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Lisa Qing

For other reports on COVID‑19,
see our COVID‑19 Issues page.

Budget and Policy Post
January 20, 2021

Second Round of Federal Higher Education Relief Funding


The Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA), signed by the President on December 27, 2020, provides $900 billion for a broad array of efforts related to the coronavirus disease 2019 (COVID-19). This is the second piece of federal legislation that contains substantial COVID-19 relief funding for colleges and universities. In this post, we recap the key elements of the first round of relief funding for colleges and universities, then describe the key elements of the second round of funding. (More detail about the first round of funding is available in our earlier companion post, An Overview of Federal Higher Education Relief.) In the coming weeks, we plan to release a series of higher education analyses, which will focus on the Legislature’s key upcoming budget decisions, including how the availability of this new round of federal relief funding might influence state higher education spending.

Recap of First Round Relief Funding

Earlier Federal Act Provided Relief Funding for Student Financial Aid… The federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed on March 27, 2020, created the Higher Education Emergency Relief Fund. Nationally, $14 billion was provided to this fund. As Figure 1 shows, higher education institutions in California received a total of $1.8 billion. The vast majority of the funds—which we refer to as “base funds”—were allocated to institutions by formula. Institutions were required to spend at least half of these base funds on student financial aid. Students, in turn, could use their financial aid grants for expenses related to campus disruptions resulting from COVID-19. Institutions had considerable discretion in allocating these student aid grants, though federal guidance limited the grants to students eligible for federal financial aid (need-based or non-need-based).

Figure 1

CARES Act Provided $1.8 Billion in Higher Education Relief Fundsa

(In Millions)

Segment

Base Funds

Minority‑Serving
Institutions

Institutions
With Unmet Needb

Total

California Community Colleges

$579.7

$33.4

$0.4

$613.5

California State University

525.3

38.3

563.7

University of California

260.0

7.4

267.5

Private nonprofit

167.7

4.5

27.0

199.2

Private for‑profit

170.0

170.0

Other public

4.4

5.3

9.7

Totals

$1,707.2

$83.6

$32.8

$1,823.6

aChart excludes $54 million from the Coronavirus Relief Fund allocated to the California Community Colleges as part of the state’s 2020‑21 budget package. Chart also excludes any CARES Act funding that a higher education institution might have received for research or other targeted purposes.

bChart excludes funds ($28 million nationally) that will be awarded through a competitive process. As of January 2021, recipients have not yet been announced.

CARES = Coronavirus Aid, Relief, and Economic Security.

…And Institutional Relief. The remaining base funds were available for institutional expenses associated with changes in instructional delivery due to the pandemic. Qualifying institutional expenses ranged from paying for technology and faculty professional development to providing student refunds for housing and dining programs as campuses shifted to remote operations. In addition to base funds, supplemental funds were provided to minority-serving institutions and institutions with unmet needs. Institutions could use these supplemental funds for any mix of student financial aid and institutional expenses.

Institutions Have Already Spent Most of Their CARES Act Funds. Most higher education institutions received their award notices from the U.S. Department of Education in spring 2020. Institutions have until one year after receiving their award notice to finish spending their funds. The department reports that California institutions had spent $1.2 billion (70 percent) of the $1.8 billion in CARES Act higher education relief funds as of September 30, 2020 (the most recent date for which statewide data was available as of this writing). Of the base funds, institutions had spent a significantly larger share of student aid funds (91 percent) than institutional relief funds (52 percent). In conversations with our office, some campus administrators indicated they intend to spend remaining institutional relief funds gradually through the spring 2021 term, as they continue to incur qualifying expenses.

Second Round Relief Funding

CRRSAA Provides Second Round of Relief Funding for Higher Education. As Figure 2 shows, the new relief act provides $23 billion nationally for the Higher Education Emergency Relief Fund—notably higher than the amount provided in the first round ($14 billion). The vast majority (92 percent) will be distributed as base funds according to a new formula specified in the legislation, with the remaining distributed as supplemental funds going to minority-serving institutions and institutions with unmet needs.

Figure 2. New Federal Relief Act Provides Additional Education Funding

Institutional Base Allocations Determined by New Six-Part Formula. Figure 3 compares the new formula for base funds under CRRSAA to the previous formula used under the CARES Act. The most notable difference relates to part-time students. Whereas the CARES Act formula measured enrollment only in terms of full-time equivalent (FTE) students, the CRRSAA formula measures enrollment in terms of both FTE students and headcount. This directs a larger share of the new relief funds toward institutions that enroll many part-time students, including community colleges. In contrast to the CARES Act formula, the CRRSAA formula also accounts for certain students enrolled exclusively in distance education before the start of the pandemic, though their weight in the new formula is very small.

Figure 3

New Formula Is Used to Allocate Base Relief Funds

Component

Weight

CARES Act

CRRSAA

FTE students receiving Pell Grantsa

75%

37.5%

Headcount of students receiving Pell Grantsa

37.5

FTE students not receiving Pell Grantsa

25

11.5

Headcount of students not receiving Pell Grantsa

11.5

FTE of Pell Grant recipients enrolled fully in distance education prior to COVID‑19

1.0

Headcount of Pell Grant recipients enrolled fully in distance education prior to COVID‑19

1.0

Totals

100%

100.0%

aExcludes students enrolled fully in distance education prior to the COVID‑19 pandemic.

CARES = Coronavirus Aid, Relief, and Economic Security; CRRSAA = Coronavirus Response and Relief Supplemental Appropriations Act; FTE = full‑time equivalent; and COVID‑19 = coronavirus disease 2019.

Base Allocations Recently Announced for California. On January 14, 2021, the U.S. Department of Education announced allocations for base funds. Higher education institutions in California are expected to receive a total of $2.9 billion in base funds—notably higher than their first round funding ($1.7 billion). As Figure 4 shows, the California Community Colleges will receive the largest amount of funding among California higher education institutions, followed by the California State University and then the University of California. Based on the department’s announcement, the funds will be processed automatically within a few weeks, and institutions that previously received base funds under the CARES Act would not need to reapply under CRRSAA. As with the CARES funds, institutions will have until one year after receiving their CRRSAA award to spend these second round funds. As of this writing, the department has not yet announced supplemental allocations for minority-serving institutions and institutions with unmet need.

Figure 4

California Institutions Expected to Receive $2.9 Billion in Base Fundsa

(In Millions)

Segment

Student Aid

Institutional Relief

Total

CCC

$290.2

$1,022.8

$1,313.1

CSU

262.7

591.2

853.8

UC

130.0

261.0

391.0

Private nonprofit

85.2

182.0

267.3

Private for‑profit

108.9

108.9

Other public

2.1

6.0

8.0

Totals

$879.0

$2,063.0

$2,942.0

aDoes not include supplemental awards for minority‑serving institutions and institutions with unmet need.

Less Than Half of Base Funds Are Reserved for Student Aid. Like the CARES Act, the new relief act requires institutions to spend a portion of their base funds on student financial aid. Specifically, public and private nonprofit institutions are required to spend at least the same amount of base funds on student aid as they were required to spend on this purpose under the CARES Act. By comparison, for-profit institutions are required to spend their entire CRRSAA base funds on student aid. Whereas the CARES Act specified that student aid was for expenses related to campus disruptions due to COVID-19, CRRSAA allows student aid to be used for the regular costs of college attendance or emergency costs related to COVID-19. CRRSAA also includes a new requirement that institutions prioritize financial aid grants for students with exceptional need, such as those students qualifying for Pell Grants.

Remaining Base Funds May Be Used for Institutional Relief. The remaining base funds (totaling $2.1 billion across California institutions, compared to $879 million for student aid) may be used for institutional expenses related to COVID-19. Qualifying expenses for this institutional relief are also somewhat broader than those allowed under the first round. Whereas the CARES Act specified that institutional relief was for expenses related to changes in instructional delivery due to COVID-19, CRRSAA allows institutions to use their base funds for expenses and lost revenues associated with COVID-19, as well as certain student support activities. The new legislation also allows institutions with unspent relief funds provided under the CARES Act to repurpose those funds for uses allowable under CRRSAA.

Minority-Serving Institutions Will Receive Supplemental Funding. About 170 institutions in California are eligible for federal programs supporting minority-serving institutions—most commonly the Developing Hispanic-Serving Institutions program. The U.S. Department of Education will allocate supplemental funds to minority-serving institutions using a statutory process. Under the process, each minority-serving program receives funding in proportion to that program’s funding level in federal fiscal year 2019‑20. Then, within each program, eligible institutions receive funding based on a specified formula—which for most programs is the same formula used to allocate base funds. As under the CARES Act, institutions may use minority-serving institution supplemental funds for any mix of student aid and institutional expenses.

Some Institutions With Unmet Needs Also Will Receive Supplemental Funding. After making other funding allocations, the U.S. Department of Education will make supplemental allocations to institutions with the greatest unmet needs related to COVID-19. The legislation does not specify how these needs are to be measured, but it indicates that eligible institutions may include those enrolling many graduate students (who are ineligible for Pell Grants and thus receive low weighting in the base allocation formula) and institutions that do not otherwise receive an allocation. It is not yet known whether the department will use the same approach taken under the CARES Act, under which it allocated the majority of supplemental funds for unmet needs to institutions receiving less than $500,000 in other higher education relief funding.

CRRSAA Provides Governor With Additional Flexible Funds for Education. The new relief act also provides California with $341 million for the Governor’s Emergency Education Relief Fund, initially created under the CARES Act. Of this amount, $187 million is reserved for assistance to private K-12 schools. California has discretion to spend the remaining $154 million on emergency grants to elementary and secondary schools, higher education institutions, or other education-related entities. California chose to allocate all of its Governor’s Emergency Education Relief funds under the CARES Act for elementary and secondary education. The administration has not yet indicated whether it intends to allocate any of the new Governor’s Emergency Education Relief funds for higher education.

Broader Federal Legislative Package Includes Changes to Federal Student Aid. In addition to COVID-19 relief funds, the newly enacted legislation includes several policy changes related to student financial aid. Most notably, it changes the approach used to determine eligibility for Pell Grants and other federal aid programs beginning in the 2023‑24 award year. These changes are intended to reduce the number of questions on the Free Application for Federal Student Aid (FAFSA), as well as allow students to better predict their eligibility for Pell Grants. The changes are expected to increase the number of students eligible for the Pell Grant as well as the maximum Pell Grant. In addition, the legislation increases the maximum Pell Grant by $150 for 2021‑22 and restores Pell Grant eligibility for incarcerated students, among various other changes.