AGB Policy Alert: Year-End Appropriations and COVID-19 Pandemic Relief Bills

By AGB December 28, 2020 January 8th, 2021 AGB Alerts

On Sunday, December 27, President Trump signed into law The Consolidated Appropriations Act, 2021, which includes both a $1.4 trillion appropriations bill and more than $900 billion in COVID-19 relief, along with other provisions.

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 relief measure provides $22.7 billion to institutions of higher education, split between institutional expenses and financial aid grants to students, similar (but not the same) as the formula that was used in the March 2020 CARES Act.

  • Roughly $20.2 billion of the fund will be allocated to higher education institutions via a formula that takes into account 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 are less stringent than in the CARES Act and can be used to address expenses associated with coronavirus (including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff training and payroll).
    • Regrettably, the law does not repeal Secretary Betsy DeVos’ guidance on student eligibility for emergency aid, which states only those who can participate in Title IV federal student aid programs can receive money. This guidance unfortunately affects some of the most neediest students.
    • Institutions must spend at least as much on student grants as they did from their CARES Act allocation last year.
    • Institutions that were forced to pay the net investment income excise tax will only receive 50 percent of their allotment, and it can only be used for emergency grants to students, sanitation, and campus health and safety measures related to the COVID-19 pandemic.
  • The measure provides $1.7 billion for Historically Black Colleges and Universities (HBCUs), Hispanic-Serving Institutions (HSIs), and other minority-serving institutions (MSIs).
  • A competitive grant process provides $113 million for institutions with the most unmet need from other sources.
  • The measure allocates $680 million to for-profit institutions (based on the same formula described above) to provide financial aid grants to students.

The legislation provides an additional $4.1 billion to governors for discretionary funding to K-12 and higher education.

Additional Funding for Research

The appropriations bill provides $42.9 billion for the National Institutes of Health (NIH), approximately $1.25 billion more than last year. It also includes an increase of at least 1.5 percent for every NIH institute and center.

Economic Recovery Loan Programs

Provisions include $284 billion for Paycheck Protection Program (PPP) loans, with set-asides for very small businesses. Loans can be made through March 31, 2021.

  • The legislation also allows some nonprofits and small businesses that received a PPP loan earlier to receive a “second draw” loan. It also expands the kind of loan expenses to include personal protective equipment, facilities modifications, and some other worker protection expenditures. However, “second draw” loans are intended for those small businesses and nonprofits most affected by the pandemic: the cap on the number of employees for eligible nonprofits and small businesses is reduced to 300 employees, and the maximum loan would be $2 million. Applicants must demonstrate at least a 25 percent reduction in revenue. The bill also allows businesses to deduct expenses associated with their forgiven PPP loans in addition to expanding the employee retention credit intended to prevent layoffs.

The provisions extend coverage for emergency economic injury disaster loans (EIDL) through December 31, 2021.

Other Important Provisions
  • Pell Grants: Congress increased the maximum Pell eligibility to $6,495 (a $150 increase). In addition, the bill establishes a “poverty threshold” guaranteeing the receipt of the full Pell Grant amount to those who qualify and permits incarcerated individuals to receive Pell Grants at nonprofit and public institutions that offer prison education programs. Lastly, the bill eliminates denial of financial aid due to drug convictions or failure to enroll in the Selective Service.
  • HBCU Capital Financing Loans: The bill eliminates outstanding capital financing loans to HBCUs.
  • Subsidized Student Loans: The bill eliminates the 150 percent cap on the receipt of subsidized undergraduate student loans.
  • Free Application for Federal Student Aid (FAFSA) Simplification: The bill significantly shortens the length of the FAFSA application and cuts the number of questions students must answer from 108 to 36. It also simplifies the eligibility requirements to receive a Pell Grant, resulting in an additional 500,000 eligible students.
  • Broadband Access: The bill includes $3.2 billion in a fund to provide monthly subsidies for broadband service and a Wi-Fi-connected device for low-income families (including families with a Pell Grant recipient). A similar $1 billion fund will benefit tribal communities. The bill also creates a $285 million fund to increase broadband access and allow for hiring of technology staff at HBCUs, HSIs, and other MSIs to benefit the institutions and their surrounding communities.
  • Extension of Section 127 Tax Benefit: The bill would extend for five years, through 2025, the tax benefit provided when companies pay up to $5,250 of an employee’s student loan payments each year on a tax-free basis.

One important issue not included in the legislation is limited liability protections for businesses, including colleges and universities. Many speculate that such limited liability protections could be negotiated in future legislation.

Why This Is Important

Congress hopes that the funding will offer some emergency aid to institutions as they address the consequences of the COVID-19 pandemic, but it is far less than the $120 billion that AGB and the higher education community requested over the summer and fall. According to the National Student Clearinghouse Research Center, freshman enrollment declined 13.1 percent this fall compared with the previous year. These and other challenges are causing unprecedented financial stress for much of higher education.

It is unclear if Congress will pass another recovery bill when President-elect Joe Biden takes office next month, although Biden has already indicated that another relief package is a priority for his administration.

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 loan? Is your institution and/or institutionally related foundation eligible? If yes to both, do you know how to apply?
  3. Do you have a policy and process for identifying students who need emergency aid? How will these funds be distributed?
  4. 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 your operating budget? How about next year’s budget?
  5. As a result of the current pandemic, in what ways will you revise your enrollment strategy or projections? How might your tuition and institutional student aid strategies need to change?
  6. How might the pandemic affect your asset management strategy (foundation or endowment)? What policies should you consider to effectively utilize available funds?

Additional Resources