How to distribute CARES Act funds to students

Expert Insight

How to distribute CARES Act funds to students

The CARES Act provides every institution with hundreds of thousands, if not millions, of dollars to disburse to students, but institutions have just 30 days to determine how they will distribute these funds. Unsurprisingly, institutions have a lot of questions about how best to leverage these funds to support their students, and what to consider and prioritize in developing their approach. EAB has analyzed the guidance put out by the Department of Education (ED) and developed guidance on how to approach this important and urgent task. Below, we answer some of your most pressing questions on the CARES Act, and outline three potential policies to guide the distribution of your awarded funds.

CARES Act Emergency Financial Aid Grants FAQ

No. Institutions cannot extract any portion of these funds prior to their distribution to students under any circumstances.

Only students eligible for Title IV funding are eligible to receive CARES Act funds. That means international students and DACA students are not eligible to receive funds. Furthermore, students enrolled exclusively online prior to March 13 are ineligible for this pool of funding.

The CARES Act Funding Certification and Agreement Form makes clear that funds distributed to students are to be for “expenses related to the disruption of campus operations due to coronavirus.” The form lists several such expenses, including, “food, housing, course materials, technology, health care, and child-care.”  Though it doesn’t specify “transportation,” this is also included in the indirect cost of attendance, so EAB interprets this as another valid expense

No. The funds provided for emergency financial aid grants to students – which must constitute no less than fifty percent of the total funds the institution receives – “may not be used to reimburse the institution for any costs or expenses, including but not limited to any costs associated with significant changes to the delivery of instruction due to the coronavirus and/or any refunds or other benefits that [the institution] previously issued to students.”  However, the other half of the CARES Act funding can (as of time of writing) be used to reimburse the institution for refunds already distributed to students. For more general info on the CARES Act, see EAB’s overall CARES Act FAQ.

Some institutions that have not already issued refunds for room and board are considering whether they could use the CARES funds as grants for these costs (since food and housing are included in the approved expenses).  We advise caution here.  This is the equivalent of not issuing a refund. Students will understand this. Some students have already brought class-action lawsuits against institutions that have not issued refunds. Other institutions have received bad press simply for a delay in getting refunds to students. And prospective students are watching to see how your institution is caring for students (and staff).  If students view your response as particularly tight-fisted compared with other schools, the PR consequences will not be good.

The funds can be claimed immediately by completing the Funding Certification and Agreement Form.  Once the agreement is signed, you must report your policy for distributing the funds to students to the Department of Education (ED) within 30 days.  The totality of the funds must be spent within one year of signing the agreement.  ED strongly recommends distributing the funds as quickly as possible.

No. These funds are not considered financial aid under Title IV of the Higher Education Act. They do not impact cost of attendance or EFC calculations. This gives institutions wide latitude to determine which students would most benefit from additional funds.

Determining Your Best-Fit Institutional Approach

In short, you have 30 days after signing the agreement to determine how best to distribute these additional funds to students. In determining the approach that is right for your institution, you will need to consider the distribution of need across your student body, your institutional priorities, your capacity to staff and operationalize these efforts, and the requirements of the Act itself. Consider how each of the following options aligns with your institutional priorities.

Approach 1: Develop a Distribution methodology.

What this means: The institution determines, based on data already available, how much CARES money to award to each student.  This would involve using some metric of student need (e.g., EFC or unmet need) to award CARES funding on some sort of sliding scale. 

  1. It’s hard to know who really needs the money. Some $0 EFC students have funding for college that isn’t captured by the FAFSA or other forms.  Some seemingly affluent students may have had significant expenses that they are struggling to cover at a time when a parent has recently lost a job. Regardless, relying on information from the FAFSA will leave your picture of student finances at least two years out-of-date. If you devise a methodology in-house, however directionally correct, some money will go students who don’t need it, and some students who need it will miss out.
  1. Be intentional about breadth versus depth of support. The CARES dollars will only go so far.  Determine if you want to help all of your students a little bit or your neediest students a lot. You know your student body best and can weigh the trade-offs associated with each choice.
  2. Use some measure of student need in the methodology. Both the CARES Act and Agreement Form encourage (though do not require) institutions to use socioeconomic diversity as a criterion in distributing funds.  Given the wide range of student profiles at institutions, one or another of available measures of student need may make more sense for your institution.  Some examples include:
    • EFC
    • Pell-eligibility
    • Net price as a share of household income
    • Unmet need
    • Having taken out PLUS or private loans
    • Level of indebtedness
  3. Process and disburse funds quickly. If you are using an in-house methodology, students will be far less forgiving about delays than they will be if they have to submit an application for your review.
  4. Be Transparent. Explain your rationale to students. You probably don’t need (or want) to publish the full formula, but you should tell students the basic principles that you used to figure out how much money to award.

Approach 2: Implement an Application Process. 

What this means: The institution asks students to fill out a short form explaining how they have been financially impacted by the pandemic, and what their corresponding associated costs are. 

  1. Some students will never fill out an application. As with all money that has to be applied for, demand may be inversely related to need.  Some of the neediest students will not apply, while the volume of applications from students who do not need support may be higher. 
  2. Students will ask for more money than you have. When students inevitably apply for more funding than you have to disburse, they may feel disappointed if you provide less than they request.
  3. Financial Aid Office has limited bandwidth. Your financial aid office is already dealing with an increase in volume of appeals.  It probably doesn’t have time to process, read, and adjudicate all of the applications that you receive.
  4. An application will delay disbursement. Managing an application process will delay the disbursement of funds to students.  If you simply produce an in-house methodology, you don’t have to wait for students to tell you what they need to award the funds.
  1. Keep it short. To maximize submissions and ensure you’re hearing from has many impacted students as possible, keep the application to no more than one page, with clear instructions at the top. This should be clearly differentiated from your emergency grant aid application if you have one.
  2. Include a maximum reimbursement amount. ED recommends the maximum Pell grant award but you could go higher or lower depending on how many students you want to help or how much you want to help the neediest students. Be clear with students that the maximum awards will be for students with only the most exceptional of circumstances.
  3. Include a pick-list of the kinds of expenses students may have incurred. Have students select which eligible COVID-related costs they incurred and how much those costs were.  Consider including a “maximum reimbursement amount” per specific item (e.g., no more than $1000 in technology hardware costs). 
  4. Broadcast that not all requests for funds will be approved. On the application itself, clearly indicate that just because the student is applying for $X amount of funding does not mean that they will receive it.

Approach 3: Combine the Previous Two in a Hybrid.

What this means: The institution awards a portion of the funds directly to students and holds the remainder in reserve to be awarded based on student requests. 

  1. It’s the most work. To execute a hybrid approach, your institution will both have to come up with a distribution methodology and develop, process, review, and distribute funds based on an application. 
  1. Keep the distribution methodology simple. If you opt for a hybrid approach, keep the distribution methodology simple. Given the more limited amount of funds distributed this way, minimizing the amount of work going into the formula make sense.  To that end…
  2. Consider distributing some funds to all students. By recognizing that every student has borne some costs associated with the pandemic, you mitigate the ill-will that might be produced if some students get nothing at all.
  3. Limit the kind of expenses on the application. If you are already distributing funds to most students as part of the distribution methodology, you could limit the kind of expenses students are able to request funds for on the application.

Additional Guidance:

Use CARES fund distribution as another moment to speak to students with a change of financial circumstance. Some students who receive funding may not realize that they can request additional funds if they have had a change of financial circumstance. This can be an opportunity to remind them to contact the financial aid office if this situation applies to them.

CARES funds are just one part of addressing affordability concerns.  While this primer was designed to help you figure out how to best distribute CARES funding, these funds will only partially address student affordability concerns.  If you are interested in more details about emergency grant programs or how to minimize financial attrition, you can access additional EAB publications here

Communicate decisions about distribution to all campus stakeholders. Many of the staff interacting with students are not close to this decision. Faculty, Academic Advisors, Student Affairs staff, and other employees who come in more regular contact with students will be asked questions about this. Ensure they are equipped to answer basic questions and/or direct the student to someone who can.

Get everyone (metaphorically) on-campus to support the effort. Whether your campus chooses to use an application for CARES funds or not, rallying the entire institution’s staff to encourage students struggling financially to contact the aid office is key. Section 2 of EAB’s Addressing College Students’ Basic Needs study provides recommendations on cultivating a campus-wide referral network.

Consider setting some funds aside for later. While ED and students want you to distribute the funding promptly, it may be prudent to set some funds aside for later. Some students are coping with a sick partner or family member and can’t be bothered with an application right now. Others may not yet realize they have some particular expense that might be covered. While the goal should be to distribute most funds quickly, setting aside a small portion may make sense.

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