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

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This AskRegs Knowledgebase Q&A was updated on March 1, 2021 to include guidance NASFAA has received from the U.S. Department of Education (ED) about applying to students' accounts Higher Education Emergency Relief Fund (HEERF I) student grants under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) as well as HEERF II student grants under the 2021 Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA, Section 314 of the Consolidated Appropriations Act, 2021).

HEERF I Funds Spent Prior to December 27, 2020
According to the U.S. Department of Education's (ED's) 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 are allowed to deliver the HEERF I grants directly to students using checks, electronic funds transfer (EFT) payments, debit cards, and payment apps that adhere to ED's requirements for paying credit balances to students under 34 CFR 668.164(d), (e), and (f). This means a debit card or payment app must comply with Tier 1 and Tier 2 requirements. The HEERF I grant cannot 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.

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

NASFAA has received 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).

HEERF I Funds Remaining Unspent as of December 27, 2020 and HEERF II Funds
The same rules for the delivery methods for HEERF I funds to students prior to December 27, 2020 would apply to HEERF I funds that remained unspent as of the December 27, 2020 enactment of CRRSAA and for HEERF II funds. See the following from the Higher Education Emergency Relief Fund (HEERF) II Public and Private Nonprofit Institution (a)(1) Programs (CFDAs 84.425E and 84.425F) Frequently Asked Questions (revised March 19, 2021) and the Higher Education Emergency Relief Fund (HEERF) II Proprietary Institution Grant Funds for Students (CFDA 84.425Q) ((a)(4) Program) Frequently Asked Questions:

Q&A #5 (proprietary) and #9 (public and private nonprofit)

“How may students use their financial aid grants?

Answer: Financial aid grants for students may be used 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.

See Question 19 of the Higher Education Emergency Relief Fund (HEERF) Frequently Asked Questions (FAQ) Rollup Document for more details as to how institutions may pay the financial aid grants to students, if not applying it to a student’s account after obtaining the student’s written (or electronic), affirmative consent.”

HEERF I funds that remained unspent as of December 27, 2020 and HEERF II funds, however, may be applied to a student’s outstanding balance with if the student opts in and provides written authorization to so, if certain conditions are met. Without this authorization, the funds must be delivered directly to the student and not encumbered by the institution.

See the following from the above referenced FAQs:

Q&A #4 (proprietary) and #8 (public and private nonprofit) (emphasis added):

“What are the requirements for making financial aid grants to students?

Unlike the CARES Act, the CRRSAA requires that institutions prioritize students with exceptional need, such as students who receive Pell Grants, in awarding financial aid grants to students. However, students do not need to be only Pell recipients or students who are eligible for Pell grants. In addition, the CRRSAA explicitly provides that financial aid grants to students may be provided to students exclusively enrolled in distance education.

Institutions 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.

Institutions should carefully document how they prioritize students with exceptional need in distributing financial aid grants to students, as the Department intends to establish reporting requirements regarding the distribution of financial aid grants to students consistent with section 314(e) of CRRSAA.”

Here again, NASFAA has received ED confirmation 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).

NASFAA also has received ED confirmation that students may give schools permission to apply the HEERF II funds to student account charges that were posted to the student’s account prior to December 27, 2020. While the charge was posted to the student’s account before December 27, 2020, providing the funds to students after December 27 is acceptable.

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.

Note: This AskRegs Q&A was updated on January 25, 2021 to reflect requirements under the CRRSAA, which became law on December 27, 2020.

AskRegs Q&As represent NASFAA's understanding of regulatory and compliance issues. They are FOR INTERNAL USE ONLY. While NASFAA believes AskRegs Q&As are accurate and factual, they have not been reviewed or approved by the U.S. Department of Education (ED). If you should need written confirmation of AskRegs information for audit or program review purposes, please contact your ED School Participation Division. NASFAA shall not be liable for technical or editorial errors or omissions contained herein; nor for incidental or consequential damages resulting from the furnishing, performance, or use of this material.