NASFAA AskRegs: Can HEERF I, HEERF II, Or HEERF III Student Grant Funds Be Used To Pay a Student's Outstanding Balance?

This AskRegs Knowledgebase Q&A was updated on May 12, 2021 to include guidance in the May 11, 2021 Higher Education Emergency Relief Fund (HEERF) III Frequently Asked Questions, as it relates to leftover HEERF I grants under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), HEERF II grants under the 2021 Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA, Section 314 of the Consolidated Appropriations Act, 2021), and HEERF III grants under the American Rescue Plan Act of 2021 (ARP).

HEERF I Funds Remaining Unspent as of December 27, 2020, HEERF II Funds, and HEERF III Funds
Yes. According to Q&A #11 and #12 in the HEERF III Frequently Asked Questions, students can opt in to voluntarily provide written affirmative authorization to allow schools to apply leftover HEERF I student grants, HEERF II student grants, and HEERF III student grants to student ledger account charges for any component of the student’s cost of attendance (COA) or for emergency costs that arise due to Coronavirus, such as tuition, food, housing, health care (including mental health care), or child care. The charges or costs do not have to be related to a disruption in campus operations.

This is true even in cases where the charges were posted to the student's account prior to December 27, 2020 and for an outstanding balance consisting of those allowable costs. This is also true for costs that were incurred by the student prior to December 27, 2020 and for which the school is delivering the HEERF grant funds directly to the student. However, as indicated in the revised HEERF II Frequently Asked Questions, "Institutions have this expanded flexibility to use unliquidated (unspent) funds effective December 27, 2020 (the date of enactment of the CRRSAA), for costs incurred on or after March 13, 2020, the date on which the President declared a national emergency due to the COVID-19 pandemic (85 FR 15337)."

In a May 14, 2021 American Council on Education (ACE) and U.S. Department of Education (ED) webinar, "Allocations and Guidance for COVID-19 Emergency Relief Funds," ED reiterated that you cannot use HEERF student grant funds to pay an outstanding balance consisting of charges that were incurred by the student before March 13, 2020. That would include Spring 2020 charges that were posted to the student's account prior to March 13, 2020.

HEERF I Student Grant Funds Spent Prior to December 27, 2020
No. Under the CARES Act, and as expressly stipulated in the Recipient’s Funding Certification and Agreement for Grants to Students, HEERF I student grants are intended to go to students “for their expenses related to the disruption of campus operations due to coronavirus, such as food, housing, course materials, technology, health care, and child-care expenses.” The April 21, 2020 Frequently Asked Questions makes it clear that HEERF I grants to students cannot be applied toward outstanding balances, stating, "The CARES Act requires institutions to provide the emergency financial aid grants to students. The institution may not use that portion of the HEERF set aside for emergency financial aid grants to students to satisfy a student’s outstanding account balance." The Frequently Asked Questions goes on to say, "The disbursement of the emergency financial aid grant to the student must remain unencumbered by the institution; debts, charges, fees, or other amounts owed to the institution may not be deducted from the emergency financial aid grant."

This means you cannot pay outstanding charges on the student's account with HEERF I funds even if you have the student's permission to do so. These funds must be delivered directly to the student using a means such as a check, an electronic funds transfer (EFT), a cash payment, a payment app, or a preloaded debit card with conditions. See AskRegs Q&A, How Must Schools Pay HEERF I, HEERF II, and HEERF III Grants To Students?

NASFAA has received the U.S. Department of Education (ED) confirmation that HEERF I student grants can be applied to the student's ledger account and passed through the institution's student information system/student accounts system only as long as 100 percent of those funds are delivered to the student and do not pay the student's account balance (i.e., the funds remain unencumbered by the institution). This was later confirmed in Q&A #28 of the revised HEERF II Frequently Asked Questions.

Update Notes:

This Q&A was updated on March 22, 2021 to include guidance in the revised HEERF II Frequently Asked Questions and guidance NASFAA has received from ED about awarding leftover HEERF I student grants, HEERF II grants, and HEERF III grants. It represented a change in ED's previous position.
This Q&A was previously updated on March 2, 2021 to include guidance NASFAA received from ED about awarding leftover HEERF I student grants under the CARES Act and HEERF II student grants under the CRRSAA.
This Q&A was previously updated to reflect HEERF I guidance in the April 21, 2020 Frequently Asked Questions about the Emergency Financial Aid Grants to Students under Section 18004 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.