This article was updated May 25, 2021. Legislation and guidance on this topic are constantly evolving. Information is current as of date of publication.

Below is an overview of key Higher Education Emergency Relief Fund (HEERF) II frequently asked questions (FAQs) and the US Department of Education’s responses to help your higher education institution comply with the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) and HEERF-related requirements.

To learn more about HEERF regulations and availability, revisit FAQs related to HEERF I funding, read the US Department of Education’s HEERF II FAQs, or gain additional CRRSAA insight in our related article.

What is the HEERF II program?

Section 314 of the CRRSAA, known as HEERF II, designates an additional $21.2 billion in higher education support funds under the CRRSAA, which are available to institutions impacted by the coronavirus. Funds must be used in accordance with Congress and the US Department of Education’s stipulations, but these have expanded under the new legislation.

What are some of the major changes Congress made in the HEERF II programs?

There are five major changes within the HEERF II programs:

1. Supplemental funding
2. Allowable uses of grant funds
3. Financial aid grants to students
4. Allocation for students enrolled in exclusively distance-education courses
5. Separate program for proprietary institutions

Supplemental Funding

Under the CRRSAA, private not-for-profit and public CARES Act grantees are to receive HEERF II funds as supplemental awards and aren’t required to submit new or revised applications to the US Department of Education.

An eligible private not-for-profit or public higher education institution that didn’t originally receive HEERF funding under the CARES Act will have an opportunity to apply for these new funds.

Allowable Uses of Grant Funds

Congress expanded the allowable uses of the awards under HEERF II of the CRRSAA and for unspent CARES Act funds, subject to certain limitations.

Financial Aid Grants to Students

Congress modified the share amount that must be used for financial aid grants to students. Under the CARES Act, recipients of HEERF grants were required to use 50% of the allocation under Section 18004(a)(1) for financial aid grants to students.

The CRRSAA requires an institution receiving HEERF II funding to provide the “same amount” in CRRSAA financial aid grants to students that it was required, or would have been required, to provide under its original CARES Act Student Aid Award portion.

Because there are more funds appropriated under the CRRSAA, the US Department of Education anticipates a larger share of the HEERF II allocation will be available for institutional support.

The US Department of Education clarified that institutions can use HEERF grant funds, which includes unspent CARES Act funds, CRRSAA funds, and American Rescue Plan funds, to make financial aid grants to the following students:

• Non-degree seeking
• Non-credit
• Dual enrollment
• Continuing education
• Qualified aliens as defined within 8 U.S.C. section 1641

Allocation for Students Enrolled in Distance-Education Courses

Students enrolled in exclusively distance education courses are included in the CRRSAA HEERF II allocation formula.

Institutions will now receive allocations that factor these students into the formula, and the formula also allows exclusively online institutions that were ineligible for funding under Section 18004(a)(1) of the CARES Act to apply for grant funds. Amounts apportioned for students enrolled in exclusively distance-education courses may be used only for financial aid grants to students.

Separate Program for Proprietary Institutions

Proprietary institutions are no longer eligible to receive awards under Section 314 (a)(1) of CRRSAA but may apply for new funding under Section 314(a)(4). This program supports only financial aid grants to students.

When is the due date for submitting HEERF II applications?

Applicants are required to submit their applications using grants.gov by April 15, 2021. Learn more about this requirement in the Federal Register notice.

Will institutions that received HEERF funding under the CARES Act receive HEERF II funds under the CRRSAA?

Yes, these institutions will receive additional funding, and no action is required. The US Department of Education will make supplemental awards to the existing student aid portion and institutional portion grants.

Can an institution that didn’t receive HEERF funding under the CARES Act receive HEERF II funds under the CRRSAA?

Eligible higher education institutions that didn’t receive HEERF funding under the CARES Act must apply on the Health & Human Services grants website. Institutions must complete an application for both the student aid portion and institutional portion grants.

What amount of HEERF II funds must be used for financial aid grants to students?

An institution that receives HEERF II funds from the new CRRSSA must provide the same amount of student financial aid grants it was required, or would have been required, to provide under its original CARES Act Student Aid Award portion.  

Institutions must promptly, and to the greatest extent possible, distribute all financial aid grants to students within the one-year performance period specified in the Grant Award Notification.

Are there requirements for how the student aid portion of HEERF II grants can be used?

Under the CRRSAA, institutions must prioritize students with exceptional needs, such as students who receive Federal Pell Grants. Institutions should document how they prioritize students with exceptional needs because the US Department of Education intends to establish reporting requirements regarding distributing financial aid grants to students.

Institutions may not do any of the following:

1. Require a student’s continued or future enrollment at the institution to receive financial aid grants
2. Use financial aid grants to satisfy a student’s outstanding balance, unless it has obtained the student’s written or electronic consent. If a student provides affirmative consent to have the emergency grant applied directly to their student account, an institution may apply grant funds to charges that were posted to the student account before December 27, 2020, as long as the grant itself was made available to the student after December 27, 2020. The Department of Education clarified on March 19, 2021, that institutions may apply the financial aid grant to the student’s account for charges that were posted to the student’s account prior to December 27, 2020.  The student must have been enrolled during a period of time for which the national emergency was declared.
3. Require this consent as a condition to receive or be eligible for the financial aid grant

Should the student aid portion be reported on 1098-T?

At this time there’s no official guidance regarding 1098-T reporting, however any student aid portion that is applied directly to the student account may be considered payment for qualified tuition and related expenses. It’s recommended that all institutions track aid that’s applied directly to student accounts to assist with potential 1098-T reporting.

Are there requirements for how the institutional portion of HEERF II grants can be used?

Allowable use under the CRRSAA institutional portion includes:

1. Defraying expenses associated with coronavirus—including lost revenue, reimbursement for expenses already incurred, technology costs associated with transitioning to distance education, faculty and staff trainings, and payroll. The US Department of Education clarified that employee benefits costs can be considered payroll costs if they were newly associated with coronavirus and were incurred on or after March 13, 2020.
2. Carrying out student support activities authorized by the Higher Education Act of 1965, that address needs related to coronavirus
3. Making additional financial aid grants to students

Similar to the CARES Act, no supplemental institutional portion may be used to fund the following:

• Contractors that provide pre-enrollment recruitment activities
• Marketing or recruitment
• Endowments
• Capital outlays associated with facilities related to athletics, sectarian instruction, or religious worship
• Senior administrator or executive salaries, benefits, bonuses, contracts, or incentives
• Stock buybacks, shareholder dividends, capital distributions, and stock options
• Any other cash or other benefit for a senior administrator or executive

What is lost revenue?

Lost revenue are those revenues that were otherwise expected but were reduced or eliminated due to the novel coronavirus 2019 (COVID-19) pandemic.

Does lost revenue need to be associated with the COVID-19 pandemic?

Lost revenue that is estimated by an institution must be associated with the coronavirus as noted by CRRSAA section 314(c)(1).

What is the time period to charge lost revenue and how should it be reported on the Schedule of Expenditures of Federal Awards?

Institutions may estimate their lost revenues from March 13, 2020, through the end of their HEERF grant performance period. For an institution with a fiscal yearend of June 30, 2021, they will include lost revenue and expenditures on their schedule of expenditures of federal awards for the time period March 13, 2020, through June 30, 2021.

How is lost revenue calculated?

The CRRSAA doesn’t have a defined calculation, which allows institutions flexibility in calculating the lost revenue. Some examples include:

• Year-over-year using the prior year or semester-over-semester comparison using a prior year semester compared to a current year semester
• Three or five year combined average revenue as a baseline compared to current year actuals
• Comparison to previously budgeted revenue or projected revenue for the period
• Using a fiscal year ending prior to March 13, 2020, compared to current year actuals

Can a higher education institution charge indirect costs to its HEERF II grants?

Indirect costs may be charged only to institutional portion awards. Generally, the indirect cost rate will be the on-campus rate specified in an institution’s negotiated indirect cost rate agreement.

If an institution doesn’t have a negotiated indirect cost rate, it may charge the de minimis rate of 10% of “modified total direct costs,” as defined in the Uniform Guidance, 2 Code of Federal Regulations (CFR) 200 subpart E.

Can a higher education institution charge direct administrative costs to its HEERF II grants?

Reasonable direct administrative costs may be charged only to institutional portion awards. Any direct administrative costs charged to HEERF II grants must be documented, reasonable, and necessary for the performance of the grant.

What additional responsibilities does a higher education institution have when accepting these funds?

There are three main responsibilities for higher education institutions that accept HEERF II funds:

1. Employee and contractor payment. Institutions must, to the greatest extent practicable, continue to pay employees and contractors during any disruptions or closures related to coronavirus.
2. Use of funds. Institutions must report how funds are used to the US Department of Education no later than six months after the date of the award as well as provide detailed accounting of funds’ use.
3. Records and supporting documents. Institutions must retain all financial records, supporting documents, statistical records, and all other records pertinent to the award for three years after submitting the final expenditure report. Please note, this means three years from the date the final expenditure report is submitted—not three years from receiving the award.

What are the HEERF II reporting deadlines?

Institutions must report to the US Department of Education on the use of HEERF II funds no later than six months after the date of the supplemental award, and the institution must provide detailed accounting of how the funds were used. The Department of Education will release further details specifying the manner and frequency with which the institution must report these items based on Section 314(e) of the CRRSAA.

All institutions were required to submit certain information about their use of HEERF I money to the Department of Education by February 8, 2021. There are also certain quarterly reporting requirements that must be posted to the institution’s primary website.

We’re Here to Help

To learn more about receiving HEERF II grants or remaining compliant with CRRSAA rules and regulations, contact your Moss Adams professional or read our article. Additionally, legislation and guidance on this topic are constantly evolving, so it’s important to stay alert for changes to the complete FAQs.