Press Release/Statement | March 10, 2021

TICAS Statement on Passage of the American Rescue Plan

Accountability Affordability COVID-19

Author: Statement of Jessica Thompson

“We applaud Congress for its passage of the American Rescue Plan. The bill, which President Biden is expected to sign shortly, includes $350 billion in assistance for states to cover COVID-related costs and keep their budgets whole, and nearly $40 billion in new emergency funding specifically for colleges and students. These investments are critically needed to sustain and strengthen higher education both during and in the aftermath of the pandemic. The bill also closes the ‘90/10 loophole,’ exempts discharged student debt from taxation through the end of 2025, and provides funding to the Education Department to support borrowers in the transition back into repayment later this year. 

“As the nation looks toward recovering and rebuilding following the COVID crisis, we urge Congress and the Biden Administration to focus now on the systemic changes required to permanently close equity gaps in college enrollment and completion — and to reduce reliance on student debt — by doubling the maximum Pell Grant, investing in a new federal-state funding partnership for public colleges, further protecting students from low-quality colleges, and improving the student loan repayment system.“

Notable higher education–related provisions of the American Rescue Plan include:  

  • $40 billion in aid for colleges and students: The bill provides nearly $40 billion directly to colleges and universities through the Higher Education Emergency Relief Fund (HEERF). As in the most recent relief package, funds will be distributed based on a formula that accounts for both FTE enrollment and headcount — a welcome shift from the original CARES Act formula, which relied only on FTE enrollment. The majority of new HEERF funds will go directly to nonprofit and public institutions, who will be required to spend at least half of the funds on direct emergency aid to students. (One percent of funds will go to for-profit colleges, who will be required to use all the funds for direct student aid.) The bill also reserves critical additional aid specifically for HBCUs and other MSIs.  
  • Closing the ‘90/10’ loophole: The bill closes what is known as the ‘90/10’ loophole to reduce the aggressive recruitment of veterans and other vulnerable students by low-quality colleges.  
  • Exempting discharged student debt from taxation: The bill exempts from taxable income any discharges of federal student debt through the end of 2025. This broad exemption not only covers any potential one-time COVID-related debt discharges, but also addresses a longstanding issue for borrowers enrolled in income-driven repayment plans. It is critical to make this exemption permanent so that no discharge of student debt is considered taxable income, regardless of the reason for the discharge. 
  • Funding for transitioning borrowers back into repayment: The bill also includes $91 million in funding to the Education Department to prepare for transitioning borrowers back into repayment after emergency benefits are scheduled to end on September 30, 2021, including significant direct outreach and support efforts for the tens of millions of affected student loan borrowers. 

###

The Institute for College Access & Success is a trusted source of research, design, and advocacy for student-centered public policies that promote affordability, accountability, and equity in higher education. For more information see www.ticas.org or follow us on Twitter and Facebook.