What the relief package means for higher education

Expert Insight

What the relief package means for higher education

Higher education leaders have spent the last few weeks anticipating how Washington will help colleges and universities get through the COVID-19 crisis. Now, federal assistance is, at last, on the way, though several complex provisions await implementation, making their impact uncertain.

To help university leaders quickly understand what the Coronavirus Aid, Relief, and Economic Security Act, or “CARES Act,” means for them, EAB has 1) outlined the law’s major components below and 2) based on those, identified strategic considerations and imperatives for leaders.

How will the legislation impact colleges and universities?

The CARES Act touches on multiple federal education policies. The most consequential sections for higher education leaders relate to new emergency funding, modified financial aid rules, and research programs.

For a more detailed breakdown of all of the funding and regulatory provisions, the law firm of Hogan Marren Babbo & Rose produced this comprehensive report.

Emergency funding

The CARES Act creates a Higher Education Emergency Relief Fund that provides direct funding for institutions to help cover COVID-19 expenses. Funding will be issued through Title IV disbursement mechanisms. Key components of the relief fund include:

  • $14.2B in total funds, with $12.56B in funds devoted to helping institutions support students and navigate disruptions due to COVID-19. These institutional awards are distributed based on the following formula: 75% of funds based on the number of full-time Pell recipients and 25% of funds based on total in-person enrollment before the shift online
  • $331M to institutions who have significant unmet need after receiving their formulaic CARES emergency relief allocations. Recipients of that additional funding pool will be determined by the Secretary of Education, with priority given to schools who receive less than $500K under the abovementioned formula, likely smaller schools
  • $992M in dedicated emergency aid to HBCU and minority-serving institutions (MSIs)
  • 50% of funds each institution receives must go towards emergency student financial aid for expenses related to the disruption of campus operations due to coronavirus, including eligible expenses under a student’s cost of attendance (e.g., food, housing, course materials, technology, healthcare, and child care)
  • The remaining balance of funds can be used for most costs incurred by COVID-19, including the shift to online instruction. Importantly, it excludes certain enrollment expenses, like payments to marketing vendors, and capital expenses associated with athletics facilities
  • Institutions who accept relief fund are encouraged to maintain all staff on payroll, but they are not legally mandated to do so

An additional $2.95B is available for state governments to direct to colleges and universities or their K-12 education system

Federal financial aid

The CARES Act relaxes existing federal financial aid policies to address the extraordinary circumstances created by the pandemic. Updates to federal aid provisions include the following:

  • Campus-based Aid Waivers
    • Institutions do not need to match federal funds provided to the institution for Federal Supplemental Educational Opportunity Grants (SEOG) and Federal Work Study (FWS) programs during the emergency period
  • Federal Work Study (FWS)
    • Students can continue to receive expected work study wages even if they are not able to perform job functions due to COVID-19 disruptions
  • Federal Supplemental Educational Opportunity Grants (SEOG)
    • Can now be used to offer emergency aid without impacting the cost of attendance
  • Federal Student Loans
    • Suspends federal student loan payments for 6 months and halts interest accrual during that period
  • Aid Eligibility
    • Students who do not complete the semester due to emergency circumstances will not have the payment period counted toward their maximum of 12 semesters of undergraduate federal financial aid. 
  • Title IV Funds
    • Universities do not need to return Title IV fund if students withdraw due to COVID-19, although they still will need to report on fund use

Research

The CARES Act provides federal research agencies with additional funds to prevent, prepare for, and respond to COVID-19. However, it does not contain emergency research support funding that many professional associations and university research leaders had requested. As a result, the CARES Act doesn’t directly awards funding to cover the administrative costs of slowing down or modifying university research disrupted by COVID-19 closures

  • Additional federal research funding includes:
    • $75M in funding for the National Science Foundation (NSF) for RAPID grant awards
    • $945M provided to the National Institutes of Health (NIH) for COVID-19 research
    • $99M granted to the Department of Energy’s Office of Science to support the national laboratory system’s work on COVID-19
    • $60M authorized to National Institute of Standards and Technology (NIST) with $50M for the Hollings Manufacturing Extension Partnership to support manufacturing research and $10M for Manufacturing USA to spend on pharmaceutical and biotech research

What potential actions should higher education leaders consider today?

Although the ink is barely dry on the relief package, higher education leaders can take proactive steps to plan for these emergency measures and position their institution to best deploy these resources when they arrive.

  • Department of Education systems historically are not able to distribute funds to institutions quickly as the Department of Education has limited staff and technology capacity, so leaders should not expect to receive funds right away. (Unfortunately, it’s too soon to tell if this lag will be measured in weeks or months, but EAB will be closely monitoring the timeline). Institutions should plan accordingly, continuing to control costs in the short-term. This may necessitate making difficult decisions on employment, capital spending, debt financing, and endowment draw until the aid is received. Even then, federal emergency funds may not cover all added expenses and lost revenue.
  • (APLU has used the CARES Act formula to provide estimates on how much money each school expect to receive —access their estimates here.)
  • As noted above, the relief law disperses most funds through a formula based on in-person student enrollment and Pell grant recipients. This will skew how funds are distributed, potentially advantaging large research universities, who typically enroll the most students, and regional publics, who enroll a disproportionate number of Pell-eligible students.
  • Public institutions may also receive more money through provisions for governors to receive additional education aid. Institutions with an affiliated health system and/or academic medical colleges will also be able to access emergency hospital funds, including a $100B emergency appropriation to help cover COVID-19 care costs and declines in revenue. Schools in states heavily impacted by COVID-19, such as New York and Washington, will likely receive priority as the law urges the Secretary of Education to prioritize areas where COVID-19 has caused the most economic disruption.
  • This law is aimed largely at relief for students, passing through institutions, not as investment in or a bailout for higher education institutions. Most funds will merely replace some lost revenue, refund some unforeseen expenses, or flow directly to students. It will not support growth in capital projects or operating budgets, as the 2009 stimulus package did for some institutions.
  • A significant portion of federal funds will flow through universities to support their students during these unprecedented times. At a time when the burden on the financial aid office is already heightened due to the economic shock and increased appeals for financial aid, the administration of millions of dollars via this program will be a brand new task.  This may require repurposing staff to help beleaguered financial aid staff members. Institutions will want to make sure they execute on distributing the aid with speed and fairness as students will evaluate their performance and will hold institutions accountable if they perceive the institution to be lagging their peers.
  • (See EAB’s Minimize Financial Attrition Roadmap to learn how colleges and universities can identify students at risk of financial attrition and ensure they get the help they need.)
  • The CARES Act includes language that encourages states to maintain current levels of funding (often called a “maintenance of effort” clause), but it lacks strong enforcement mechanism, and language like it has been routinely ignored in the past. In this case, the Secretary of Education may waive the requirements for states experiencing revenue decline, which in practice will be all or most states.
  • Many institutions surprised themselves with the agility and uptake of their online education efforts when face-to-face instruction became impractical. Even long-resistant stakeholders acknowledged the uniqueness of the circumstances and agreed to pilot the remainder of the semester in the cloud. Many leaders are wondering how they can build on this initial exposure and lay the groundwork for additional buy-in for online instruction, especially if the pandemic requires us to continue teaching this way past the spring semester. 

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