NAICU Washington Update

American Rescue Act Passes House; Now Under Consideration in the Senate

March 05, 2021

The House passed the American Rescue Plan Act (H. R. 1319) last week, sending President Biden’s $1.9 trillion coronavirus relief package to the Senate for the next step in the reconciliation process. 

The bill maintains $40 billion for higher education, including private, nonprofit colleges. However, before House passage, changes were made to the higher education language in the bill to ensure that it would not face obstacles unique to the reconciliation process upon parliamentary review in the Senate. The rules for a reconciliation bill in the Senate require that legislative provisions must be germane to the purpose of the bill, have an impact on spending (whether a savings or a cost), and not amend other non-relevant legislation, to be considered relevant to the reconciliation process. 

Because of these rules, the following provisions were removed from the original committee version of the bill before passage in the House.
  • A provision mandating that institutions are the sole determiner for student grants. 
  • A provision making student support activities authorized under the Higher Education Act an allowable use of funds.
  • A provision allowing HBCUs and MSIs to use their regular Title III and Title V grants for pandemic purposes, as under CARES and CRRSAA. 
  • A requirement that the Secretary of Education must disburse funding through the G5 system, and the required timeframe for the Secretary to disburse funds.
However, in an unexpected move, the Senate also added a provision to make all student loan forgiveness (for both federal and private loans) tax free through 2025.  Such tax forgiveness has been a long sought goal of the higher education community.  Currently, only public service loan forgiveness is tax free.

The American Rescue Plan still requires institutions to spend at least 50% of funds on emergency student grants.  The bill also removes the previous limitation on funding for institutions that paid the endowment tax.  Institutions must also use portions of funds “to implement evidence-based practices to monitor and suppress coronavirus in accordance with public health guidelines,” and “to 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.”

The bill also contains an important provision for nonprofit colleges and universities that self-insure their unemployment amounts.  It builds on the CARES Act provision that allows a 50% subsidy to states to assist self-insuring nonprofits with their unemployment costs.  The American Rescue Plan increases the subsidy from 50% to 75%, beginning on March 31 through August 31, 2021.  The nonprofit community is continuing to push for 100% federal coverage of these costs but this is welcome progress.

Consideration of a reconciliation bill in the Senate is limited to 20 hours of debate, thus prohibiting a filibuster, and requires only 51 votes for passage. However, the amendment process, referred to as “vote-a-rama,” can take hours, if not days, to complete. Passage in the Senate is expected on March 5 or 6, however, anything could happen. 

The big difference between the House and Senate versions of the bill is that the Senate does not include a $15 federal minimum wage.  Because of bill differences, the House will need to vote again on final approval before sending the bill to the president’s desk. The House is tentatively scheduled to consider the Senate bill on March 8. The expiration of Unemployment Insurance on March 14 is keeping the bill moving.