In late March, congressional lawmakers passed the third and most comprehensive piece of legislation designed to provide economic relief to individuals, corporations, and nonprofit entities impacted by the coronavirus pandemic.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides budgetary relief to higher education institutions through numerous provisions. It also provides several student aid and student loan borrower support provisions.
Education Stabilization Fund
Economic relief for higher education in this bill includes a nearly $31 billion Education Stabilization Fund. These funds are primarily split into three buckets:
- $13.2 billion for Department of Education grants to K–12.
- $13.95 billion for Department of Education grants to colleges and universities.
- $2.95 billion to states for awarding grants to K–12 and higher education institutions, mostly at the discretion of each governor.
Separate allotments within the Education Stabilization Fund provide additional funds to tribal colleges and designated minority-serving institutions. Additionally, about $349 million is reserved expressly for schools hit particularly hard by the COVID-19 virus, with priority going to small schools that receive less than $500,000 from the larger pool of ED grants, as well as to minority-serving institutions that have remaining unmet needs.
ED grants to colleges and universities. Of the $13.95 billion ED will award to colleges and universities, 90 percent of the funds will be distributed directly to schools via the Title IV distribution system. Each institution’s allotted amount was determined by a formula created by ED that is based on full-time equivalent enrollment of Pell Grant recipients at an institution (75 percent of the calculation) and FTE enrollment of non–Pell Grant students (25 percent of the calculation). ED used the most recent data available from the Integrated Postsecondary Education Data System and Federal Student Aid for this calculation. The calculation does not include students who were completing their education exclusively online prior to the coronavirus pandemic.
Institutions must use 50 percent of their allotment for direct emergency aid to students, including “grants to students for food, housing, course materials, technology, health care, and child care.” ED has issued some guidance for institutions surrounding use and disbursement of these funds but has encouraged schools to distribute funds to students quickly, even as some compliance questions remain.
Institutions have fairly broad discretion in how they use the remaining funds. The legislation states that funds can be used to “defray expenses for institutions of higher education,” which can include supplementing lost revenue and covering technology costs associated with a transition to distance education. Funds may not be used for endowments, athletic or religious facilities, or enrollment recruitment contractors. The legislation also requires that institutions receiving funding retain their current employees to the “maximum extent practicable.”
ED grants to states for education. The Department of Education is also administering the $2.95 billion in Education Stabilization Fund grants to states in support of K–12 and higher education institutions. Each state will receive an amount based primarily on its population between the ages of 5–24 (60 percent of the calculation) and the number of primary and secondary school-age children who reside in the state (40 percent of the calculation). Governors may provide these funds to both public and private institutions within the state but are not required to award a set percentage to either K–12 or postsecondary education. The bill provides governors with discretion to allocate the funds based on their determinations of schools “most significantly impacted” by the coronavirus.
When applying for these funds, states must include assurances of their financial support for higher education for FY20, FY21, and the three preceding fiscal years. States cannot count funds for state-provided need-based financial aid, capital projects, research and development, or tuition and fees paid by students in their show of support.
Additional Education Assistance
In addition to the funding provided via the Education Stabilization Fund, historically black colleges and universities (HBCUs) that have taken out Title III loans are eligible to receive a loan payment deferment during the crisis period. ED will make the principal and interest payments on these capital financing loans during the deferment, and upon a loan’s full closing ED will also set the repayment terms for these amounts. The legislation also allows ED to waive certain provisions regarding the distribution and uses of grant funding for minority-serving institutions, including graduate programs at HBCUs.
Congress has also made additional funds available to federal research and arts agencies to supplement grant awards to institutions and spur further research efforts. While the National Institutes of Health, the National Science Foundation, and NASA received the largest amounts of funding, all the major grant-awarding agencies should be receiving an influx of funds to aid with their response efforts.
Student Aid and Student Loan Borrower Relief
The CARES Act stipulates that Pell Grants awarded during the coronavirus emergency period will not be counted toward annual or cumulative limits if the recipient is unable to complete a term due to the COVID-19 emergency.
The legislation also allows ED to waive Return to Title IV (R2T4) requirements for schools and students when a student withdraws because of the coronavirus. Institutions granting such waivers will need to report to ED the number of recipients, the amount of grant or loan assistance associated with each waiver, and the total amount the institution has not returned under Title IV.
The CARES Act relieves borrowers of the obligation to repay Direct Loans associated with a payment period when the student withdrew due to the coronavirus pandemic. Additionally, terms impacted by the coronavirus pandemic will be excluded from the calculation of a student’s “satisfactory academic progress.” The legislation also excludes any portions of the Direct Loan payment period that a student is not able to complete during the coronavirus pandemic from subsidized usage calculations.
ED is further required to suspend borrowers’ obligations to make payments on their Direct Loans and ED-held Federal Family Education Loans through September 2020, and interest is not permitted to accrue on loans during this period. For borrowers in federal loan forgiveness programs, this suspension period will still count toward payment requirements even if payments are not made. Perkins Loans and private student loans are not included in this payment suspension.
ED has also suspended any involuntary collections of loan payments during this period, including garnishment of wages and reduction of tax refunds and other federal benefits for borrowers in default.
TEACH Grant and Teacher Loan Forgiveness Program recipients generally have their program requirements waived if their teaching and other service obligations were interrupted as a result of the coronavirus.
The legislation waives the requirement for institutions to match federal funds for campus-based aid programs for award years 2019–20 and 2020–21. Additionally, it waives the limits on transferring funds between the Federal Supplemental Educational Opportunity Grant (FSEOG) and Federal Work-Study (FWS) programs, while also allowing institutions to disburse FSEOG funds as emergency grants to undergraduate and graduate students. The maximum emergency FSEOG grant allowed would be the maximum Pell Grant for the award year (currently $6,195).
The CARES Act also allows institutions to make FWS payments for students for a period of up to one academic year, even if the student is unable to perform the required work due to closure of an institution.
Despite having passed several pieces of coronavirus response legislation, lawmakers are already discussing the potential for another major relief bill at the time of publishing.
NACUBO will continue advocating for federal support for higher education throughout this crisis. Click here to stay up to date on our COVID-19 advocacy relief efforts and guidance for higher education.
NACUBO CONTACT Megan Schneider, senior director, government affairs, NACUBO, 202.861.2547