The Legal Brief

CARES Act Provisions Benefiting Higher Education

April 3, 2020

Among the many sectors that are provided relief under the CARES Act, higher education institutions are set to receive both appropriations and regulatory flexibility. The following discusses many of those provisions.

Of the roughly $2 trillion emergency funding provided under the CARES Act, $30.75 billion is included for an Education Stabilization Fund to provide assistance and relief to the education sector, both K-12 and higher education. About $13.95 billion of the $30.75 billion appropriated to the Education Stabilization Fund has been allocated specifically for higher education.

90 percent of such amount (about $12.55 billion) is to be distributed directly to higher education institutions through the Title IV distribution system. The amount each institution receives is to be apportioned 75 percent based on its relative share of full-time equivalent students that are federal Pell Grant recipients, and 25 percent based on its relative share of full-time equivalent student who are not federal Pell Grant recipients (excluding students that were attending solely online).
- At least 50 percent of such amount received is required to be used for emergency financial aid grants to students for expenses related to the disruption of campus operations due to COVID-19. This includes eligible expenses under a student’s cost of attendance, such as food, housing, course materials, technology, health care and child care. Institutions need to be aware that these funds cannot be used to provide refunds to students for housing, dining and other costs for this current Spring 2020 term.
- The remaining amount may be used by the institution to cover costs associated with significant changes to the delivery of instruction due to COVID-19, so long as the costs do not include payments to contractors for the provision of per-enrollment recruitment activities, endowment, or capital outlays associated with facilities related to athletics, sectarian instruction or religious worship.
7.5 percent of such amount (about $1 billion) is reserved for minority-serving institutions (such as historically black colleges and universities and tribal universities) to be used to defray expenses (including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, payroll) incurred by such institutions and for grants to students for any component of the student’s cost of attendance, including food, housing, course materials, technology, health care, and child care.
2.5 percent of such amount (about $350 million) is reserved for grants to institutions that are particularly impacted by COVID-19, particularly smaller institutions receiving less than $500,000 under the Title IV formula above and minority-serving institutions with significant unmet need to be used to defray expenses (including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, payroll) incurred by such institutions and for grants to students for any component of the student’s cost of attendance, including food, housing, course materials, technology, health care, and child care.

In addition, $2.953 billion of the Education Stabilization Fund is being provided directly to governors to use to support both K-12 education and colleges and universities, based on need. These funds are allocated to states on the basis of 60 percent of population ages 5-24 and 40 percent on population of children counted under the Elementary and Secondary Education Act. Importantly, these funds are not limited to being used for public institutions. In order to take advantage of these funds, institutions should be documenting the needs they have as a result of COVID-19 and reach out to their respective governors’ offices to discuss the same.

Recipients should be aware that the CARES Act provides that any institutions receiving Education Stabilization Fund moneys are required “to the greatest extent practicable, [to] continue to pay its employees and contractors during the period of any disruptions or closures related to coronavirus.” This does not, on its face, specifically prohibit necessary lay-offs or terminations. Most importantly, institutions receiving funds from the Education Stabilization Fund should document and track all expenditures and uses of funds provided, as they are subject to mandatory reporting requirements with the Department of Education.

The CARES Act also provides regulatory flexibility and waivers in several areas that will help ease financial burdens for both students and institutions. The following summarizes several of those items.

Institutions are not required to match federal funds for certain on-campus based aid programs and limits on transferring funds between programs in the Federal Work Study and Supplemental Educational Opportunity Grants programs are waived.
Institutions are granted broad flexibility to disburse Supplemental Educational Opportunity Grants funds as emergency grant aid to students.
Institutions are permitted to provide Federal Work Study payments to students for up to one year, even if the student is not able to perform the required work as a result of campuses being closed.
Subsidized loan usage limits are adjusted to exclude loans borrowed from counting towards annual and cumulative limits if a borrower is unable to complete the term due to COVID-19.
Pell Grants are excluded from counting towards annual and cumulative limits if the recipient is unable to complete the term due to COVID-19.
Institutions’ obligation to return Title IV funds is suspended if a student withdraws due to COVID-19. In turn, a student’s obligation to return Title IV aid they have received is suspended if they withdraw due to COVID-19.
Institutions are permitted to allow students to take leaves of absence and not return during the same semester.
Borrowers are relieved of the obligation to repay loans that were taken out if they withdraw due to COVID-19 during the payment period for which those loans were taken out.
Institutions are permitted to exclude terms impacted by COVID-19 in the calculation of students’ Satisfactory Academic Progress.
Permits otherwise eligible programs at foreign institutions to be eligible for Title IV aid for distance education.
Permits deferral of principal and interest payments on current Title III capital financing loans to historically black colleges and universities.
The category of extenuating circumstances for calculating TEACH Grant recipients’ service obligations is modified to include COVID-19 and allows semesters of service interrupted by COVID-19 to count towards their consecutive years of service.
The Secretary of the Department of Education is authorized to waive certain statutory provisions relating to the distribution and uses of grant funding at minority-serving institutions, including graduate school programs at historically black colleges and universities.
The Secretary of the Department of Education is authorized to waive requirements on allowable uses of grant funding and requirements on matching grants, as may be requested by an institution.
Principal and interest payments on federal Direct Loans are suspended through September 2020, and such suspended payments are still counted towards payment requirements for student loan forgiveness programs.
Garnishment of wages, Social Security and tax refunds of student loan borrowers in default are suspended through September 2020.

Guidance from the Department of Education is expected in the coming days on how many aspects of the CARES Act relief will be implemented. We will continue to provide updates as additional information becomes available.

Attorneys

Mark A. Imbrogno