Are Emergency FSEOG and Higher Education Emergency Relief Fund Student Grants Taxable Or Untaxed Income?

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This AskRegs Knowledgebase Q&A was updated on March 31, 2021 to include IRS guidance related to Higher Education Emergency Relief Fund (HEERF I) student grants under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and HEERF II funds under the 2021 Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA, Section 314 of the Consolidated Appropriations Act, 2021).

HEERF II Funds Under the CRRSAA
They are neither taxable nor untaxed income. The following is from the IRS Higher Education Emergency Grants Frequently Asked Questions website:

"Q1. I am a student who received an emergency financial aid grant under section 3504, 18004, or 18008 of the CARES Act for unexpected expenses, unmet financial need, or expenses related to the disruption of campus operations on account of the COVID-19 pandemic. Is this grant includible in my gross income? (added March 30, 2021)

A1. No. Emergency financial aid grants under the CARES Act for unexpected expenses, unmet financial need, or expenses related to the disruption of campus operations on account of the COVID-19 pandemic, such as unexpected expenses for food, housing, course materials, technology, health care, or childcare, are not included in your gross income.

Q2. I am a student who received an emergency financial aid grant from a Federal agency, State, Indian tribe, institution of higher education, or scholarship-granting organization (including a tribal organization) because of an event related to the COVID-19 pandemic. Is this grant includible in my gross income? (added March 30, 2021)

A2. No. Emergency financial aid grants made by a Federal agency, State, Indian tribe, institution of higher education, or scholarship-granting organization (including a tribal organization) because of an event related to the COVID-19 pandemic are not included in your gross income."

Note: Section 3504 funds are Emergency FSEOG funds. Section 18004 funds are HEERF I funds under the CARES Act. Section 18008 funds are Elementary and Secondary School Emergency Relief Fund funds under the CARES Act. Section 277 funds are any emergency financial aid grants made by a federal agency, state, Indian tribe, institution of higher education, or scholarship-granting organization (including a tribal organization) because of an event related to the COVID-19 pandemic; these include HEERF II funds under the CRRSAA.

It is NASFAA's understanding based on conversations with ED that HEERF II grants awarded to students under the CRRSAA also are not untaxed income for Title IV federal student aid purposes.

Emergency FSEOG and HEERF I Funds Under the CARES Act
They are neither taxable nor untaxed income. HEERF I student grants and Emergency Federal Supplemental Educational Opportunity Grant (FSEOG) awards under the CARES Act are not taxable income for the student. According to IRS FAQs, "Emergency financial aid grants under the CARES Act for unexpected expenses, unmet financial need, or expenses related to the disruption of campus operations on account of the COVID-19 pandemic, such as unexpected expenses for food, housing, course materials, technology, health care, or childcare, are qualified disaster relief payments under section 139 of the Internal Revenue Code.  This grant is not includible in your gross income."

HEERF III Funds Under the ARP
It is NASFAA's understanding that the above IRS language in Q2/A2 also applies to HEERF III funds awarded under the American Rescue Plan of 2021 (ARP). If we hear differently, we will update this AskRegs Q&A.

Update Note: This AskRegs Q&A was updated on March 2, 2021 to include guidance NASFAA received from the U.S. Department of Education (ED) about awarding leftover HEERF I student grants and HEERF II student grants.

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.