CARES Act Higher Education FAQ

This page is continuously updated as new guidance is released. If you have questions related to the CARES Act that are not listed below, please contact Jackson Nell (jnell@eab.com), and we will help you find an answer.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act contains numerous provisions that will impact higher education as institutions respond to the COVID-19 crisis. EAB has produced this FAQ memo to help answer education leader’s most pressing questions on the policies that may impact their institution. Importantly, this remains a fluid policy space where federal agencies continue to craft rules and guidance based on the statute. Congress and the White House may also elect to provide new appropriations or legal changes in the coming weeks and months based on the perceived economic need and the extent of the crisis. EAB will continue to monitor this space closely to keep college and university leaders informed on federal actions that may affect higher education.

General questions

How long will it take for CARES Act education funding to be distributed?

The Department of Education (ED) published initial guidance on higher education funds during the 5 weeks following the passage (March 27^th to April 30^th) of the CARES Act. Each of the 4 pools from which higher education institutions can receive funds has separate eligibility criteria, guidelines, and timelines. Institutions must opt-in to receive funds by completing a signed Certificate of Funding Agreement for each program.

ED issued the first guidance on CARES Act funding on April 9^th, 2020. This guidance refers exclusively to Section 18004(a)(1) (Enrollment Formula Funds) used to provide emergency student financial aid. Once ED receives a Certificate of Funding Agreement from an institution, those funds will be made available through the G5 system. Based on reporting by Politico, institutions have reported delays in drawing down their funds and limited guidance from ED regarding the distribution timeline.

On April 14^th, ED announced details on the Governor’s Emergency Education Relief Fund (GEERF). Specifically, they plan to award funds within 3 business days after a state submits its application. Each state government then has discretion to determine how quickly to award grants to educational institutions.

On April 21^st, ED published guidance on Section 18004(a)(1) (Enrollment Formula Funds) funds reserved for institutionally determined use. Institutions will be able to receive these funds after they sign the funding agreement for the emergency student aid and complete an additional Certificate of Funding Agreement. ED did not specify the timeline for making these funds available for drawdown by institutions.

On April 30^th, ED released information on the dedicated funds for minority-serving institutions (MSIs), Section 18004(a)(2), and the supplementary emergency funding, 18004(a)(3), for colleges and universities who received under $500K through the other funding pools. Eligible institutions will need to submit a separate certificate of funding agreement (MSI Dedicated Funding, Supplementary Emergency Funding) for each of these programs. These forms must be submitted by August 1^st, 2020 on Grants.gov to receive the money through the G5 system.

Where will ED post guidance and updates on the CARES Act?

ED has created a dedicated site to publish updates and information related to COVID-19 and a separate page devoted to the CARES Act’s education funding provisions.

What funding is dedicated to higher education institutions?

The table below outlines the funding pools created to benefit higher education institutions in the CARES Act.

What provisions are made for university-affiliated organizations?

The CARES Act provisions for higher education exclusively target institutions and students. It creates no direct funding mechanism for university-affiliated entities (e.g., independent athletic organizations, advancement foundations, research foundations, etc.) under the education funding programs.

Affiliated organizations will be able to take advantage of other provisions of the law, including the Payroll Tax Deferral, the Employee Retention Credit, and changes to charitable giving incentives.

Several affiliated foundations who are Section 501(c)(3) organizations are seeking assistance through other provisions within the law. Most of their focus has been on the Small Business Administration’s Paycheck Protection Program. To access these funds, an organization must employ less than 500 employees (full-time, part-time, and temporary included) or meet the North American Industry Classification System (NAICS) criteria for employee-based business size.

How the affiliation provisions of the Paycheck Protection Program will be applied remains unclear, especially in relation to organizations affiliated with public universities (e.g., public university-benefit foundations). However, given the unique nature of each institution’s affiliated organization’s legal structure, operating agreements, and relation to the university, some schools and their affiliated organizations are working with their general counsels to conduct due diligence and see if they can apply.

Governor Emergency Education Relief Fund (GEERF)

How much funding is available?

$2.95B

How will these funds be distributed to each state?

These funds will be distributed based to each state, including the District of Columbia and Puerto Rico, using the following formula:

1. 60% based on state’s share of individuals 5 to 24 in relation to the national population
2. 40% based on each state’s relative share of children counted under Section 1124(c) of the Elementary and Secondary Education Act (ESEA)

How much funding will each state receive?

Based on the funding formula outlined above and ED funding allocation guidance, we estimate that each state will receive the following funds:

How can these funds be used?

Fund use is largely at the discretion of governors and state governments. They can be distributed to both public and private higher education institutions along with K12 providers. The aid will take the form of direct grants to institutions.

On April 14^th, ED provided clarification and guidance on how GEERF should be used.

• Discretion is granted to individual governors to spend funds on K12 and higher education institutions (includes charter and private schools) as they see fit through direct grants
• ED expects that GEERF will go to education institutions most impacted by COVID-19 and encourages states to direct funds to institutions needing additional support to provide access to digital remote instruction
• States will need to establish a criterion to determine which schools are most impacted by the COVID-19 emergency and how the funds will be used to support essential emergency education operations
• GEERF contains a provision that states maintain their pre-CVOID public education funding, although this can be waived
• Funds should not be used to support executive or administrative salaries. States need to report to ED if they do
• States will also need to submit additional reports to the ED if any of the funds go to or provide for “the benefit of state, local, or IHE teacher or faculty unions or association”
• States have 1 year to spend the money but are encouraged to so as soon as possible
• States will need to report on how they plan to spend the money and the criteria they will use to determine aid need to ED within 45 days after receiving the funds 
• States need to fill out a brief application and funding certificate to access funds
• Funds will be dispensed to state governments within 3 days of application receipt

What restrictions are imposed on the use of these funds?

States who accept these funds agree to maintain their education spending relative to their pre-COVID-19 budget allocations. However, states can request waivers from the Secretary of Education that would permit them to cut education funding if state revenues decline due to a COVID-19 caused recession.

Any recipient of GEERF aid, including states, K12 agencies, and higher education institutions, are expected to maintain their payrolls and make payments to their current contractors. However, like other Education Stabilization Program stipulations on payroll, this is not a binding legal mandate.

States are also encouraged to target schools that “have been the most significantly impacted by COVID-19” and support their ability to continue instruction remotely through these funds.

The ED strongly discourages funds from being used to support administrative and executive salaries. It also expects states to exercise caution on GEERF aid used to benefit teachers and staff and requires states to report back on any instances of funding for employee benefits.

How can higher education institutions receive these funds?

Higher education institutions should reach out to their state governments and education agencies to request these funds as the state will control the award process. Education leaders will want to proactively communicate to state governments what their unmet needs are and what aid would be most impactful, especially as state leaders craft their funding criteria. This may include producing documentation to share with state leaders of unexpected COVID-19 costs, such as emergency facility cleanings, and using existing lines of communication with legislators and agencies to update them on the fiscal pressures that COVID-19 has put on institutions’ budgets. Colleges and universities should collaborate with other state or regional institutions as well as education advocacy groups to amplify their message and focus on directly linking their aid need with federal and state expectations on how GEERF aid should be used.

How will the funds be dispensed? ED’s G5 system will be used to distribute the aid to each state. Each state will then determine its own funding criteria and mechanism to provide direct aid to educational institutions.

Higher Education Emergency Relief Funds Distributed Through Pell Enrollment Formula Section 18004(a)(1) (Formula Funds)

General

How much total funding is available to institutions? 

$12.56B

How will these funds be awarded? 

The CARES Act stipulates a funding formula to divide these funds among institutions. The formula has two distinct parts:

1. 75% of the funds will be awarded based on the institution’s fulltime in-person Pell grant recipients as a share of the national total.
2. 25% of the funds will be awarded based on the institution’s fulltime in-person enrollment who are not Pell Grant recipients as a share of the national total.

The CARES Act then divides the Formula Funds into two categories based on the stipulations for  their use:

Emergency Student Financial Aid

• At least 50% of funds must go to emergency financial aid for students
• Also referred to as the Advanced Funds, Emergency Financial Aid Grants to Students, Section 18004 Student Funds, or CARES Act Student Aid Funds

Institutional Funds

• The remaining balance can be used at the institution’s discretion to cover qualified expenses
• Also referred to as Recipient’s Institutional Costs Funds, Institutional Portion of the Higher Education Emergency Relief Fund, and Section 18004 Institutional Funds

How will these funds be distributed? 

ED’s G5 system will be used to directly distribute to institutions both the Emergency Student Financial Aid as well as the Institutional Funds. Once the prerequisite funding certificates are signed and submitted, ED will make their allocated funds available for drawdown. However, Politico reports that institutions have encountered delays in the availability of their funds and limited guidance from ED as to the exact distribution timeline.

What institutions are eligible?  

Any institution that is eligible for Title IV funding (federal financial aid) or meets the definition provided in Title I of the Higher Education Act of 1965.

Do institutions need to apply?

To receive Emergency Student Financial Aid, institutions need to submit a signed Funding Certification and Agreement. To receive Institutional Funds the institution must submit the student aid agreement mentioned above. Then, they must complete and submit a second Funding Certification and Agreement.

How much direct funding will my institution receive?

ED issued allocation amounts for institutions on April 9, 2020.

How much funding on average will peer institutions receive?

Using the analysis done by the Association of Public and Land-grant Universities (APLU), We have broken down what the average institution can expect based on  institution type. Note these are preliminary estimates and are illustrative at a high level of how the funding will be broken down among industry segments.

Uses and Stipulations

How can these funds be used? 

Emergency Student Financial Aid

At least 50% of the 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). Though ED does not specify “transportation,” this is included in the indirect cost of attendance so EAB interprets this as another valid expense.

ED has provided updated guidelines on April 9, 2020 for emergency CARES Act grants that stipulates:

• The funds can only be used to provide direct grant assistance to students
• Universities must make these funds available to students as soon as possible
• Institutions cannot use these funds to reimburse themselves on any incurred costs or expense, including refunds or aid previously issued to students
• Institutions have discretion over how to award aid with a few provided guidelines instead of mandates
  • Institutions should prioritize students with the greatest need and factor in student socioeconomic status
  • Institutions can elect to award aid to all their students aid or award aid only to those who have demonstrated need
  • ED recommends, but does not require, using the maximum Federal Pell grant (for the 2019-2020 academic year, $6,195) as the maximum amount of aid awarded to each student
• Financial aid administrators should exercise “professional judgement” on a case-by-case basis to exclude this emergency aid from a student’s cost of attendance
• Emergency aid will not be counted as Title IV financial aid
• Funds can only be awarded to students who are eligible for Title IV funding, thereby prohibiting aid from going to most non-US citizens
• Students must demonstrate their eligibility for this aid by completing or having completed the FASFA or, under penalty of perjury, attesting that they are eligible to receive Title IV financial aid
• Students exclusively enrolled in online programs before March 13^th are not eligible
• Institutions will need to report to ED within 30 days on how they intend to award the funds

On April 21^st, ED issued a technical FAQ, providing further guidance and clarification on the emergency student aid funds.

For further guidance from EAB on how to distribute this aid, please see How to Distribute CARES Act Funds to Students.

Institutional Funding

Based on ED’s April 21^st Letter from Secretary DeVos, Funding Certification and Agreement, and FAQ, the following guidelines and stipulations apply to the institutional use allocation:

• Institutions need to have first signed the student aid funding certificate to access these funds
• Should institutions choose, they can convert their institutional use funds to provide additional emergency financial aid to students under the same rules as the already issued agreement
• ED urges institutions, especially well-resourced schools and universities with substantial endowments, to “devote the maximum amount of funds possible to emergency financial aid grants to students, including some or all of the funds earmarked for Recipient’s Institutional Costs” (Section 3 of the Funding Agreement)
• Institutions have reasonable discretion on how they use the money as long as they can demonstrate a valid connection between the eligible expense and “significant changes to the delivery of instruction due to the coronavirus” (Section 4 (b) of the Funding Agreement)
• Institutions can use the funds to reimburse themselves for student refunds (e.g., room and board, tuition, and other fees) or technology (e.g., laptops, hotspots) they purchased for students, if done so on or after March 13^th
• Institutions cannot use the funds for executive salaries or benefits
• Institutions will need to submit quarterly reports to ED to demonstrate that they used the funds for qualified purposes and to account for how much of the funds were used to reimburse refunds
• Institutions should spend the funds within one year

On April 21^st, ED provided a technical FAQ on Institutional Fund uses.

Can these funds be used to reimburse institutions for student refunds?

Emergency Student Financial Aid

No. For refunds issued prior to March 27^th, the institution cannot use student emergency aid to reimburse itself for refunds (Section 2 of the Funding Certification and Agreement).

For refunds issued on or after March 27^th, in most cases, no. We do not recommend that institutions equate refunds with Emergency Student Financial Aid. These are separate institutional policy decisions and have their own legal conditions associated with them.

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, and some have already brought class-action lawsuits against institutions that have not issued refunds. Other institutions have received bad press simply for delaying 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 to other schools, there may be undesirable public relations consequences. EAB also believes that ED will be highly suspect of any attempt by schools to repurpose emergency student aid for any other purpose than directly helping students.  

Institutional Funds

Yes, student refunds issued on or after March 13^th are eligible for reimbursement. Eligible refunds include tuition, room and board, and other student fees. Institutions will need to demonstrate that the refunds resulted from COVID-19-caused disruption and report to ED their rationale and the amount of funds used to cover refunds.

What can these funds not be used for?

The CARES Act specifically states that Formula Funds (Emergency Student Financial Aid and Institutional Funds) cannot be used on these categories of expenses:

1. Payments to contractors for the provision of pre-enrollment recruitment activities
2. Endowments
3. Capital outlays for facilities related to athletics, sectarian instruction, or religious worship

Emergency Student Financial Aid

These funds are highly restricted to eligible student expenses and cannot be used to reimburse the institution in any form except institutionally-funded emergency aid grants to students made on or after March 27^th (See question 3 of the ED FAQ for more details).

Institutional Funds

These funds have fewer restrictions, but they still can only be used to cover expenses reasonably linked to “significant changes to the delivery of instruction due to the coronavirus” (Section 4 (b) of the Funding Agreement). Institutions should still treat these funds carefully and with due diligence to ensure their compliance with ED’s requirements.

Can Institution Funds be used to pay online program management vendors (OPM)?

Yes, if the funds are used to cover a per-student fee to an OPM vendor. Funds cannot be used to cover any recruitment activities performed by the OPM or any other contractor.

Do institutions that accept these funds need to maintain their full payroll?

Likely no, they are not legally mandated to maintain their full payroll. However, the CARES Act and ED impose a loose maintenance of effort expectation that all institutions who accept Formula Funds to take every effort to avoid laying off or furloughing staff. Institutions who do make personnel cuts following their receipt of CARES funds may need to demonstrate to ED that they “to the greatest extent practicable” worked to maintain their payroll. Given the tremendous financial strain on university and college budgets, most institutions will be able to reasonably demonstrate that personnel cuts are, unfortunately, necessary despite CARES funds, and no viable financial alternatives exist.

Institutions that accept Paycheck Protection Program (PPP) funds or use certain CARES tax code provisions may have added and more stringent payroll maintenance requirements.

Historically Black Colleges and Universities (HBCUs) and Minority Serving Institutions (MSIs) Section 180004(a)(2)

What funding does the CARES Act dedicate to HBCUs and MSIs?

All HBCUs and MSIs who participate in Title IV will receive their allotment of Higher Education Emergency Relief Funds distributed through the CARES-dictated funding formula (75% Pell enrollment, 25% total non-Pell enrollment, both in-person).

In addition, the CARES Act provides $1.05B in dedicated funding to Title III, V, and VII programs. These funds will be divided between programs based on the existing funding ratio outlined in the FY2020 federal budget. Based on ED’s published methodology, we estimate the funding distribution in the table below.

How will these dedicated funds be distributed to MSIs and HBCUs?

First, funds will be distributed to each qualified Title III, V, and VII program based on the FY2020 appropriation ratios. Then ED elected to distribute the funds to institutions within each program through the Pell Formula used for the first round of HEERF funds (75% Pell enrollment, 25% total non-Pell enrollment, both in-person and full-time). These funds are awarded in addition to the first round of Formula Funds and they are not competitive. Each qualified program used a slightly different methodology based on the number of intuitions and overlapping programs.

How can these funds be used?

Funds awarded under Section 18004(a)(2) are less restricted in their use by both statute and ED guidance than the blanket Formula Funds under Section 18004(a)(1).

In the Certificate of Funding Agreement, ED issued the following guidelines and stipulations:

• Funds can be used to defray expenses due to COVID-19, including lost revenue, costs already incurred, payroll, and virtual learning infrastructure
• Eligible expenses must have occurred after March 13^th, 2020
• Funds can be awarded as additional financial aid to students as long as they meet the Emergency Student Aid guidelines (outlined in the FAQ’s earlier section)
• Institutions are encouraged, but not required, to spend at least 50% of these funds on student aid
• Institutions must submit their Certificate of Funding Agreement by August 1^st, 2020 to receive the money
• Institutions have one year following the submission of their Certificate of Funding Agreement to use the funds
• ED expects institutions to submit quarterly reports and keep detailed documentation on how the funds are used

How much funding will my institution be receiving?

ED created an Excel file that breaks down all the Title III, V, and VII emergency funding allocations by institution.

What about existing HBCU and MSI awards?

ED has waived requirements on existing Title III, V, and VII awards. These funds can now be used to “prevent, prepare for, and respond to coronavirus”. Institutions will still need to document how they spent these funds and report back to ED.

What other regulatory provisions are provided for HBCUs and MSIs?

The CARES Act includes the following regulatory provisions for HBCUs and MSIs:

Supplementary Emergency Funding Section 18004(a)(3)

How much funding is available?

$348M

How will these funds be awarded? 

These funds will be awarded as grants through the Fund for the Improvement of Postsecondary Education (FIPSE). ED decided to award $321.7M through a methodology that identified institutions that received less than $500K through Formula Funds and MSI funds. These identified schools (981 public and non-profit private institutions) will receive an additional grant equal to the difference between their initial funds and $500K.

The remaining balance (about $15M) will be awarded through competitive grants. ED will announce details on that grant process in the coming weeks.

What institutions are eligible? 

Only public and non-profit private institutions with significant unmet need are eligible.

What can these funds be used for?

Funds awarded under Section 18004(a)(3) are less limited in their use by both statute and ED guidance than the blanket Formula Funds under Section 18004(a)(1).

In the Certificate of Funding Agreement, ED issued the following guidelines and stipulations:

• Funds can be used to defray expenses due to COVID-19, including lost revenue, costs already incurred, payroll, and virtual learning infrastructure
• Eligible expenses must have occurred after March 13^th, 2020
• Funds can be awarded as additional financial aid to students as long as they meet the Emergency Student Aid guidelines (outlined in the FAQ’s earlier section)
• Institutions are encouraged, but not required, to spend at least 50% of these funds on student aid
• Institutions must submit their Certificate of Funding Agreement by August 1^st, 2020 to receive the money
• Institutions have one year following the submission of their Certificate of Funding Agreement to use the funds
• ED expects institutions to submit quarterly reports and keep detailed documentation on how the funds are used

How much funding will my institution be receiving?

ED published the Supplementary Emergency Funding allocations for the eligible 981 institutions here.

ED will make an additional $15M available for competitive grants that institutions can apply for.

Title IV Financial Aid

What changes does the CARES Act make to Title IV 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:

Emergency Student Financial Aid

How should the emergency financial aid provided in the Higher Education Relief Fund be awarded?

EAB has provided recommendations based on the latest ED guidance here.

What sort of expenses can these funds cover?

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 does not specify “transportation,” this is also included in the indirect cost of attendance so EAB interprets this as another valid expense.

How must the payments be made to students?

The aid must take the form of a direct grant to students through checks, electronic transfer payments, debit cards, and qualified payment apps. Schools cannot levy fees or outstanding balance charges to the aid.  

Can these funds be used to reimburse the institution for refunds previously issued to students?

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 be used to reimburse the institution for refunds already distributed to students.

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, and some have already brought class-action lawsuits against institutions that have not issued refunds. Other institutions have received bad press simply for delaying 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 to other schools, there may be undesirable public relations consequences. EAB also believes that ED will be highly suspect of any attempt by schools to repurpose emergency student aid for any other purpose than directly helping students.

What is the timeline for getting and distributing these funds?

The funds can be claimed 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 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.

Will these funds require reevaluating student financial aid awards?

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.

Which students are eligible for this funding?

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 before March 13 are ineligible for this pool of funding.

ED suggests that students must demonstrate their eligibility for this aid by completing or having completed the FASFA or, under penalty of perjury, attesting that they are eligible to receive Title IV financial aid.

Are incoming new students for the Fall 2020 semester eligible?

It is unlikely. Incoming students are likely not eligible since they were not directly impacted by “the disruption of campus operations due to coronavirus” (Section 2 of the Funding Certification and Agreement), nor does the definition of “student” in the CARES Act itself appear to include prospective or incoming students.

ED may clarify its position here through additional guidance or FAQs. Institutions may also contact ED directly with questions at HEERF@ed.gov.

If a student owes the university money, can these funds be applied to that balance?

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

Can universities use Emergency Student Financial Aid funds to pay student employees?

No. ED considers student payroll an institutional cost and prohibits reimbursement through Emergency Student Financial Aid, although Institutional Funds may be used for this purpose. Schools may elect to furlough or layoff their student employees and instead offer Emergency Student Financial Aid grants directly to former student workers for eligible expenses to help cover their lost expected income. However, this arrangement cannot be constituted in any way as employment and students cannot be expected to work to receive aid.

Loan Programs

The CARES Act creates a variety of emergency loan and grant programs largely targeted at supporting private enterprise. However, several programs are accessible to higher education institutions that meet the eligibility requirements. These programs are listed below. Institutions will need to conduct their own due diligence to assess their eligibility and need for these programs. Moreover, leaders should note that many of the guidelines surrounding eligibility and use of funds from these programs are still being determined.

Paycheck Protection Program

What is the Paycheck Protection Program?

The Paycheck Protection Program (PPP) is a Small Business Administration (SBA) program intended to support independent and small enterprises (including nonprofit colleges and universities) with loans to cover up to 8 weeks of payroll costs. Loan funds under the PPP can be used for payroll, rent, utilities, and mortgage interest. PPP loans can be forgiven if up to 75% of the total amount is used to cover payroll costs and no wage cuts or layoffs are made. Applications opened on April 3^rd. Total program funding is capped at $350B, and the program will stop accepting applications once that level is reached. Congress has signaled that it may be willing to raise the cap should the demand merit it.

The Treasury Department issued this one-page summary that covers the core provisions and a longer FAQ document with more details. Given the SBA guidance is broad and not clearly defined, institutions should contact their local SBA office or an approved Paycheck Protection Program lender for institution-specific guidance.

Can universities and affiliated organizations apply for the Paycheck Protection Program?

Potentially, if the following conditions are met:

1. Are a private independent school and/or a Section 501(c)(3) organization
2. Meet at least one of the following eligibility criteria:
   • Employ less than 500 employees (in most cases, including student employees –for further clarification, see next question)
   • Meet the NAICS employee-based sizing standard. For colleges and universities, NAICS code 611310 defines the employee-based size standard as less than $30,000,000 in annual revenue

For additional guidance, the SBA released an updated size standard tool that you can use to check your eligibility as well as an updated FAQ

Do student employees count towards the 500-employee threshold?

In most cases, yes. The SBA criteria include full-time, part-time, and hourly employees (anyone on payroll/who receives a W-2) and anyone who cannot be classified as an independent contractor or an unpaid intern.

several higher education professional associations and lobbying groups are in conversation with the Small Business Administration (SBA) to see if those rules can be clarified or made more favorable to higher education institutions. However, we doubt that these efforts will be successful, given the tremendous volume of requests on the SBA and the first-come-first-serve nature of the funding.

Midsize and Large Business Loans (Main Street Lending Programs)

Title IV of the CARES Act establishes $454B in emergency funding in the form of loans to enterprises who employ more than 500 workers but less than 10,000. This aid is targeted at enterprises “not otherwise receiving adequate economic relief in the form of loans or loan guarantees provided under this [CARES] Act” (Title IV). The program is managed by the Federal Reserve (the Fed).

On April 30^th, the Fed clarified in a FAQ documents (Question E.6) that non-profits and government instruments are not eligible for any of the Main Street Lending Programs. Currently the loan programs rely on earnings before interest, taxes, depreciation, and amortization (EBITDA) to determine eligibility. As most, institutions do not use EBITDA based accounting they will not be able to access the loan programs. Both the Fed and Treasury are looking into potential changes that would expand the program to higher education.

Tax credits and changes

The CARES Act provides several tax code changes that may benefit some, mostly private, institutions. Below, EAB has summarized the most common provisions we have seen institutions consider. Note this should not be considered professional tax advice and leaders should consult with their legal, tax, and accounting advisors before taking advantage of the program.

Charitable Giving and Advancement

What tax code changes does the CARES Act make that will impact philanthropic giving?

Creation of a temporary universal charitable contribution deduction

Section 2204 of the CARES Act creates a universal deduction for charitable contributions of up to $300. This deduction will apply to all taxpayers who do not itemize (i.e., claim the standard deduction) and will enable them to deduct $300 worth of qualified charitable contributions from their adjusted growth income (AGI). Currently, this universal charitable contribution deduction is temporary and will only apply to contributions made in 2020.

Removal of charitable contribution limitation on cash gifts for individuals

The CARES Act suspends the existing 60% adjusted gross income (AGI) limitation for individual charitable contributions in 2020. With this new policy, individuals can now deduct donations up to 100% of their 2020 AGI. This change only applies to cash contributions (gifts to donor-advised funds (DAFs) are not eligible).

Increased charitable contribution limitation for corporations

The CARES Act increases the current taxable income limit on cash contributions made by corporations from 10% to 25% for 2020.

Increased limit on contributions of food inventory for corporations

The act also increases the deductions for charitable contributions of food inventory to 25% of taxable income for corporations, up from the current cap of 15%.

Understanding the Federal Relief Package’s Impact on Higher Education Institutions

Hear EAB experts clarify what funds are promised within the 880+ page bill, analyze how the funds will affect university finances and staffing needs in the short-term, and discuss the impact this legislation will have beyond the current crisis.