The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted on March 27, provides $2 trillion in relief for multiple sectors of the economy coping with the coronavirus pandemic. Higher education institutions, students, and student loan borrowers benefit from a number of provisions, including those outlined below. While Congress clearly intended to relieve burdens on institutions, some provisions will require additional effort to administer.
Educational Stabilization Fund
Higher education institutions will receive almost $14 billion in additional support this year from the federal government to help mitigate the impact of the COVID-19 emergency. The CARES Act directs the Department of Education (ED) to allocate most of the funds (90% or $12.6 billion) to institutions based on their relative share of full-time equivalent (FTE) students, excluding those solely enrolled in distance education courses, prior to the emergency. Three-quarters of the funds will be based on Federal Pell Grant recipients and one-quarter on FTE students who did not receive Pell grants. Minority-serving institutions (MSIs) will receive an additional 7.5% or $1 billion of the funds. The remaining 2.5% is reserved for those institutions that the ED Secretary determines have the greatest unmet needs, with priority given to those that receive less than $500,000 under the other provisions.
These funds are provided to institutions to help them "prevent, prepare for, and respond to coronavirus" and costs associated with changes to modes of instruction. Each college or university must, however, use at least 50% of the funds it receives to provide emergency financial aid grants to students for expenses related to the disruption of campus operations. Funds cannot be used to pay for contracted recruitment services, endowments, or capital construction related to athletics, sectarian instruction, or worship. The law calls for any institution receiving support from this fund to continue to pay its employees and contractors during disruptions or closures "to the maximum extent practicable."
MSIs and Historically Black Colleges and Universities (HBCUs) may also repurpose prior awards under Titles III, V, and VII of the Higher Education Act (HEA) to help their coronavirus response efforts. A separate section of the CARES Act allows the Secretary of Education to grant deferments to HBCUs with capital financing loans under Title III of the HEA.
The CARES Act directs ED to use the same systems it uses to disburse Title IV aid to distribute these supplemental funds to institutions. Except for the 2.5% reserved for institutions with greatest need, award amounts are determined by formula so institutions should not have to apply for funds. ED sent a letter to presidents of all eligible institutions of higher education on April 9 and a certificate of funding and agreement for institutions to submit in order to receive the 50% of funds earmarked for emergency student grants. The department also posted a list of the amount of money allocated to each institution under the statutory formula.
The CARES Act also waives several existing requirements or provides other relief relating to the federal student aid programs to help students and increase institutional flexibility. The various provisions are outlined below.
Nonfederal Share of Campus-Based Aid. Institutions will not be required to provide a nonfederal share (generally 25% of their federal funds) for the Federal Supplemental Educational Grant (FSEOG) and Federal Work-Study (FWS) programs for either the 2019-20 or the 2020-21 award years. For-profit entities that employ FWS students will still be required to provide matching funds.
Transfers from FWS to FSEOG. Institutions may transfer up to 100% of their unexpended allotment of FWS funds to their allotment for FSEOG during a qualifying emergency (but not the other way, from FSEOG to FWS).
FSEOG for Emergency Aid. Schools may use all or any amount of their FSEOG allocation for the fiscal year to provide emergency grants to students to help meet unexpected expenses and unmet need as a result of a qualifying emergency. In doing this, the institution may waive the usual need calculation. The emergency aid grant cannot exceed the Pell grant maximum. These emergency grants will not be counted as other financial assistance under section 471 of the HEA. The school may contract with a scholarship-granting organization to accept applications from or disburse funds to its students, if the full allocated amount is disbursed to the students.
Continued FWS Pay. Institutions may continue to pay FWS wages to students even if they are unable to continue working during the emergency. The payment may be equal to or less than the amount of wages the student was expected to earn and may be paid as a one-time grant or in multiple payments. The student must have already been working in an FWS job before the emergency prevented them from completing the obligation. Note that ED had earlier issued similar guidance based on the Robert T. Stafford Disaster Relief and Emergency Assistance Act before passage of the CARES Act.
Withdrawals. Institutions are not required to return unearned Title IV funds to ED when a student withdraws during a term due to the emergency. FAS's Compliance Alert (April 8) provided more detail on these provisions.
Satisfactory Academic Progress (SAP). Schools may exclude credits that were attempted but not completed by a student due to the COVID-19 emergency from the quantitative component of their SAP calculations.
Relief for Borrowers. Student loan borrowers whose loans are held by ED will not have to make payments on their loans through September 30, 2020, and interest will not accrue during that time. ED will also suspend involuntary payments (wage garnishments, tax refund reductions, etc.) during that time.
ED has issued guidance to institutions over the last few weeks. The most recent was released April 9 with accompanying documents. Their COVID-19 resource page gathers information from a variety of sources.