What the American Rescue Plan, CARES Act, and other government relief mean for students in 2021

Since March 2020, the federal government has passed several helpful coronavirus-related policies aimed at providing relief for students and their families. Here’s what we know now.

Our College & COVID-19 series is part of our commitment to students and families during this time of uncertainty. Our goal with this series is to provide the resources, information, and guidance you need to help you successfully continue your college journey.


As a student, your life has likely been disrupted by the coronavirus pandemic. You and your family may have experienced financial challenges because of the pandemic, too. To help relieve some of those economic hardships, the U.S. government passed policy throughout 2020 and into 2021 aimed at supporting American families, businesses, and students.

Let’s take a look at some of the legislation and related events that will have the most impact on students and your college journey.

The American Rescue Plan

The new COVID-19 relief bill, formally called the American Rescue Plan, was passed in early March 2021. While most of the bill’s contents were aimed at providing relief to families and businesses through monetary stimulus, a few provisions address high school and college students directly.

The bill allocated nearly $130 billion to help K – 12 schools reopen, and an additional $40 billion for colleges and higher education institutions to provide financial aid grants for students experiencing homelessness, hunger, or other challenges because of the pandemic.

If you or your family have had to deal with big financial changes due to COVID-19, this bill may be able to help you. Your school’s financial aid office may even be able to help you determine what the new policies can mean for your individual circumstance; start by calling or emailing them. You can also check out these emergency resources for students to help you cover immediate needs triggered by the pandemic.

The CARES Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which became U.S. law in March 2020, was designed to support businesses and homeowners and also college students and graduates paying back federal student loans. Initially, the legislation suspended principal and interest payments on all federal student loans through Dec. 31, 2020. Then on Jan. 20, 2021, the suspension of these payments was extended through Sept. 30, 2021, by executive order.

Certain federal student loans will also have 0% interest rates through Sept. 30, 2021. This means that if you choose to make payments on your loan, the money you pay will go toward the loan principal, not interest. If you’ve dropped out of college because of the coronavirus outbreak, you do not have to return your federal aid from Pell Grants, and dropping out for that reason won’t affect whether you’re eligible for grants or federal loans in the future.

The potential for federal student loan forgiveness

Since early 2021, there’s been an ongoing conversation on Capitol Hill regarding student loan forgiveness. While the American Rescue Plan did not include a policy for student loan forgiveness, it did include a provision that would make whatever you’re forgiven free from federal tax through 2025.

But the student loan forgiveness discourse is still happening. Some economists and legislators are proponents of forgiving up to $10,000 per borrower, as they say this could help those who did not complete college and have defaulted on their payments. More than a third of borrowers who defaulted owe less than $10,000 in federal student debt. The main worry for these experts is that some people who don’t need relief could benefit from the loan forgiveness. Other economists and legislators are pushing for $50,000 in student loan forgiveness, arguing that this number could help address systemic economic injustices for minority students and families.

Whatever the decision about federal student loan forgiveness is, it would apply to all federal borrowers. If you have private loans or special circumstances that would prevent you from paying your federal loans back, even beyond the pandemic, you could apply for either a deferment or forbearance. Both are ways to pause your payments, but deferment often doesn’t require you to pay interest on certain federal loans (interest will still accrue if you get a forbearance). If you have a private loan, be sure to check with your lender for what options and terms may be currently available to you.

Once you’re out of school, you could consider deferment if you’ve experienced a qualifying life event like unemployment or receiving state or federal assistance. Forbearance may be an alternative if you don’t qualify for deferment and your financial hardship is short-term. You will still need to pay interest on your loans if you go this route. But if you feel you can’t pay your loans back long-term, you may opt for an income-based repayment plan over deferment or forbearance.

Consolidated Appropriations Act, 2021

This piece of legislation was signed into law in December 2020, but provisions of the 2,000-page bill generally won’t go into effect until July 1, 2023, for award year 2023 – 24.

The National Association of Student Financial Aid Administrators (NASFAA) called this “a significant and welcomed piece of student aid legislation” for good reason. While the name of this law is general, it details very specific changes for college students.

  • The Free Application for Federal Student Aid’s (FAFSA) Expected Family Contribution will be renamed Student Aid Index, and there will be adjustments to how it’s calculated
  • Pell Grant eligibility will be expanded
  • Schools won’t be allowed to have a policy of denying all professional judgment requests (i.e., financial aid appeals)
  • The Secretary of Education will have the authority to regulate all cost of attendance components except tuition and fees — this includes things like on-campus meals and room and board

You can read more in-depth details of the Consolidated Appropriations Act, 2021 and how it affects students on NASFAA’s website.

Executive orders

The current administration released a series of executive orders in January 2021; the most pertinent one for students is called “Executive Order on Supporting the Reopening and Continuing Operation of Schools and Early Childhood Education Providers.”

This mandate lays out the foundation of getting students back to school. First, officials will work to open schools safely, using evidence-based guidance on when and how to do so. Additionally, the Department of Education will develop a report detailing the disparate impacts of COVID-19 on students, including those attending HBCUs, Tribal schools, Hispanic-serving institutions, and other minority-serving institutions.

There are many unknowns when it comes to the pandemic, but eventually, students will be able to return to in-person and on-campus education. For high schoolers, this will likely help you go back to “normal” when it comes to applying to and paying for college. For college students, this means you’ll be able to continue on your journey to a degree and beyond.

A new Secretary of Education

A new administration means a new cabinet: On March 1, 2021, the U.S. Senate confirmed Dr. Miguel Cardona as Secretary of Education.

Dr. Cardona is a champion of safe in-person learning, as he demonstrated in his tenure as Connecticut’s education commissioner. He also said public schools and colleges need more resources, including funding to support students’ mental health as they respond to the pandemic.

In his confirmation hearings, the main issues at hand regarded when to reopen public schools and colleges for in-person learning, whether to conduct standardized tests in 2021 for K – 12 students, and the rights of transgender students to play on sports teams that align with their gender identity.

In late February 2021, it was announced that schools would be required to conduct federally mandated standardized tests. As of March 31, 2021, a federal decision has not been made on the issue of transgender athletes’ rights.

What the new policies mean for students

These policies, statements, and events aim to ease the mental and financial burdens for college students and their families. While some assistance is immediate, and other policies won’t be in place until the future, there are options to help you get through this crisis so you can stay on track with your college goals.

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