What is the American Rescue Plan?

The American Rescue Plan Act of 2021 is a $1.9 trillion coronavirus rescue package designed to facilitate the United States’ recovery from the devastating economic and health effects of the COVID-19 pandemic. The nearly $2 trillion price tag makes this economic rescue legislation one of the most expensive in U.S. history. It one part of President Biden's Build Back Better plan, which also includes the American Jobs Plan and the American Families Plan.

The package includes direct stimulus payments of $1,400, extending unemployment compensation, continuing eviction and foreclosure moratoriums, and increasing the Child Tax Credit while making it fully refundable. It provides funds for state and local governments to help compensate for lost tax revenues, money for schools from kindergarten through eighth grade to safely reopen amid the pandemic, and subsidizes COVID-19 testing and vaccination programs.

Key Takeaways

  • The American Rescue Plan Act of 2021 is designed to facilitate the United States' recovery from the devastating economic and health effects of the COVID-19 pandemic.
  • The plan—which passed the House on Feb. 27, 2021, and the Senate on March 6, 2021—was signed into law by President Biden on March 11, 2021.
  • The package costs $1.9 trillion, making it one of the largest economic rescue plans in U.S. history.
  • It mixes efforts to mitigate the economic effects of the pandemic with strategies to fight the virus itself.

Understanding the American Rescue Plan

The American Rescue Plan Act of 2021, the latest stimulus package to be considered by Congress during the COVID-19 pandemic, follows in the wake of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 and the nearly $900 billion stimulus included in the Consolidated Appropriations Act of 2021, passed in December 2020. The Act extends some aspects of those bills while also creating new recovery strategies.

Direct Financial Payments

The plan provides for direct $1,400 stimulus payments to people making $75,000 or less annually, building on the $600 payments in the second stimulus package to reach the $2,000 mark originally requested by then-President Donald Trump in December.

Individuals with adjusted gross incomes (AGIs) of $75,000 or less—and couples with AGIs of $150,000 or less—receive the full amount. So will each of their qualified dependents regardless of age. Payments to individuals with AGIs over $75,000 will be reduced until they disappear entirely at $80,000 ($160,000 for couples).


Federal unemployment benefits are extended through September 6, 2021, at a weekly amount of $300—not the $400 originally contained in the draft legislation.

Extended Unemployment Benefits

The American Rescue Plan Act extends Pandemic Unemployment Assistance (PUA) benefits of $300 a week through September 6, 2021, and increases the total number of weeks available from 50 to 79. Federal Pandemic Unemployment Compensation (FPUC) benefits of $300 are also extended through September 6, 2021.

In addition, the first $10,200 in 2020 benefits is tax-free for families making $150,000 or less. People who had taxes withheld from unemployment benefits in 2020 will be able to recover them when they file their 2020 taxes or via an amended tax return if they have already filed taxes.

The Act also provides a 100% subsidy of COBRA health insurance premiums so unemployed workers can remain on their employer healthcare plans through the end of September.

March 31, 2021

The date when current federal eviction and foreclosure moratoriums end.

Moratoriums Remain; Financial Assistance Increased

The current eviction and foreclosure moratoriums, which end on March 31, 2021, will not be extended under the plan. However, additional funding will provide relief to those behind on mortgages, rent, and utility bills. The legislation provides:

  • $21.55 billion for emergency rental assistance through September 30, 2027
  • $5 billion in emergency housing vouchers through September 30, 2030
  • $100 million for tribal housing improvements
  • $100 million for rural housing through September 30, 2022
  • $5 billion to assist people experiencing homelessness

Increased Food Aid

The legislation extends the 15% increase in Supplemental Nutrition Assistance Program (SNAP) benefits through September 30, 2021, and provides $1.15 billion to states for SNAP administration through September 30, 2023, as well as $1 billion for nutrition assistance programs in the U.S. It also allocates $490 million to the USDA to increase the amount of cash-value vouchers under the Women, Infants, and Children (WIC) program. In addition, the plan allocates $390 million to increase participation in WIC through September 30, 2024.

Reimbursement is provided to emergency shelters under the National School Lunch Program for meals provided to individuals younger than 25. The Pandemic Electronic Benefit Transfer program is now extended through any school year or summer period following a designated public health emergency.

Expanded Child Tax Credit

The American Rescue Plan Act increases the Child Tax Credit maximum to $3,000 a year for each child ages 6 to 17, and $3,600 for each child under age 6, for couples who make $150,000 or less and single parents who make $112,500 or less. Payments will be sent by direct deposit on a monthly basis, according to current language.

A family with one child under age 6 would receive $300 per month and $250 per month for children ages 6 to 17. The law provides for one year of credit payments. The idea behind regular payments is to help families pay for ongoing costs instead of claiming a credit when they file their taxes. The credit is refundable, meaning everyone who qualifies will get it no matter their tax situation.

Student Loan Forgiveness Tax Free

While the plan does not include student loan forgiveness, it does include a provision that any student loan forgiveness passed between December 30, 2020, and January 1, 2026, will be tax-free. Normally, loan forgiveness counts as taxable income.

Schools and Child Care Block Grants

The plan sets aside $122 billion for K–12 education through September 30, 2023. This money will be used to reduce class sizes, improve ventilation, purchase personal protective equipment, and fund other steps to help schools reopen safely.

Almost $40 billion would go to colleges and universities to provide emergency financial aid grants for students through September 30, 2023. An additional $15 billion will go to child care providers through the Child Care and Development Block Grant program through September 30, 2021. The act also includes $1 billion for the Head Start program through September 30, 2022.

Help for Businesses

The Restaurant Revitalization Fund, a new program for restaurants and bars, allocates $28.6 billion in pandemic assistance grants. The grants can provide up to $10 million per company with a limit of $5 million per physical location and be used to cover payroll, rent, utilities, and other expenses.

The Paycheck Protection Program (PPP) will receive an additional $7.25 billion, and more nonprofits will now be allowed to apply for forgivable loans to help cover payroll and other operating expenses. The PPP's application deadline was extended to May 31, 2021.

Pandemic Response

About $50 billion will pay for additional COVID-19 testing and contact tracing, and $7.66 billion will help increase the size of the public health workforce. About $16 billion will fund vaccine distribution and supply chains.

The bill provides $47.8 billion to expand federal, state, and local testing for COVID-19 and enhance contract-tracing capabilities with new investments to expand laboratory capacity and set up mobile testing units. It also contains about $14 billion to speed up the distribution and administration of COVID-19 vaccines across the country.

State and Local Government

The American Rescue Plan includes $350 billion in aid to states, cities, tribal governments, and U.S. territories. These funds are designated to help replace lost tax revenue due to the pandemic. Analysis by The Washington Post found that a majority (26) of states experienced revenue declines between December 2019 and December 2020.

Minimum Wage Struck

Following a ruling by the Senate parliamentarian that the minimum wage hike to $15 an hour could not be included in the legislation under budget reconciliation, that measure was removed from the bill. Sen. Bernie Sanders, I-Vermont, offered an amendment to include the increase in the Senate version, but it did not win enough support. The current minimum wage is $7.25 an hour.

Comparison to CARES Act and Consolidated Appropriations Act

The American Rescue Plan Act (ARPA) is the latest in a series of three major pieces of COVID-19 relief legislation. The CARES Act was first, followed by the Consolidated Appropriations Act (CAA), and most recently, the American Rescue Plan Act (ARPA). The table below compares base funding in several key areas for each law.

Legislation CARES Act CAA ARPA
Signed into law March 27, 2021 President
Donald Trump
Dec. 27, 2020
Donald Trump
March 11, 2021 President
Joe Biden
Key Components
Direct payment/EIP $293 billion ($1,200) $166 billion ($600) $402 billion ($1,400)
Unemployment $268 billion ($600) $120 billion ($300) $206 billion ($300)
Small business $377 billion $325 billion $54 billion
Community development $5 billion $12 billion $362 billion
Transportation $71 billion $45 billion $43.2 billion
Vaccine develop/distribute $28 billion $69 billion $93 billion
Schools $31 billion $82 billion $176 billion
Rent assistance $17 billion $25 billion $21.6 billion
Nutrition & Agriculture $25 billion $26 billion $22.7 billion
U.S. Postal Service $10 billion (loan) $10 billion (loan forgiveness) $570 million (paid leave)
Child Care $5 billion $10 billion $40 billion
Broadband $25 billion $7 billion $7 billion plus
Coronavirus Relief Fund $150 billion Extended to 12/31/21
Employee Retention Credit $55 billion Extended to 6/30/21 Extended to 12/31/21
Lookback for EITC/CTC Created Expanded
Total appropriations $2.2 trillion $910 billion $1.9 trillion