Can We Use Our Student and/or Institutional Share Of HEERF Funds To Make Scholarships To Students?

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This AskRegs Knowledgebase Q&A was updated on August 18, 2021 to provide additional clarification regarding the use of Higher Education Emergency Relief Fund (HEERF) funds as scholarships.

The following guidance 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 Expended Prior to December 27, 2020
No and yes. The following HEERF I guidance is from the U.S. Department of Education's (ED's) Higher Education Emergency Relief Fund (HEERF) Frequently Asked Questions (FAQ) Rollup Document:

Q&A #37: "Can institutions use the Student Portion of its CARES Act funds under Section 18004(a)(1) for student scholarships?

No. The CARES Act does not allow institutions use the Student Portion of their Section18004(a)(1) funds for student scholarships. Institutions may use the Student Portion of their Section 18004(a)(1) funds only for direct emergency financial aid grants to students, not scholarships.

However, an institution may use the Institutional Portion of its Section 18004(a)(1) award for student scholarships under limited circumstances. Section 18004(a)(1) requires institutions to use Institutional Relief funds only to cover “costs associated with significant changes to the delivery of instruction due to the coronavirus” pursuant to Section 18004(c).

Therefore, if an institution wishes to use the Institutional Portion of its Section 18004(a)(1) award to fund student scholarships, the scholarships must be geared towards these types of costs. Examples of such allowable scholarships for “costs associated with significant changes to the delivery of instruction due to the coronavirus” include covering the cost of fees to access an online library in lieu of a physical library (if such fees are otherwise usually required), providing students with computers and internet access, and subsidizing the added cost of off-campus housing.

Furthermore, it is important that any scholarships funded by the Institutional Portion of a Section 18004(a)(1) award would not count toward the minimum fifty percent of an institution’s total allocation that must be spent on emergency financial aid grants to students for expenses related to the disruption of campus operations due to coronavirus."

Q&A #38: "Can institutions use CARES Act funds under Section 18004(a)(2) or Section 18004(a)(3) to make scholarships to students?

Yes. Section 18004(a)(2) and Section 18004(a)(3) of the CARES Act state that institutions may use funds specifically “for grants to students for any component of the student’s cost of attendance (as defined under section 472 of the Higher Education Act), including food, housing, course materials, technology, health care, and child care.”

HEERF I Funds Remaining Unspent as of December 27, 2020, HEERF II Funds, and HEERF III Funds
If you are awarding leftover HEERF I funds under the pre-December 27, 2020 allowable uses, then you can follow the above guidance. Otherwise, you cannot award leftover HEERF I, HEERF II, or HEERF III student or institutional funds as institutional scholarships because the criteria for making emergency grants to students under the CRRSAA and ARP differ from the criteria for making grants under the CARES Act prior to December 27, 2020.

The student portion of leftover HEERF I funds and the student portion of HEERF II funds and HEERF III funds cannot be used to fund scholarships. Schools must still use those funds only for emergency grants to students. However, the grants are now made using the selection criteria under the ARP. See the following from the HEERF III Frequently Asked Questions:

Q&A #11: "What are the requirements for making emergency financial aid grants to students?

Students who are or were enrolled in an institution of higher education on or after the date of the declaration of the national emergency due to the coronavirus (March 13, 2020) are eligible for emergency financial aid grants from the HEERF, regardless of whether they completed a FAFSA or are eligible for Title IV. The CRRSAA requires that institutions prioritize students with exceptional need, such as students who receive Pell Grants or are undergraduates with extraordinary financial circumstances, in awarding emergency financial aid grants to students Beyond Pell eligibility, other types of exceptional need could include students who may be eligible for other federal or state need-based aid or have faced significant unexpected expenses either for themselves or that would affect their financial circumstances, such as the loss of employment, reduced income, or food or housing insecurity. In addition, the CRRSAA explicitly states that emergency financial aid grants to students may be provided to students exclusively enrolled in distance education provided they have exceptional need.

The Department encourages institutions to prioritize domestic students, especially undergraduates, in allocating this funding. Domestic students include citizens, permanent residents, refugees, asylum seekers, DACA recipients, other DREAMers, and similar undocumented students. 

Institutions may not (1) condition the receipt of emergency financial aid grants to students on continued or future enrollment in the institution, (2) use the emergency 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 emergency financial aid grant. 

Institutions should carefully document how they prioritize students with exceptional need in distributing emergency financial aid grants to students, as the Department is exploring reporting requirements regarding the distribution of emergency financial aid grants to students (see 2 CFR § 200.334)."

Q&A 13: "How may students use their emergency financial aid grants? 

Emergency financial aid grants may be used by students for any component of their 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. Students determine how they may use their emergency financial aid grant within the allowable uses." 

The institutional portion of HEERF funds also cannot be used to award institutional scholarships to students, because the allowable uses effectively prevent it.

Q&A #21: "What are the allowable uses of funds for institutional uses? 

Under the ARP, similar to the CRRSAA, allowable uses under the HEERF III (a)(1) Institutional Portion awards include: 

As described in Question 42, grant expenses may be incurred back to March 13, 2020, the date of the declaration of the national emergency due to the coronavirus. 

Additionally, as mentioned in Question 1, the ARP has added two new required uses of HEERF III institutional portion grant funds for public and private nonprofit institutions. Namely, a portion of their institutional funds must: 

(a) implement evidence-based practices to monitor and suppress coronavirus in accordance with public health guidelines; and 

(b) conduct direct outreach to financial aid applicants about the opportunity to receive a financial aid adjustment due to the recent unemployment of a family member or independent student, or other circumstances, described in section 479A of the HEA."

If you award the HEERF institutional funds to students, you have to follow the HEERF rules for student grants. Even if you call it a scholarship, it's a grant to the student and must follow HEERF student grant rules per footnote #4 in the HEERF III Frequently Asked Questions. You cannot call it a scholarship to circumvent these rules.

More Information: See the following:

Update Notes:

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