AGB Policy Alert: the American Rescue Plan Act of 2021

By AGB March 17, 2021 March 24th, 2021 AGB Alerts

On March 11, 2021, President Joe Biden signed into law The American Rescue Plan Act of 2021, which includes $1.9 trillion to address the effects of the COVID-19 pandemic on the United States.

What Board Members Need to Know

The following information offers a brief overview of the package as it relates to higher education.

COVID-19 Relief Education Stabilization Fund 

The act offers roughly $39.6 billion to institutions of higher education through December’s Higher Education Emergency Relief Fund (HEERF) that was established in the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA). As with the CRRSAA, at least 50 percent of this funding must be used for aid to students.

  • Roughly $36 billion of the fund will be allocated to higher education institutions via a formula that considers both headcount and full-time equivalent enrollment, including very small factors of students enrolled exclusively in distance education. This funding is available for public and private nonprofit institutions.
    • Funding uses for the institution portion of the allocation can be used to address expenses associated with coronavirus, including replacing lost revenue, reimbursing expenses already incurred, covering technology costs associated with a transition to distance education, and reimbursing costs related to faculty and staff training and payroll costs.
    • The portion of funding that institutions receive based on Pell Grant recipients who are enrolled exclusively online must be entirely used for emergency student financial aid.
    • Institutions that were forced to pay the net investment income excise tax will receive their full allocation, unlike under CRRSAA.
  • The measure provides $2.97 billion for Historically Black Colleges and Universities (HBCUs), Hispanic-Serving Institutions (HSIs), and other Minority-Serving Institutions (MSIs).
  • A competitive grant process provides $198 million for institutions with the most unmet need from other sources.
  • The measure allocates $396 million to for-profit institutions (based on the same formula described above) to provide financial aid grants to students.
Maintenance of Effort Requirements

States that accept the bill’s funding for elementary and secondary education are required to maintain proportional support for both K-12 and higher education in fiscal years 2022 and 2023 relative to overall spending. The funding level is determined as an average over fiscal years 2017-2019. The secretary of education can waive this requirement if necessary.

Additional Funding for Research 

The appropriations bill provides $600 million for the National Science Foundation for purposes such as scholarships, fellowships, and grant extensions.

Economic Recovery Loan Programs

Provisions include an additional $7.25 billion available under the Paycheck Protection Program (PPP), although the program still expires on March 31, 2021. Congress is considering a bill to extend the deadline by 60 days, but the measure has yet to pass either chamber. The program is now available to most 501(c) nonprofits.

  • The “affiliation rules” will be lifted for 501(c)(3) and 501(c)(6) organizations. This means that an organization’s headcount would be considered “per physical location” rather than in total and across all locations. As such, a 501(c)(3) with more than 500 employees—but at multiple locations—would be eligible for PPP.

The provisions also provide $15 billion for targeted Economic Injury Disaster Loan (EIDL) advance payments with funds provided to businesses located in low-income communities that have no more than 300 employees and have suffered an economic loss of more than 30 percent.

Other Important Provisions
  • Eliminating taxation on portions of education loans that are discharged: Starting after December 31, 2020, through January 1, 2027, the bill would not count any amount discharged from a loan made for postsecondary education expenses as income, and therefore the amount would not be subject to taxation. The provision covers loans for postsecondary educational expenses, including federal student loans and certain private education loans.
  • Extending paid leave tax credit to include public sector employees: Institutions that choose to continue offering paid leave to their employees can claim a credit for March 31, 2021, to September 30, 2021. Until now, public sector employees did not qualify for the paid leave tax credit.
  • 90/10 rule for for-profit institutions: The bill alters the way federal money from sources other than the Department of Education are calculated for the 90/10 rule. Specifically, the bill would include all federal funds that are “disbursed or delivered to or on behalf of a student to be used to attend such institution” as counting on the 90 side of the calculation, including funds such as the GI Bill. This provision is subjected to negotiated rulemaking and wouldn’t come into effect until January 1, 2023.
  • State and local relief: The bill includes $350 billion for state, local, and tribal agencies to alleviate costs incurred during the health crisis. Although this funding is not directed to higher education specifically, the hope is that it helps states that may otherwise cut funding to institutions or to student aid to balance the budget.

Why This Is Important

The impact of the coronavirus epidemic on higher education is ongoing. According to the Chronicle of Higher Education, the sector has lost about 650,000 jobs since February 2020 and there is still tremendous uncertainty regarding how colleges and university will fare next year. Nevertheless, the bill is a sincere testament to federal support for higher education and hopefully will provide some much-needed relief to both campuses and students.

It is unclear whether additional funding might be included in future legislation. However, many Republican members of Congress balked at the overall price tag associated with the American Recovery Plan Act. Given that vaccine delivery is steadily improving and some states are already revising reopening plans, any additional support will likely be smaller and more targeted.

Questions for Board Members

  1. What are the most urgent needs of your institution, system, and/or foundation?
  2. Does your institution and/or institutionally related foundation qualify for a PPP or EIDL loan? Is your institution and/or institutionally related foundation eligible?
  3. What are your governing board and senior leadership team doing—or what can they do—to address the current crisis? For example, are they planning more communication such as additional meetings or calls, appointing special ad hoc committees or task forces, reconfiguring budgets (in light of refunds and lost revenue), etc.? What changes could be or are being made to the operating budget? How about next year’s budget?
  4. As a result of the pandemic, will you have to revise your enrollment strategy or projections? If so, in what ways? How might your tuition and institutional student aid strategies need to change?
  5. How might the pandemic affect the accessibility of the institution’s long-term assets held within the endowment or held and managed by an affiliated foundation? What actions, strategies, or policies might be considered to effectively utilize available funds needed in the short-term?

Additional Resources



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