In January, the U.S. Department of Education (ED) announced it was distributing $198 million in American Rescue Plan Act (ARPA) funds to support colleges, universities and students in 2022. Much of the funding (50% to 100%) must be used for Higher Education Emergency Relief (HEERF) grants for students.
Community and rural colleges with at least 50% of students being Pell Grant recipients and at least a 4.5% enrollment decline year over year; institutions where at least 90% of the student body consists of graduate students; and institutions that didn’t receive previous HEERF disbursements due to application errors will receive priority for funds.
Thousands of U.S. colleges and universities have received HEERF funds. They have broad discretion to distribute the student aid portion pretty much as they see fit. In general, they award grants to students ranging from an average of a couple of hundred dollars to $3,000 (with some colleges offering even more); they are intended to help students cover ongoing expenses like tuition, housing, food, and healthcare (including mental healthcare).
Funds cannot be applied to students’ outstanding account balances without permission or reduce financial aid. They are not considered income, so no taxes apply, and they have no impact on FAFSA filings.
The process for distributing funds varies. Many colleges automate allocations based on financial need using FAFSA information. Some also offer discretionary grants that require students to complete an application process.
Colleges and universities who received HEERF funds are required to provide detailed reporting on the use of funds and timing of distributions. Data about how a school is distributing funds, how many students received grants, how much money has been distributed, and more must be posted on a school’s website by predetermined deadlines. For complete details, refer to the National Association of Student Financial Aid Administrators (NASFAA) HEERF Reporting Guidelines.
In early April, ED extended the performance period for all open HEERF grants to June 30, 2023.
For more information, visit the U.S. Department of Education website which includes revised FAQs from the IRS and auditing requirements. Also visit the NASFAA website.
In related news, on April 6, the ED extended the student loan payment pause through August 31. What’s more, any student debt forgiven after December 31, 2020, or through January 1, 2026, is no longer considered taxable (which can translate into big savings for student loan borrowers).
There’s likely more changes, clarifications, and information to come – keep an eye out for future RBT CPA Thought Leadership articles designed to keep you in-the-know. In the meantime, if you have any questions about taxes or audits related to ARPA funding, give your RBT CPA contact a call.