How Must Schools Pay HEERF I, HEERF II, and HEERF III Grants To Students?

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This AskRegs Knowledgebase Q&A was updated on May 14, 2021 to include guidance in the May 11, 2021 Higher Education Emergency Relief Fund (HEERF) III Frequently Asked Questions as it relates to 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
The school only has two options for delivering (or paying) leftover HEERF I grants, HEERF II grants, and HEERF III grants to students:

  1. The school can deliver the funds directly to the student, unencumbered by the school; or
  2. The school can choose to allow the student to opt in and provide a separate written (or electronic) affirmative authorization for the school to apply the funds to the student's institutional ledger account.

The school cannot direct or control in any way how students spend their HEERF grants. Per the U.S. Department of Education's guidance in Q&A #14, "The student emergency financial aid grant is provided to the student, and may be used by the student for any component of the student’s cost of attendance or for emergency costs that arise due to coronavirus, such as tuition, food, housing, health care (including mental health care), or child care."

Also, Q&A #11 reminds, "The institution may not (1) condition the receipt of financial aid grants to students on continued or future enrollment in the institution, (2) use the financial aid grants to satisfy a student’s outstanding account balance, unless it has obtained the student’s written (or electronic), affirmative consent, or (3) require such consent as a condition of receipt of or eligibility for the financial aid grant."

If the school is not collecting the student's authorization in order to apply the HEERF grant funds to the student’s account, the school must deliver the funds directly to the student following the guidance in Q&A #19 of the HEERF Frequently Asked Questions (FAQ) Rollup Document (emphasis added):

"Institutions may provide emergency financial aid grants to students using checks, electronic transfer payments, debit cards, and payment apps that adhere to the Department’s requirements for paying credit balances to students. 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. The emergency financial aid grant may not be made to students through the use of a credit card that can be used only on campus or in a retail outlet affiliated with the institution."

Q&A #28 in the revised HEERF II Frequently Asked Questions indicates that, in situations where the school does not have written authorization from the student to apply HEERF funds to the student's institutional ledger account, those funds can be applied to the student's 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).

It is NASFAA's understanding that the above guidance related to credit balances only applies to delivery method and that the 14-day timeframe for delivering Title IV credit balances in 668.164(h) does not apply. Documented cash payments are also acceptable.

Reference the following:

HEERF I Funds Spent Prior to December 27, 2020
HEERF I funds that were spent prior to December 27, 2020 were required to be delivered directly to students; there was no option for the student to authorize the school to apply the grant funds to the student's account.

According to 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, schools were allowed to deliver the HEERF I grants directly to students using checks, electronic funds transfer (EFT) payments, debit cards, and payment apps that adhered to ED's requirements for paying credit balances to students under 34 CFR 668.164(d), (e), and (f). This meant a debit card or payment app had to comply with Tier 1 and Tier 2 requirements. The HEERF I grant disbursement could be made to students through the use of a credit card that could be used only on campus or in a retail outlet affiliated with the institution.

In any case, the disbursement of the HEERF I grant to the student must have remained unencumbered by the institution. That is, any outstanding balance (debts, charges, fees, or other amounts owed to the institution) must not have been deducted from the HEERF grant, not even with the student's permission.

NASFAA received ED confirmation that HEERF I student grants could 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 in the revised HEERF II Frequently Asked Questions.

Update Notes:

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