Navigating Financial Storms: New Rules on Emergency Grants

Emergencies, particularly those tied to finances, are often unpredictable and have the ability to alter an individual’s life path. For students, these emergencies can upend their already precarious financial situation, sometimes leading to dropping out of school. To remedy this, institutions of higher education, charities, and individual donors often step in to provide students with additional funding when necessary. As an example, during the COVID-19 pandemic, AccessLex made available $5 million through a Law Student Emergency Relief Program to our approximately 200 member law schools. The problem, however, is that this type of aid is considered estimated financial assistance (EFA) and cannot be given if a student has already met their pre-determined financial need for the year. Although a professional judgment determination can be made by the financial aid office to get around this roadblock, this process is often time-consuming, requires strict documentation, and can overwhelm financial aid administrators during an emergency that impacts multiple students, such as the COVID-19 pandemic. 

To address this challenge, Congress passed the Free Application for Federal Student Aid (FAFSA) Simplification Act, which among other things, makes changes to how emergency grants are treated. Recently, the Education Department (ED) released a Dear Colleague Letter (DCL) clarifying these changes. First, the term “estimated financial assistance (EFA)” will be replaced with “other financial assistance (OFA).” Second, institutions will be required to shift from using the Expected Family Contribution to using the Student Aid Index which is calculated by using modified need analysis formulas. Lastly, emergency grants and loans provided to students for expenses included in one of the components of their cost of attendance during emergencies will no longer be considered EFA (or OFA).  

These changes were in response to tremendous advocacy efforts from the higher education community, including the following from AccessLex:

• In May 2020, we wrote a letter to Congress urging its members to change the treatment of institutional and other emergency grants. 
• In March 2021, we wrote to ED Secretary Miguel Cardona outlining our higher education priorities, including exempting institutional and other emergency grants from the estimated financial assistance calculation. 
• In July 2021, we asked Senate leaders to include a provision exempting institutional and other emergency grants from the estimated financial assistance calculation in its budget reconciliation package. 
• We provided financial aid administrators with information regarding the current state of law of emergency grants and ways institutions could more effectively use professional judgment to provide emergency aid. 

The unpredictable nature of financial emergencies can have profound negative effects, especially for students. The FAFSA Simplification Act and ED’s policy guidance is an exciting step forward ensuring that emergency grants and loans from schools, charities, and other private donors flow quickly and seamlessly to students who have urgent needs. 

Check out some of AccessLex Institute’s relevant advocacy resources:

Read our full set of Higher Education Act policy recommendations.

Visit our #MakeTheCase microsite to get involved in advocating to protect graduate lending.