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Higher Education Provisions in CARES Act

By Austin Reid  |  April 10, 2020

The Coronavirus Aid, Relief and Economic Security (CARES) Act, signed into law by President Donald Trump on March 27, provides funding and flexibilities for higher education institutions to respond to the COVID-19 emergency.

Higher Education Relief Fund

The CARES Act provides $14.25 billion for emergency relief to institutions of higher education to respond to the coronavirus. Of these funds, 90% is allocated to colleges and universities based primarily on their share of students receiving the Pell Grant. The Department of Education has released a table with allocation amounts for each institution.

At least 50% of these funds must be distributed as emergency aid to students who have had their semester disrupted by the COVID-19 pandemic. Emergency aid can include anything under a student’s cost of attendance, which includes food, housing, course materials, technology, health care and child care.

On April 9, the Department of Education announced it was expediting the process to distribute approximately $6.28 billion in emergency aid for students to colleges and universities. To access funds, institutions must sign a short agreement; funds could be available as soon as April 15. Institutions can expect to receive funds within 24-72 hours of a successful application to the department.

Once funds are received, institutions are responsible for distributing the emergency aid to students and must develop their own processes and priorities for awarding aid to students. The emergency aid must be provided as direct cash payments to students and cannot be used to refund schools for reimbursements already provided to students.

Per an April 9 letter, Secretary of Education Betsy DeVos encouraged universities to prioritize students with the greatest needs, as well as consider a maximum funding threshold to encourage wide distribution of funds. The letter also asked institutions without great student need to consider giving part of their allocation to institutions with significant need. However, these encouragements should not be construed as requirements for institutions.

The remaining 50% of funds can be used for institutional uses, although an institution could choose to allocate more than 50% of funds for emergency aid for students. The department is currently developing guidance on allowable uses of institutional funds, which are expected to be released by late April. The CARES Act defines allowable uses as “any costs associated with significant changes to the delivery of instruction due to the coronavirus.”

Within the $14.25 billion Higher Education Relief Fund, 7.5% (approx. $1 billion) is reserved exclusively for historically black colleges and universities and other minority-serving institutions. The remaining 2.5% (approx. $356 million) is reserved exclusively for certain institutions under Part B, Title VII of the Higher Education Act.

Relief for Borrowers with Federal Student Loans

The CARES act defers payments and waives interest payments on all federally held student loans until Sept. 30, 2020. This policy excludes private student loans and federally issued loans held by private lenders (Federal Family Education Loan program, discontinued 2010) and federal debt held by colleges and universities (Perkins loans, discontinued 2017). Each month during the payment deferral period still counts toward federal loan forgiveness programs and student loan rehabilitation. The bill also suspends all involuntary collections of defaulted student loans and associated penalties, including wage garnishments, Social Security garnishments and tax refund offsets.

More information on student loan provisions in the CARES Act can be found on this NCSL Student Loan Fact Sheet.

Waivers and Flexibilities for Students and Institutions

Through the CARES Act, students and institutions are not required to pay back federal student loans and Pell Grants if students withdraw from courses due to the COVID-19 emergency. Students who withdraw will not have this semester counted against their lifetime eligibility for federal financial aid.

The CARES Act also allows institutions to use funds from the Federal Supplemental Educational Opportunity Grant (FSEOG) to provide emergency aid for students. Institutions are also authorized to continue to make federal work-study payments to students who are unable to work due to school and workplace closures.

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