College Funding Changes In The Pandemic Relief Bill

There are several student financial aid provisions in the pandemic relief package that was included in the Consolidated Appropriations Act of 2021 that passed the House and Senate on Monday, December 21, 2020.

Student Loan Relief

Student loan borrowers are disappointed that the legislation did not include an extension to the student loan payment pause and interest waiver, nor did it provide any student loan forgiveness.

The payment pause and interest waiver is set to expire on January 31, 2021. President-elect Joe Biden will be able to extend it further after he takes office on January 20, 2021. Several possible extension dates have been floated, including April 1, April 30 and September 30, but Joe Biden has not yet said anything specific about the extension, just that it is needed.

Nevertheless, there are some changes in the legislation that affect student loan borrowers. In particular, the tax-free status of employer-paid student loan repayment assistance programs (LRAPs), which was set to expired on December 31, 2020, has been extended for five years through the end of 2025. Such LRAPs will be exempt from income and FICA taxes for both the employee and the employer.

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SULA, a complicated set of limits on subsidized Federal Direct Stafford loans, has been repealed. SULA mostly affected students who transferred from a 4-year college to a 2-year college.

In addition, there have been a few changes concerning the U.S. Department of Education’s Next Generation Processing and Servicing Environment (NextGen) for federal student loans.

  • New student loan borrower accounts must be allocated to loan servicers based on their past performance and servicing capacity.
  • Borrower accounts must be reallocated from servicers for “recurring non-compliance with FSA guidelines, contractual requirements, and applicable laws, including for failure to sufficiently inform borrowers of available repayment options.” Applicable laws include consumer protection laws.
  • NextGen must allow for multiple student loan servicers that contract directly with the U.S. Department of Education.
  • NextGen must incentivize more support to borrowers at risk of delinquency or default.
  • Borrowers must be allowed to choose their loan servicer when they consolidate their federal loans.
  • The U.S. Department of Education must improve transparency through expanded publication of aggregate data concerning student loan servicer performance.

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Changes in College Tuition Tax Breaks

The legislation changes the income phaseouts for the Lifetime Learning Tax Credit (LLTC) to be the same as the income phaseouts for the American Opportunity Tax Credit (AOTC), starting with tax years that begin after December 31, 2020.

The Lifetime Learning Tax Credit will start phasing out at $80,000 for single filers and $160,000 for taxpayers who file as married filing jointly. The tax credit is fully phased out at $90,000 (single) and $180,000 (married filing jointly). Married taxpayers who file separate returns are not eligible.

For comparison, the 2020 income phaseouts for the LLTC were $59,000 to $68,000 (single) and $118,000 to $136,000 (married filing jointly).

The new income phaseouts will not be adjusted for inflation.

In addition, the legislation repeals the Tuition and Fees Deduction, effective with tax years that begin in 2021. This is a permanent repeal, so the Tuition and Fees Deduction will not be resurrected by the next tax extenders bill.

New Funding for Higher Education Emergency Relief Fund

The $81.88 billion for the Education Stabilization Fund includes

  • $54.3 billion for the Elementary and Secondary School Emergency Relief Fund
  • $22.7 billion for the Higher Education Emergency Relief Fund (HEERF)
  • $4.05 billion for the Governor’s Emergency Education Relief Fund, of which $2.75 billion has been earmarked for Emergency Assistance to Non-Public Schools

The Higher Education Emergency Relief Fund previously received $16 billion as part of the CARES Act.

The allocation formula for the HEERF funding is more complicated than the one in the CARES Act, but the allowable uses are similar. Public and private non-profit colleges are required to use at least half of the money for financial aid grants to students. Private for-profit colleges are required to use all of the money for financial aid grants to students. Colleges must provide at least the same amount of emergency financial aid grants to students as they did under the CARES Act provisions, even if their total allocation is lower.

The emergency financial aid grants to students can be used for any element of the student’s cost of attendance or for emergency costs related to the pandemic, such as “tuition, food, housing, health care (including mental health care), or child care.”

The grants must be prioritized to students with exception financial need, such as Pell Grant recipients.

The emergency financial aid grants to students are tax-free.

Most College Students Remain Ineligible for Stimulus Checks

Most college students will remain ineligible for the recovery rebate checks, also known as the stimulus checks.

The legislation includes the same restriction that limits the $600 per qualifying child to children age 16 and younger. Only 0.1% of undergraduate students are age 16 or younger.

College students who are under age 24 are also ineligible, because they can be claimed as a dependent on someone else’s federal income tax return. The remain ineligible even if they are not claimed on someone else’s tax return.

A college student might qualify if they are married and file a joint return with their spouse or if they provide more than half of their own support. About 15% of undergraduate students are married. College students who are 24 years old or older may also qualify. More than 40% of undergraduate students are 24 years old or older.

College students can still claim the $1,200 stimulus checks from the CARES Act in addition to the new $600 stimulus checks, if they are eligible.

Increase in the Maximum Pell Grant

The maximum Federal Pell Grant has been increased to $6,495 for the 2021-2022 academic year.

Eligibility criteria will be pegged to a multiple of the poverty line starting with the 2023-2024 academic year. Students will be eligible for the maximum Pell Grant if they and their parents/spouse, as applicable, are not required to file a federal income tax return or if their adjusted gross income (AGI) is less than 175% to 225% of the poverty line. The higher threshold is reserved for households involving a single parent.

FAFSA Simplification

The legislation simplifies the Free Application for Federal Student Aid (FAFSA) starting with the 2023-2024 academic year. The new FAFSA reduces the number of questions on the form by two-thirds, from 108 questions to about three dozen questions. Follow me on Twitter. Check out my website or some of my other work here

Mark Kantrowitz

Mark Kantrowitz

I am Publisher of, a free web site about borrowing to pay for college. I am an expert on student financial aid, the FAFSA, scholarships, 529 plans, education tax benefits and student loans. I have been quoted in more than 10,000 newspaper and magazine articles about college admissions and financial aid. I am the author of five bestselling books about paying for college and have seven patents. I serve on the editorial board of the Journal of Student Financial Aid, the editorial advisory board of Bottom Line/Personal, and am a member of the board of trustees of the Center for Excellence in Education. I have previously served as publisher of, Cappex, Edvisors, Fastweb and FinAid. I have two Bachelor’s degrees in mathematics and philosophy from the Massachusetts Institute of Technology (MIT) and a Master’s degree in computer science from Carnegie Mellon University (CMU)



University of California Television (UCTV)

How to pay for college is a pressing question for all applicants from the class of 2020. COVID-19 has caused financial uncertainty and many are having to rethink their plans. Jodi Okun, an expert in financial aid, joins Steven Mercer to talk about how the pandemic is impacting financial aid awards, what to do if your family’s financial situation has changed, and how to plan for the future in uncertain times. [Show ID: 35963] More from: STEAM Channel ( UCTV is the broadcast and online media platform of the University of California, featuring programming from its ten campuses, three national labs and affiliated research institutions. UCTV explores a broad spectrum of subjects for a general audience, including science, health and medicine, public affairs, humanities, arts and music, business, education, and agriculture. Launched in January 2000, UCTV embraces the core missions of the University of California — teaching, research, and public service – by providing quality, in-depth television far beyond the campus borders to inquisitive viewers around the world. (

The Big College Expense You Probably Didn’t Know About And Save For: Mandatory Health Insurance

Watch out: If your health insurance does not meet the requirements set by the college your child attends, you may be forced to buy an entirely new policy sold or sponsored by the college. This potential cost is often omitted from listed expenses of attendance. Here's how you can get a waiver.

Watch out: If your health insurance does not meet the requirements set by the college your child attends, you may be forced to buy an entirely new policy sold or sponsored by the college. This potential cost is often omitted from listed expenses of attendance. Here’s how you can get a waiver.


Even though you may have solid health insurance for your family, the policy’s provisions may not meet the requirements set by the college your child attends. That means you may be forced to buy an entirely new policy the college sells or sponsors. At some colleges, the cost of the policy is over $5,000 for the 2019–2020 academic year (see the table below).

The way to avoid this charge is to get a waiver from your college by proving you have a health-insurance plan that’s comparable to the one it sells. The process to do this for the academic year often occurs in July and August or the month before the tuition bills come out.

There is a good reason for colleges’ mandatory health insurance and its stringent requirements. Colleges are understandably concerned that students could face debt from medical expenses that dwarfs even their student-loan debt. And while the cost of mandatory student health insurance is often a big surprise for many families, in some situations the college’s insurance policy can actually present both savings and a better plan. However, colleges need to improve their grade in making students and parents aware of this large mandatory additional expense.

My Surprise

About a month before receiving the bill for my daughter’s freshman year, I received a form email from the college stating that she was automatically enrolled in its student health-insurance plan unless I completed an online application to receive a waiver. The cost of the policy was around $1,500. This cost was not listed in the table the college posted on its website and not part of the cost data that appears in various other websites and books as an expense of attendance for the college.

I’m a financial educator focused on equity compensation (stock options, restricted stock, ESPPs) through the website, which even has a section on financial planning for college funding. Thus I’m financially aware and had rigorously saved for my kids’ college education, mostly in 529 Plans. This new and large cost completely shocked and baffled me.

I run a small business and already pay about $12,000 per year for a family plan. I did not see the need to pay for another health plan. While I was able to obtain the waiver and opt out of this additional expense for my daughter’s four years of college, for my son, now at another university, it’s more challenging and complex.

I soon discovered that many colleges have similar requirements. How did I fail to know about this expense? Why are colleges in the business of health insurance?

What I Learned

Your college student will receive healthcare from the student health center on campus as part of the tuition and health-services fee you pay. The health-insurance requirement kicks in for anything beyond the health services the school can provide. Health insurance that would cover emergency care for your child, which for most students would be the only reason they would need additional healthcare, may not meet the requirements the college sets.

The Affordable Care Act (“Obamacare”) allows colleges to sell health insurance and set their own higher standards based on what the school determines its students need. They can make having health insurance comparable to the plan they offer a condition of enrollment. See FAQs from the American College Health Association, other resources on its website from the Student Health Insurance/Benefits Plan Coalition, and a discussion of regulations in the United States Federal Register.

Colleges’ standards dive deep into the minutiae of insurance plans. They are very specific about the insurance features they want students at their location to have before waiving the obligation to buy their plan. In addition, under either federal or state laws, colleges cannot sell short-term or supplemental plans that simply fill the gaps where your health insurance does not meet the college’s requirements.

What It Costs

In the table below is the yearly mandatory health-insurance fee I found on websites at selected colleges, showing a wide range in this cost. Most colleges do not offer a choice of plans or alternative insurers. Plus, these costs rise yearly, even faster than tuition costs. I selected colleges from the West, Midwest, East, and South (two per region). For each region, I selected one larger university and one liberal-arts college.

College Cost of student health insurance
Stanford $5,208
Pomona (and other Claremont Colleges) $2,551
Northwestern $4,050
Oberlin $1,694
Boston University $2,466 (basic plan); $3,297 (premium)
Swarthmore $1,784
Duke $3,535
Davidson $2,295

Colleges Need To Improve Disclosures About This Potential Cost

Below is an example that illustrates how colleges present the requirement on their websites, yet leave the insurance cost out of the main table of college expenses. I selected from the table Northwestern University as an example of a college that does have information on its website about student health insurance in various places, but like other colleges seems to sidestep listing it clearly in a table of its costs of enrollment. (Disclosure: I’m a fellow Big Ten alum from University of Michigan, a college that does not have mandatory health insurance but does offer a student plan.)

The screenshot below is from the webpage that shows the requirement for health insurance ($4,050 in 2019–2020):

Northwestern's requirement for health insurance ($4,050 in 2019–2020)

Northwestern’s requirement for health insurance ($4,050 in 2019–2020)

Northwestern University

The next screenshot shows the webpage with specific provisions that a health plan must have:

Northwestern's requirements for coverage by a health insurance.

Northwestern’s requirements for coverage by a health insurance.

Northwestern University

Lastly, this screenshot is from the webpage showing costs of enrollment at Northwestern:

Costs of enrollment at Northwestern. Note that while the health-service fee is listed, the mandatory cost of the student health-insurance plan is not included.

Costs of enrollment at Northwestern. Note that while the health-service fee is listed, the mandatory cost of the student health-insurance plan is not included.

Northwestern University

Note that while the health-service fee is listed, the mandatory cost of the student health-insurance plan is not included. It is mentioned separately as a requirement on another page. A common practice at all colleges is that this information does not appear in this type of key table of costs. It’s like leaving a critical question blank that’s worth at least 25% of the points in a final exam.

At a minimum, colleges should voluntarily at least footnote the potential cost of health insurance when they list the health-service fee and the total cost of enrollment. While I do not believe colleges are being deliberately sneaky about selling student health insurance, leaving out this cost is less than totally transparent. After all, colleges do list the cost of books, which (unlike health insurance) they can’t force students to buy; and most students find ways to lower that cost when it comes out of their own pocket (ask my kids for their savvy advice). Therefore, colleges should provide more upfront transparency about the mandatory cost of health insurance and waiver process.

Five Steps Students And Parents Need To Take

1. Once you know what college your child will be attending, be sure you check its requirements for student health insurance to determine whether you may need to pay for its student health plan. You may have time to switch into another plan to meets its standards, hopefully before the open enrollment period for the year in your current plan.

2. Look for a notice by mid-summer from the college stating that the student has been automatically enrolled in its plan, unless you opt out of it by obtaining a waiver and how to do so. This could be an email (or also a colorful postcard, which I receive for my son from Cornell University that has very specific requirements and a $3,108 fee in 2019). It may be sent via a third-party service provider/insurance broker whose website you use to submit the waiver request, such as Gallagher Student Health.

The process is a black box in some ways, unless you’re familiar with very specific provisions in your health plan. You input information about your health insurance without knowing whether or how your plan will qualify. To then receive an email that you “earned” the waiver, your plan needs to provide comparable coverage to what the college sells or sponsors.

Complete and submit the waiver application on time. Do not delay, as you may have to pay a fee for submitting it late and you may experience a backup in any later rounds should your initial waiver request be denied. Even if you do submit it on time, the college may need it earlier than the late-fee deadline. Otherwise, the charge will still appear on your tuition/bursar statement (it then gets credited back).

Alert: You will face an additional college cost unless you apply for and receive the waiver. Colleges should explicitly state this in their communications to students and parents.

3. Should your waiver request at first be denied, as it was for my son from Cornell, contact your health insurer to see whether you can get a letter documenting that your health plan meets the school’s requirements. You want to then resubmit your waiver request with this letter. Should you still be denied, your college will probably have an internal process for submitting a waiver request to someone at the college responsible for student health insurance.

If you have an HMO plan that does not have facilities in the state of your college or any limits in your plan on its out-of-area network, you are likely to face challenges in getting the waiver, as will students with an out-of-state Medicaid plan or a plan that covers only catastrophic illness. International students will almost certainly need to buy the school’s plan. (My own experience and that of others is mentioned near the end of a Boston Globe article: College-bound? The fees could end up being a big surprise.)

4. The tuition/bursar statement will have lines with many fees on it, ranging from the big tuition number to a student activity fee. Look out for a line on your tuition bill/bursar statement that seems like it could be for student health insurance (at Cornell it’s SHP Premium). Do not assume this is just another fee for the college that is part of the already extremely large sum you thought you had to pay for attending it. This is an additional fee that is potentially waivable, even if it was disclosed in a prior communication and you simply didn’t see it or receive the information.

Question your college about this fee before you pay it. I suggest that colleges put an asterisk next to this item on the bursar statement with a footnote stating that this fee is waivable and explaining the process for obtaining a waiver. That would further help prevent the unnecessary payment of this large fee when a student already has health insurance that would qualify.

5. Evaluate whether the student health-insurance plan is actually a good option to consider. For example, when you have a family plan with just one child on it, switching to a plan for a couple (or just yourself if you’re a single parent) and buying the college plan for your student can potentially reduce costs. For students who lack health insurance or have an inadequate plan, these policies offer a comprehensive choice.

As you’re scrambling to pay the upcoming semester’s tuition bill, it can be a big hassle to suddenly switch health insurers for the student, particularly if the school’s policy does not cover the doctors you now use. You would also need to change your own plan after you enrolled in it. However, if it makes financial sense and provides at least similar coverage to what you have, this is a route to at least consider. See articles from Consumer Reports and The New York Times that discuss this approach in evaluating college health insurance.

I’ve devoted most of my professional career to making complex legal and tax concepts understandable to people who do not enjoy reading the securities laws or the Internal Revenue Code. In, I created the premier online resource of educational content and tools on stock compensation (stock options, restricted stock, and employee stock purchase plans) for plan participants, financial advisors, and companies. is a sibling website I created on nonqualified deferred compensation. With the resources on these websites and my other writing and speaking, I try to help you get more value out of these compensation plans and prevent mistakes. While I have a law degree (University of Virginia), for most of my working life I’ve created legal, tax, and financial-planning publications, websites, books, and videos. I also coach a high-school tennis team and co-wrote with my wife a popular travel book (Watch It Made in the USA).

Source: The Big College Expense You Probably Didn’t Know About And Save For: Mandatory Health Insurance

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