a $25 million funding increase for the campus-based aid programs, allocating $1.19 billion for the Federal Work-Study (FWS) program, a $10 million increase over FY 2020 levels, and $880 million for the Federal Supplemental Educational Opportunity Grant (FSEOG) program, a $15 million increase compared to FY 2020.

Higher Education and Coronavirus Relief

The omnibus, under the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act, also incorporates a number of provisions directly impacting higher education, including $82 billion for an Education Stabilization Fund, about 28% of which (or nearly $23 billion) will be directed toward institutions of higher education using the same Higher Education Emergency Relief Fund (HEERF) model established in the Coronavirus Aid, Relief and Economic Securities (CARES) Act.

The allocation formula differs from that of the CARES Act, which used only full-time equivalent (FTE) enrollment, whereas the CRRSA relief also takes into account student headcount. Of the $23 billion included for higher education, 89%, or roughly $20 billion, would be allocated to public and private nonprofit institutions, based:

  • 37.5% on FTE enrollment of Pell Grant recipients who were not enrolled exclusively in distance education courses prior to the qualifying emergency 

  • 37.5% on headcount enrollment of Pell recipients who were not enrolled exclusively in distance education courses prior to the qualifying emergency 

  • 11.5% on FTE enrollment of non-Pell recipients who were not enrolled exclusively in distance education courses prior to the qualifying emergency

  • 11.5% on headcount enrollment of non-Pell recipients who were not enrolled exclusively in distance education courses prior to the qualifying emergency; 

  • 1% based on FTE enrollment of Pell recipients who were exclusively enrolled in distance education course prior to the qualifying emergency

  • 1% based on headcount of Pell recipients who were exclusively enrolled in distance education courses prior to the qualifying emergency

Unlike the CARES Act, the CRRSA does not require that 50% of an institution’s funds be spent on student grants. It does, however, require that institutions spend the same amount on student grants as they were required to spend under the CARES Act. The allowable uses of funds are more flexible than in the CARES Act, with institutions permitted to use their funds to defray expenses associated with COVID-19, including lost revenue, reimbursements for expenses already incurred, technology costs associated with the transition to distance education, faculty and staff training, and payroll. Institutions may also use their funds to carry out student support activities authorized by the Higher Education Act (HEA), or to provide emergency grants to students (including those enrolled exclusively in distance education). The grants may be used to cover any component of a student’s cost of attendance (COA), or for emergency costs that arise due to COVID-19, including tuition, food, housing, health care and child care. 

The expanded allowable uses for funds would apply to both new HEERF funds and unspent CARES Act funds. However, institutions would still be required to adhere to the 50/50 institutional/student share split for unspent CARES Act funds. Notably, the bill includes no student eligibility requirements, however, institutions are required to prioritize grants to students with exceptional financial need, such as those who receive Pell Grants. As a reminder, after a confusing and inconsistent implementation, Education Secretary Betsy DeVos issued an Interim Final Rule (IFR) on June 17, 2020, limiting eligibility for CARES Act emergency financial aid grants to students who met the eligibility criteria for Title IV student aid. The IFR referred specifically to the CARES Act, so it is unclear whether the Trump administration would attempt to tie student eligibility requirements detailed there to the new HEERF funds established in this bill. Separately, NASFAA included rescission of the June 17 IFR as a priority for the incoming presidential administration. 

Institutions subject to the endowment excise tax would have their allocations reduced by 50% and would be required to spend those funds only on student emergency grants, or for sanitation, personal protective equipment (PPE), or other expenses associated with the general health and safety of the campus environment.

In addition to the $20 billion allocated through the above formula, the bill provides another $1.7 billion, or 7.5% of the overall higher education funding, to minority-serving institutions (MSIs), and an additional $113.5 million, or 0.5% of the overall higher education funding, for institutions with the greatest unmet need related to the pandemic through the Fund for the Improvement of Postsecondary Education (FIPSE). The bill suggests ED would have 60 days to establish an application process to determine which institutions have the greatest “unmet need.” The fact that this 60-day period would span two administrations adds an additional layer of political complexity.

An additional 3%, or $681 million, would be set aside for for-profit institutions. This pot of funds would be allocated using the same formula used to distribute the $20 billion to non-profit institutions, though the bill specifies that funds received by proprietary institutions would only be allowed to be used for emergency grants for students.

To the extent practicable, the CRRSA requires the Secretary to allocate funds for the public, not-for-profit, for-profit institutions within 30 days, the funding for MSIs within 60 days, and the funding for schools with unmet need within 120 days.

The nearly $23 billion included in the bill for higher education comes after months of advocacy for additional relief for students and institutions. Most recently, the higher education community, including NASFAA, sent a letter to congressional leadership requesting that any supplemental funding bill include at least $120 billion for higher education in order to partially mitigate the challenges that students and institutions are facing amid the COVID-19 pandemic.

The bill also adds that Supplemental Nutrition Assistance Program (SNAP) eligibility will not be limited for postsecondary students who are enrolled at least half-time and who are either eligible to participate in work-study or have a zero EFC. Further, it requires the Secretary of Education to inform federal student aid applicants and postsecondary students of the temporary SNAP eligibility requirements contained in the bill.

Of note, the proposal does not further extend the student loan moratorium on federally-held student loans and does not extend the forbearance period, the pause in interest accrual, and the suspension of collections activity past Jan. 31, 2021 which was set by ED.

The package does, however, extend a provision — currently set to expire on Jan. 1, 2021 — allowing employers to contribute up to $5,250 tax-free toward their employees’ student loan debt to payments made before Jan. 1, 2026.

Next Steps

The legislation now must undergo a number of procedural steps before it can be implemented. Leaders are aiming to clear the package as soon as late this evening, but that timeline could easily be pushed to later this week due to the text clocking in at over 5,000 pages.

Stay tuned to Today’s News and our Consolidated Appropriations Act, 2021 web center for updates and developments on the status of the omnibus spending bill.

For more information on the federal budget process, see NASFAA’s Federal Budget and Appropriations page and NASFAA’s budget FAQs.

 

Publication Date: 12/21/2020


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