New Supplemental Guidance and Deadlines Issued for Higher Education Emergency Relief Funds Under the CARES Act

The U.S. Department of Education (ED) has recently provided additional guidance and instructions in connection with the Higher Education Emergency Relief Fund (HEERF) provisions of the Coronavirus Aid, Relief and Economic Security (CARES) Act. On June 16, 2020, ED released a supplemental FAQ document with respect to HEERF grants on its CARES Act website, which provides the following sub-regulatory guidance:

• Spending deadline. All HEERF funds must be spent by September 30, 2022. This includes both the institutional and the student portions of HEERF funding under Section 18004(a)(1) of the CARES Act, as well as grants to HBCUs, MSIs, and tribally-controlled institutions under Section 18004(a)(2), and funds under Section 18004(a)(3) awarded to institutions with the “greatest unmet needs related to coronavirus.” Although institutions are not required to spend HEERF funds until the September 2022 deadline, ED continues to urge institutions to promptly disburse emergency financial aid grants to students under these funding streams to those students that are eligible.

• Grants for summer and fall students. While ED encourages institutions to provide emergency grants to students as soon as possible, and particularly to students enrolled during the spring 2020 semester, students enrolled in later terms may also receive CARES Act funding if they incur expenses relating to “the disruption of campus operations” due to COVID-19. Eligible students enrolled in the summer or fall 2020 terms, for instance, may receive emergency financial aid grants under either the student portion or the institutional portion of HEERF funding.

• Scholarships. Whether an institution may use CARES Act funding for student scholarships depends on the type of HEERF funding the institution receives. No institution may use Section 18004(a)(1) funding to provide scholarships or to advertise their availability. This prohibition applies to both the student and institutional portions of HEERF emergency funding under Section 18004(a)(1). However, per this supplemental FAQ from ED, institutions that receive funding under Sections 18004(a)(2) or (a)(3) of the CARES Act may use that funding to make scholarships available to students, or to advertise the availability of such scholarships for students.

• Employee salaries or other employee benefits. The FAQ states that institutions may use the institutional portion of HEERF funding under Section 18004(a)(1) of the CARES Act to pay salaries and benefits for employees that work in dining halls and dormitories, if those employees would otherwise have been paid through student fees that were not collected due to the coronavirus’ disruption to campus operations. The applicability of this particular guidance to salaries and benefits of other employees is not clear; however, ED reiterates its earlier guidance that institutions may use Section 18004(a)(1) institutional funds to cover costs where there is “a reasoned basis for concluding such costs have a clear nexus to significant changes in the delivery of instruction due to the coronavirus.”

• Purchases on behalf of students. Institutions may use the institutional portion of HEERF funding under Section 18004(a)(1) of the CARES Act, or the funds made available under Sections 18004(a)(2) or 18004(a)(3) to purchase or provide items required to accommodate their students’ transition to online learning as a result of COVID-19. This includes qualifying purchases that the institution would usually make. For instance, per ED’s guidance, if an institution would normally purchase 1,000 laptops annually, but due to COVID-19 must purchase 2,000 laptops to accommodate the institution’s shift to online learning, that institution may use the institutional portion of HEERF funding to cover the cost of all 2,000 computers. It may not, however, use any of the student portion of Section 18004(a)(1) funds for that purpose, even though the equipment is ultimately intended for student use.

• Documentation of lost revenues under Sections 18004(a)(2) and (a)(3). Unlike HEERF funds under Section 18004(a)(1), the CARES Act expressly permits recipients of Section 18004(a)(2) and (a)(3) funding to use such funds to cover lost revenues. If an institution receiving Section 18004(a)(2) and (a)(3) funding elects to use the funds for that purpose, the institution must be able to document a year-over-year decrease in each specific revenue stream for which “lost revenue” is claimed. (We note that on June 23, 2020, ED conducted a technical assistance webinar regarding HEERF funds in which ED officials verbally suggested that Section 18004(a)(1) funds could potentially be used, in certain circumstances, to cover lost revenues. However, as we believe such use of Section 18004(a)(1) funding is inconsistent with both the CARES Act’s statutory text and written ED guidance to date, we have requested that ED further clarify those webinar statements.)

Additionally, on June 24, 2020, ED published in the Federal Register an August 1, 2020 deadline for all eligible institutions to apply for HEERF funds, whether under Section 18004(a)(1), (a)(2) or (a)(3). According to the notice, once the deadline has passed, ED intends to calculate and redistribute any reserved or unclaimed HEERF funds.

We are continuing to closely monitor developments from ED and other education regulatory authorities related to the coronavirus pandemic and other matters. Should you have questions regarding this or other educational regulatory matters, please do not hesitate to contact any member of our Education team, or your usual contact at Faegre Drinker.