Understanding the Types of Emergency Financial Aid

The COVID-19 pandemic has brought conversations about emergency financial aid to the front page of news outlets, and new legislation passed during the pandemic has created more opportunities for the federal government and universities to help students.

The COVID-19 pandemic has brought conversations about emergency financial aid to the front page of news outlets, and new legislation passed during the pandemic has created more opportunities for the federal government and universities to help students. Now, there are effectively two types of emergency financial aid for students: the emergency financial aid that has existed for years, plus new funds allocated by the federal government to help students. 

Emergency financial aid (pre-pandemic)

Before 2019, the types of emergency financial aid for students included grants, short-term loans, and non-cash emergency aid, according to emergency financial aid resource StudentAr, which aims to improve student retention in colleges and universities by helping students get access to emergency aid.

Emergency grants are separate from institutional grants and scholarships awarded through the standard financial aid process; sometimes they aren’t even administered by a financial aid office. They don’t need to be repaid and are almost always easier to administer than loans (loans require follow-up for eventual payment). Institutions set the guidelines for who is eligible for emergency grants and how much will be/can be awarded to each student. Emergency grants must be reported to the financial aid office so they can be factored into a student’s financial aid package

Completion grants also don’t have to be repaid and are most commonly distributed by institutions for students who are close to graduation and owe a past-due balance to the institution that would impede them from completing the degree. Institutions set the terms for the completion grants (i.e., who is eligible, how much money will be awarded, etc.).

Short-term loans are short-term advances on future financial aid funds and are typically the result of a timing issue. For example, if a student needs to pay rent by February 1 but won’t receive a student loan disbursement until February 5, the student can contact the financial aid office, who can create a short-term loan for the student from emergency aid funds and subsequently take the money back when the loan disperses. Institutions decide who can receive such loans and how, as well as whether to charge interest. Short-term loans don’t need to be included in a student’s financial aid package, and the quick repayment of these loans creates a stream of funding to help students in these short-term situations.

Non-cash emergency aid can include food pantries, gift cards, and transit passes. It’s easy for institutions to ensure that the funds are going to be used by students for the intended purposes. Schools can decide whether or not to include the non-cash assistance in the student’s financial aid eligibility.

Pandemic financial aid

From March 2020 until recently, three different relief acts allocated nearly 80 billion dollars to higher education institutions: the CARES Act (and HEERF I), the CRRSAA (and HEERF II), and the American Rescue Plan Act of 2021 (and HEERF III). The funds were required to be evenly split, so almost 40 billion dollars were to be given directly to students, as a way to help them pay for books, laptops, food, and housing. Each school’s number of Pell Grant Recipients determined how much they would receive. Federal Pell Grants are awarded to undergraduate students with financial need. Students were required to contact their school’s financial aid office to request funds.

In March 2020, the CARES Act allotted $14 billion to the Office of Postsecondary Education (OPE) as the Higher Education Emergency Relief Fund (HEERF I). $6 billion was to go directly to students, to cover food, tuition, housing, etc. In December 2020, the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) authorized $21.2 billion dollars in relief for higher education (HEERF II). In March 2021, the American Rescue Plan Act of 2021 and HEERF III provided $40 billion dollars, with $20 billion earmarked for emergency aid, to colleges and universities. Institutions will be disbursing these funds over the next 12 to possibly 27 months.

HEERF II and HEERF III allow schools to use emergency funds for cost of attendance, to cover student outstanding balances (with student consent), to target students who have previously stopped out or dropped out, and to prioritize exceptional need. All students, including undocumented, DACA, and international students, may receive HEERF III funds. HEERF III requires Institutions to use the funds within a year, but the U.S. Department of Education is allowing for a no-cost extension beyond September 30, 2022, which could allow institutions to help students in 2023, when there may be fewer financial resources available for students. 

Edquity recommends that institutions exhaust their HEERF II funds first to streamline reporting and compliance and then consider how they might pace out the spending of HEERF III funds, which could run as long as September 30, 2023, with an extension. We have also recommended that institutions find a new way to accurately assess student need, by measuring basic needs insecurity or other indicators of financial hardship, and distributing funds equitably that way. Edquity has been helping partners administer HEERF I and HEERF II and will continue to aggregate learnings and insights from these programs to ensure the field can refine its practices to achieve student-centered, and thus institution-benefiting, goals.

HEERF III guidance includes non-Title IV students, enabling institutions to provide funding for students who are not eligible to receive Title IV federal aid, including DACA recipients and undocumented students, and it mandates that institutions cannot discriminate against any student on the basis of race or nationality in their methodology for prioritizing need and administering aid. 

Federal funds boost enrollment

Federal funds can support re-enrollment efforts because institutions can apply HEERF emergency aid to outstanding tuition balances with students’ permission. Research shows this works wheninstitutions optimize their programs to help students persist and complete their degrees. In 2019, Edquity distributed more than $50,000 in emergency aid to Compton College students, most of whom applied for and received funds within 48 hours. A study of that program showed that students who received grants of just $250 graduated at twice the rate of students who received no emergency aid. Colleges and universities can distribute HEERF funds to support enrollment and completion efforts and remain in compliance with federal guidance. 

Takeaways

Research shows that emergency cash assistance helps students stay enrolled in college and graduate, and half of the colleges and universities in the U.S. now offer some type of emergency financial aid. Edquity’s technology helps colleges and universities administer emergency aid in an equitable, effective, and federally compliant way, and Edquity distributed over $50 million in federal emergency aid to over 60,000 students over the summer of 2021. Students typically receive funds from Edquity within 24 hours of applying, compared with a national average of 13 days. We’ve continued to improve and refine our evidence-based approach to distributing financial aid. 


Are you an administrator? Get in touch with us at inquiries@edquity.co to learn more about how you can bring equitable emergency aid to yours students today.

Are you a student? Contact support@edquity.co or or click the blue bubble in the bottom-right corner of edquity.co for assistance.

Written by

Subscribe to the Edquity Newsletter

More Emergency Aid Articles