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American Rescue Plan Act provides relief to higher education, community colleges

Apr 19, 2021

The American Rescue Plan Act of 2021 (ARPA) will provide a critical infusion of federal relief dollars into U.S. colleges and universities. The ARPA builds on earlier relief packages issued under the CARES Act and the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA).

The ARPA provides $39.6 billion to the Higher Education Emergency Relief Fund (HEERF). The funding formula accounts for part-time students in both Pell and total enrollment calculations. This means community colleges, where a majority of enrollment is part-time, will receive a proportionate share. 

Note: Your institution may have to submit a new application for ARPA funding — unlike CRRSAA, which was distributed as an automatic award.

ARPA for community colleges: How ARPA funds can be used

The higher education funds are meant to be used in two main ways:

  1. Student share: Colleges and universities must use at least 50% of their HEERF funds for emergency student aid grants, prioritizing students with exceptional financial need. 

    Aid grants can be used to cover any part of a student’s cost of attendance, as well as emergency costs incurred due to COVID-19, such as tuition, food, housing, childcare or healthcare (including mental health). 

    ED guidance clarifies that HEERF funds can be used for a wide range of students, including part-time, non-degree-seeking, non-credit, dual enrollment and continuing education students. Funds can also be used for students who left school for any reason since March 13, 2020. Guidance also expands eligibility to students who are qualified aliens.

  2. Institutional share: Institutional funds are flexible and can be used to offset lost revenues, technology costs, payroll and staff training. In addition, institutions can directly use their institutional share to pay unpaid student account balances or other student account debts.

However, institutions must use a portion of their institutional funds to implement health and safety practices to suppress COVID-19. They must also conduct outreach to financial aid applicants about the opportunity for additional aid. 

How the funds will be administered

Funds will be distributed by the Department of Education (ED). There is no timeline for the ED to distribute funds, although it’s likely the funds will be administered as timely as possible. The ED can award funds as late as September 30, 2023.

The eligibility window for expenses and lost revenue is from March 13, 2020, onward. The ED has issued guidance and an FAQ document on how institutions can calculate lost revenue for their awards. 

Tax free student loan forgiveness

ARPA legislation also includes a provision that makes student loan forgiveness tax free, for loans discharged between December 31, 2020, and January 1, 2026. Normally, debt cancellation is treated like income to the borrower.

This development is welcome news to borrowers who believe it lays groundwork for future student loan forgiveness. President Biden has said that he supports $10,000 in student loan forgiveness per borrower.

Your next steps

The American Rescue Plan Act is a significant piece of legislation. Additional funding has been allocated for local governments, health and human services, housing, veterans, technology and more.

If you’d like to discuss what ways to apply, what funds are available to you and how to spend your HEERF grants, contact an advisor at Wipfli.

You can also sign up to receive additional information about the American Rescue Plan Act in your inbox, or visit our COVID-19 resource center for more on how to navigate the pandemic and resulting changes.

Related content:

How the American Rescue Plan Act of 2021 will impact you
The American Rescue Plan Act updates EIDL program with additional funding and supplemental Targeted EIDL Advances

Author(s)

Sara McKenna, CPA
Senior Manager
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